Influencers all over industry are talking about it, but the lack of a definition for engagement in online advertising is creating confusion.

Is it the amount of time consumers spend with their mouse on an ad? Is it how long they watch a video? Is it a “like” on Facebook? Is it an ad’s recall-ability?

In the interest of full disclosure I’ll admit that my company, mediaFORGE, is guilty of contributing to the convolution of engagement. But we’re repenting.

So what is engagement? It’s more than a single measurement or an abstract way of describing a consumer experience. It’s a campaign methodology.

Engagement Defined

At its essence, an engagement is an interaction with an ad. Watching in-ad video, playing a game, browsing products, sharing content, or conducting a search (among other things) all count as engagement.

All ad interaction has a proven impact on the way consumers respond to online advertising. In fact, a recent comScore study found that ad interaction has a higher correlation to conversions than viewable impressions or even clicks.

Engagement, as a methodology, involves considering the effectiveness of ad interaction at each stage of an ad campaign — from designing the ads to setting optimization parameters to attributing success.

Fostering Engagement With Ad Design

Ads are the heart of the Engagement methodology. To engage consumers, ads must have interactive functionality and compelling personalized content. This sounds obvious, but, to be clear, this means engagement-focused ads must be dynamic on a level beyond what is required for campaigns focused on a clicks or viewable impressions.

It’s not just about throwing relevant content in an aesthetically pleasing ad. It’s about delivering a miniature brand experience to each consumer. Consumers benefit by having content they can explore without leaving the site they’re browsing. The benefit to advertisers is the opportunity to highlight multiple products and brand assets in one ad.

How To Optimize For Engagement

Optimizing campaigns is about more than identifying a metric to report against, it also determines the design of the campaign, including who it is targeting and how.

When a campaign is optimized for engagement, it means all aspects of the campaign’s design are focused on getting as many consumers to engage and convert as possible.

Every targeted display campaign is optimized towards its performance metric — click campaigns are optimized for clicks, viewable impression campaigns are optimized to appear to consumers who are most likely to return and convert. Teams of optimization and yield experts closely monitor campaigns to make sure they are maximizing the performance metric they are measured against.

The benefit of optimizing for engagement is two-fold. First, the audience of people who will engage with ads is much larger than the audience who click on ads.

Since not all shoppers are clickers, optimizing campaigns to reach engagers greatly increases the number of potential purchasers that will be reached. Also, optimizing for engagement does not rely on showing ads to users who are already likely to return to the advertiser’s site, whether or not they see an ad.

Second, optimizing for engagement means that ads will influence consumers. Anyone who interacts with a campaign ad has an experience with the brand, one that can’t be replicated by ads that are only designed to generate a click-through.

By serving ads to people who may be interested in the brand’s products/services, the effectiveness of the campaign is already increased. When that audience is further refined to those who are most likely to engage and be influenced by dynamic ads, whether in the short or long term, return on ad spend is quickly improved.

Attributing Properly For Engagement

A vital component to the Engagement methodology is the ability to track ad interactions.  It is key to using engagement as a performance metric, because claimed conversions must be attributed to a consumer who interacted with a campaign ad.

The theory behind engagement is that advertisers should not have to pay for any action other than a conversion, and that they should have proof that claimed conversions were influenced by a campaign ad.

They best way to do this is to provide data that demonstrates the link between the tracked interaction and the logged conversion.

Aligning Interests Ensures Success

I’ve explained how embracing Engagement as a comprehensive campaign methodology improves the success of an ad campaign.

There’s an additional benefit that doesn’t fit into the categories above. Engagement-based campaigns have the rare outcome of aligning the interests of all three parties involved in the campaign.

The consumer gets a better ad experience, and has positive feelings about the advertiser. Because of that, the advertiser sees higher conversions and gains improved consumer loyalty.

The display provider gets paid because the client got paid — incentivizing it to run the kind of campaign that makes consumers happy and makes advertisers money.

Tip #1: Interactivity

Modern banner-ad technology is extremely versatile. Banner ads can be designed to do anything a website can do — product scrolling, tabbed browsing, in-ad search, video, product ratings, and the list goes on. There are a number of benefits from making your ads interactive:

• Web-like functionality makes banner ads remote extensions of your website that can deliver a unique experience to individual users throughout the web.
• Adding interactive features allows users to engage without committing to a click — meaning you have more potential to influence users who aren’t willing to leave their current page, but are interested in exploring the content of your ad.
• The interactions can be tracked as in-ad engagement, adding a new layer of insight into user interests and behavior.
• Designing ads to attract users to engage means you can abandon the flashy gimmicks designed to get users to click, giving you the opportunity to transform your banner advertising from interruptive to interactive.

Tip #2: Brand Prominence

Oftentimes, banner ads include special offers or promotions to attract users’ interests. It is tempting to make these offers the most prominent part of the ad, as it may be the determining factor in a user’s decision to return to your site and convert. This makes including offers a great strategy for effective banner advertising.

However, don’t forget the importance of brand representation. Allowing brand logos and messaging to be lost amongst promotional messaging comes at the cost of long-term brand strategies that should be supported by advertising.

The short-term purpose of banner ads is to return conversions within a time period that allows us to track results and reasonably claim that the ad influenced user behavior. But it’s important to remember that the long-term goal of any advertising campaign is to build brand image and loyalty.

Those who take advantage of the offer are, of course, likely to remember your brand. But since we know that only a portion of your audience will act on the offer via your ad, it’s important to communicate your brand prominently to those who casually glance at the ad, or who think about the offer and return and convert at a later time.

Tip #3: Personalization

Today’s internet users are savvier about advertising than ever. They are active in conversations about online privacy, frequency of ad exposure, and when and where it’s appropriate for them to be targeted. With this is in mind, it is becoming less and less acceptable to bombard users with generic advertisements. And with today’s technology that gives insight into users’ interests, there’s no need to.

Recent innovations enable us to do remarkable things to personalize ads. It’s much more than just showing a user an ad for a product or service he/she previously explored. Ads can include complementary products or services in which they might be interested, based on what they have looked at or searched for recently. They can give users the opportunity to rate products, and to share products they like with their social media network. Not only that, but the ads can be tailored to reflect their perceived demographics, such as location, age or gender. And these ads perform better!

In 2011, mediaFORGE ran a test of gender-personalized retargeting ads for its client Karmaloop, an online apparel retailer of street-wear fashion.

Female-targeted ad

Male-targeted ad.

The ads were designed with creative, content and promotions that appealed a specific gender, based on the clothing the user browsed for on Karmaloop’s site. The gender-personalized ads generated higher conversion rates, and improved retargeting performance:

• Users who clicked through the male gender-specific ads were three times more likely to purchase than those who clicked through gender-neutral ads.
• Users who clicked through female gender-specific ads were two times more likely to purchase than those who clicked through gender-neutral ads.
• Users who were served with the gender-specific ads had a higher overall spend on the site (per thousand impressions), delivering an increase in revenue of 35 percent.
• Overall click-through rate increased by 24 percent.
• Average revenue-per-unique-user-reached increased by 24.7 percent.
• Karmaloop’s retargeting average order value increased by nearly nine percent.

The funnel has become a standard visualization of the initial consumer acquisition process — representing the path consumers take as they advance from in-market browsers to converted users. Traditionally, the bottom of this funnel is a conversion, fueled earlier by strategies like behavioral targeting, and search and site retargeting. These strategies are most effective when executed based on where consumers are in the acquisition funnel.

To effectively retain consumers who advance through the funnel to conversion, consider what can be done beyond the traditional funnel to promote brand loyalty among recent purchasers and to reacquire past customers with no recent activity.

From Funnel To Pyramid

The best way to visualize this concept is to extend the standard acquisition funnel beyond conversion to include what might resemble a retention pyramid, representing a strategy to create loyal proponents. When evaluating how to best target these users, it’s important to consider where they are in the inverted funnel. Retention strategies are most effective while consumers are still in the narrow end of the funnel –- soon after their initial purchase. Reacquisition strategies are best applied towards past converters who have not converted for a significant period of time.

Examples of retention and reacquisition strategies include:

• Loyalty Campaigns: Establishing a dialogue with consumers soon after conversion is instrumental in keeping your brand, products or services top-of-mind. For example, delivering personalized banner ads with complementary product offerings to converted consumers is a simple, but meaningful, way to extend a positive shopping experience and to differentiate from competitors.
• Email Retargeting: Email-initiated display retargeting is a great way to reengage brand followers at various stages of the retention pyramid –- whether they are recent purchasers or long-time subscribers. It’s an opportunity to proactively refresh the conversation with potential repeat-purchasers without waiting to see if they’ll return to the site organically.
• Lapsed User Targeting:  Lapsed users are particularly unlikely to organically revisit a site, and are important targets for reacquisition campaigns. By identifying dormant users and strategically targeting them with dynamic-display media campaigns designed to invite them back to the site, marketers can maintain influence among a nearly-lost pool of consumers.

It’s equally important to consider the nature of the offer, and how it will appeal to people at various points in the funnel. For example, retailers may run retention campaigns to encourage return site visits and purchases, whereas an auto maker will likely not expect return purchases until the reacquisition stage. Marketers promoting big-ticket items will benefit more from retention campaigns aimed at reinforcing the consumer’s decision to choose their brand.

By executing these types of retention and reacquisition strategies, marketers can effectively capture consumers in the post-conversion funnel and direct them back to the acquisition funnel. In doing so, they will increase the rate of repeat conversions and establish a foundation for building brand loyalty among new and returning consumers.

Performance Increase from Cyber Monday 2010 – Cyber Monday 2011

*Data compiled from retargeting campaigns run by 18 apparel, sporting good and home & garden retailers.

This data not only supports the growth of online retargeting, but it also proves retargeting is a valuable contributor to site performance.

In fact, our research shows retargeting’s contribution to overall site revenue grew by 78 percent between Cyber Monday 2010 and 2011. Modern interactive ad capabilities allow marketers to leverage technology to attribute site conversions to different levels of consumer ad engagement.

To further support claims about the value of retargeting, we looked at this engagement data and found that the rate of conversions resulting from engagements grew by 63 percent between the two Cyber Mondays.

It’s never too late for e-marketers to optimize their site performance through retargeting this holiday season, or to think about implementing this tactic for future campaigns.

By delivering dynamic ads with interactive and personalized content to site abandoners, they incentivize shoppers to return to their site and create an individualized shopping experience that leads to brand loyalty. In this way, retargeting will help marketers meet immediate holiday shopping goals as well as longer term objectives that improve site performance throughout the year.