Same Turkey, New Knife

February 2, 2012 Leave a comment

The way the ad tech world looked pre-DSP...and pre-DMP

Technology may still capture the most advertising value, but what if publishers own it?

A few years ago, ad technology banker Terence Kawaja gave a groundbreaking IAB presentation entitled, “Parsing the Mayhem: Developments in the Advertising Technology Landscape.” Ever since then, his famed logo vomit slide featuring (then) 290 different tech companies has been passed around more than a Derek Jeter rookie card.

While the eye chart continues to change, the really important slide in that deck essentially remains the same. The “Carving up the stack” slide (see above), which depicts how little revenue publishers see at the end of the ad technology chain, has changed little since May 2010. In fact you could argue that it has gotten worse. The original slide described the path of an advertiser’s $5 as it made it’s way past the agency, through ad networks and exchanges, and finally into the publisher’s pocket.

The agency took about $0.50 (10%), the ad networks grabbed the biggest portion at $2.00 (40%), the data provider took two bits (5%), the ad exchange sucked out $0.35 (7%), and the ad server grabbed a small sliver worth $0.10 (2%), for a grand total of 64%. The publisher was left with a measly $1.80. The story hasn’t changed, and neither have the players, but the amounts have altered slightly.

While Kawaja correctly argued that DSPs provided some value back to both advertisers and publishers through efficiency, let’s look ahead through the lens of the original slide. Here’s what has happened to the players over the last 2 years:

  • Advertiser: The advertiser continues to be in the cat bird seat, enjoying the fact that more and more technology is coming to his aid to make buying directly a fact of life. Yes, the agency is still a necessary (and welcomed) evil, but with Facebook, Google, Pandora, and all of the big publishers willing to provide robust customer service for the biggest spenders, he’s not giving up much. Plus, agency margins continue to shrink, meaning more of their $5.00 ends up as display, video, and rich media units on popular sites.
  • Agency: It’s been a tough ride for agencies lately. Let’s face it: more and more spending is going to social networks, and you don’t need to pay 10%-15% to find audiences with Facebook. You simply plug in audience attributes and buy. With average CPMs in the $0.50 range (as opposed to $2.50 for the Web as a whole), advertisers have more and more reason to find targeted reach by themselves, or with Facebook’s help. Google nascent search-keyword powered display network isn’t exactly helping matters. Agencies are trying to adapt and become technology enablers, but that’s a long putt for an industry that has long depended on underpaying 22 year olds to manage multi-million dollar ad budgets, rather than overpaying 22 year old engineers to build products.
  • Networks: Everyone’s talking about the demise of the ad network, but they really haven’t disappeared. Yesterday’s ad networks (Turn, Lotame) are today’s “data management platforms.” Instead of packaging the inventory, they are letting publishers do it themselves. This is the right instinct, but legacy networks may well be overestimating the extent to which the bulk of publishers are willing (and able) to do this work. Networks (and especially vertical networks) thrived because they were convenient—and they worked. Horizontal networks are dying, and the money is simply leaking into the data-powered exchange space…
  • Data Providers: There’s data, and then there’s data. With ubiquitous access to Experian, IXI, and other popular data types through 3rd party providers, the value of 3rd party segments has declined dramatically. Great exchanges like eXelate give marketers a one-stop shop for almost every off-the-shelf segment worth purchasing, so you don’t need to strike 20 different license deals. Yet, data is still the lifeblood of the ecosystem. Unfortunately for pure-play segment providers, the real value is in helping advertisers unlock the value of their first party data. The value of 3rd party data will continue to decline, especially as more and more marketers use less of it to create “seeds” from which lookalike models are created.
  • Exchanges: Exchanges have been the biggest beneficiary of the move away from ad networks. Data + Exchange = Ad Network. Now that there are so many plug and play technologies giving advertisers access to the world of exchanges, the money had flowed away from the networks and into the pockets of Google AdX, Microsoft, Rubicon. PubMatic, and RMX.
  • Ad Serving: Ad serving will always be a tax on digital advertising but, as providers in the video and rich media space provide more value, their chunk of the advertiser pie has increased. Yes, serving is a $0.03 commodity, but there is still money to be made in dynamic allocation technology, reporting, and tag management. As an industry, we like to solve the problems we create, and make our solutions expensive. As the technology moves away from standardized display, new “ad enablement” technologies will add value, and be able to capture more share.
  • Publisher: Agencies, networks, and technologists have bamboozled big publishers for years, but now smart publishers are starting to strike back. With smart data management, they are now able to realize the value of their own audiences—without the networks and exchanges getting the lion’s share of the budget. This has everything to do with leveraging today’s new data management technology to unlock the value of first party data—and more quickly aggregate all available data types to do rapid audience discovery and segmentation.

 The slide we are going to be seeing in 2012, 2013 and beyond will show publishers with a much larger share, as they take control of their own data. Data management technology is not just the sole province of the “Big Five” publishers anymore. Now, even mid-sized publishers can leverage data management technology to discover their audiences, segment them, and create reach extension through lookalike modeling. Instead of going to a network and getting $0.65 for “in-market auto intenders” they are creating their own—and getting $15.00.

Now, that’s a much bigger slice of the advertising pie.

[This post originally appeared in ClickZ on 2/1/12]

The Data Driven Agency

January 25, 2012 Leave a comment

Three ways you can supercharge your digital media agency with data

Today’s digital media agency has access to enormous amounts of data, but using it effectively is what is going to make the difference between the shops of the future and the also-rans. Delivering data-driven insights is the key to being a 21st century agency. Here are three ways you should be working with data to secure your future:

Visualize it

How much time are you and your colleagues spending collating data, building reports, and formatting spreadsheets and PowerPoint decks for your clients? Most of the agencies I have worked with over the years admit to dedicating an embarrassingly large amount of (highly expensive) time towards these menial tasks. It’s not that getting your clients the data they need is not worth the time, it’s simply that there are now so many automated ways to deliver the data without burning salary.

To paraphrase former agency head and Akamai leader David Kenny, if you are doing things with people that you can be doing with computers, you have already lost. Why spend time formatting Excel spreadsheets and populating PowerPoint report templates with data, when you can be spending salaried employee time selling more services, optimizing campaigns, and delivering great strategy and creative?  Today’s automated ad management solutions and DMPs offer powerful ways to port both audience and ad serving reporting data into a single interface, to get instant access to key metrics such as frequency to conversion, churn rate, and channel attribution.

Ask yourself if the cost of such a system is more than the cost of the time your employees you have been spending building reports—and, ultimately, more than the cost of your eventual demise, should you ignore the changes afoot in your business.

Aggregate and Activate it

Think of all the data you have access to from a digital media standpoint. If you are helping clients execute a digital media campaign, you have traditional serving data from your demand side server, such as DFA. You probably also have engagement data from your rich media ad server. If you have access to your clients’ website pages (or at least tags there), you have site-side data, including conversion event data. If you are using an audience measurement tool, or are doing audience-specific buying through a demand side platform, you also have audience measurement data. Great. What are you doing with all of it? Moreover, what kind of data does your client have that you can help them add to activate the common advertising data types I have just described?

Let’s take the example of an agency using an audience measurement reporting tool, alongside an ad server report. In this case, it is possible that the analyst knows that the highest frequency converters for his travel campaign belong to a popular PRIZM segment, and he may also know that visitors to a popular travel site are three times as likely to engage with his rich media ad creative. Now what? Obviously, the right move is to buy more of the audience segment and double up with guaranteed advertising on the travel site. But what about audience overlap?

How can the advertiser reduce ad waste by ensuring that members of his audience segment that he is securing for as little as $2.00 CPM on exchanges are not overrepresented on the premium site for which he is paying $18.00 CPM? Plus, how many members of that audience are also already registered as customers? If you are not deploying a DMP to aggregate your clients’ CRM (first-party) data alongside the site-side and ad serving (2nd party) data and the purchased (3rd party) data segments, then there is going to lots of duplicated uniques in your audience. Smart data aggregation creates ad activation through waste reduction, lifting conversion rates, while lowering cost per conversion. Getting an effective universal frequency cap across digital channels is very difficult, but every dollar not wasted on duplicate impressions is another dollar that may be spent finding a new audience member. Reducing waste adds reach—and performance, which every client likes.

Compare it

As a digital media agency, you’ve run hundreds, perhaps even thousands of campaigns, producing thousands of data-rich reports for your clients. How much of that knowledge are you leveraging? Although you might know the top travel sites and audience segments to reach “moms of school-age children in-market for a beach vacation,” how readily available is that knowledge? Is it sitting inside your Media Director’s head, or hidden in various documents that don’t talk to one another? How about access to normative campaign data? How quickly can you find out how certain sites performed against similar KPIs without doing hours of research?

Like or not, advertisers want to know how their campaigns are performing against known standards, and it’s gotten a lot more complicated than beating a 0.1% click-through rate lately. Knowing how your last 10 travel campaigns performed—from which guaranteed site buys succeeded, to which audience segments performed, to which creatives elicited the highest CTR—is just step one. Having that data available for quick reference means that every new campaign can start from an advanced performance level, and your media people don’t have to recreate the wheel every time you receive an RFP.

Today’s smart DMPs also feature the ability to leverage your data to an even greater extent, especially for audience buying. Why limit yourself to pre-packaged audience segments that do not include your client’s first-party data? Today’s more advanced DMPs give marketers the ability to create audience segments on the fly, building discrete segments from data that includes available third-party data—but also first-party data, such as registration details, transactional records, and signals from hosted social media listening solutions. It’s the difference between buying from an ad network and creating your own.

Summary

Buying into portals’ site sections was the first phase in the effort to bring contextual and audience relevance to ad buying. Networks followed, offering packaged audiences at scale. Then bidded exchange buying came, offering pre-packaged audience segments at the individual cookie level. Today’s best practices include marrying all available data types to give marketers the ability to create their own targeted buys, and modern data management platforms are helping the largest advertisers automate what they have been doing since the first direct mail piece went out: finding targeted audiences. Leveraging today’s DMP technology can not only help you find those audiences more easily, but help you understand who they are, why they respond, and help you find them again.

Chris O’Hara is head of strategic partnerships for nPario, a DMP with clients that include Yahoo! and Electronic Arts, among others. A frequent contributor to industry publications, this is his first column for The Agency Post. He can be reached through his blog on www.chrisohara.com

[This article originally appeared in The Agency Post on 1/25/12]

Know Your Audience

January 3, 2012 Leave a comment

Using Audience Measurement Data to Optimize Digital Display Campaigns

These days, advertising and data platforms are giving marketers a wealth of information that can be used to validate their strategies, and optimize their digital campaigns for better performance. There is a lot of data to sort through—some more useful than others. Sometimes, good campaign optimization comes down to the basics: Understanding who your audience is, and why they are doing what they are doing.

Let’s look at a real life example of a digital display campaign, run through the digital ad agency of a popular mattress retailer. The agency wanted to test new inventory sources for the campaign by running broadly on general interest sites, evaluating the demography of audiences that showed purchase intent, and optimize over the course of the campaign to maximize impact.

A theory being tested was that older audiences, who report more difficulty sleeping than younger demographic groups, would respond more favorably to the retailer’s online display ads. Campaigns were initially skewed to sites that over-indexed against audience composed of 50 and older.

Figure 1: Age of Ad Viewer, by Impressions.

As Figure 1 shows, a bulk of impressions during the discovery portion of the campaign were delivered to visitors aged 46-65 years of age, which was the desired demographic. After analysis of those who viewed or clicked on a display ad, and then went on to purchase, the audience composition was remarkably different. As shown in Figure 2, the bulk of conversions came from those aged 18-45.

Figure 2: Age of Mattress Purchaser (Conversions).

The agency adjusted the ad buy to heavy up on sites that over-indexed for a younger audience, and opted out of buys tailored to the older demographic. As wasted impressions were trimmed down in the overall plan, conversion rates increased dramatically. Testing and validating your instincts with data on an ongoing basis is the key to success in digital display advertising. The mattress retailer, who experienced better sales from older store visitors (offline), found a more responsive younger audience online. Although it seems obvious, having the initial data means being able to smartly allocate marketing capital, and having access to ongoing data means not having to rely on old insights in a changing marketplace.

Another offline theory the mattress retailer sought to validate was the mattress life cycle. After collecting brick and mortar sales data for years, the retailer knew that the average life of a mattress was approximately 7 years, and that the single greatest life event influencing the purchase of a new mattress was moving. Therefore, it made sense to target audiences based on length of residence (>7 years), and target content around buying or renting a new home.

Inventory was bought from a wide range of home-specific and moving sites, and measured using Aperture audience measurement populated with data sets from Experian, IXI financial, V12 demographic, and Nielsen PRIZM data.

 

Figure 3: Length of Residence, by Impressions.

Figure 4: Length of Residence, by Click.


As Figures 3 and 4 amply demonstrate, the mattress retailer was targeting the bulk of impressions towards individuals reporting over seven years residence in a single location, and clicks among that group indexed the highest in aggregate. That data validated the approach of buying into sites with a strong audience of self-reported homeowners. However, a deeper look into audience data revealed a strong distinction between renters and buyers.

Fig 5Comparing Impressions and Conversions by home ownership status.

As noted in Figure 5, although the bulk of impressions in the campaign were served to homeowners, renters were the ones buying the most mattresses. This learning did more than any other data point to drive campaign optimization.

Naturally, the next step in the campaign optimization process was to focus inventory delivery to sites that promised a concentrated audience of home renters. Sites such as ForRent.com, ApartmentGuide.com, and Renters.com were added to the optimization plan.

More insights came as the Aperture data was collected. Despite purporting to have a heavy concentration of renters, two of the more popular sites actually index much higher among homeowners, as shown in Figure 6. It looked as though homeowners that were looking into renting made up the majority audience—a fact that helped the retailer tailor specific messaging to them.

Figure 6: In this example, a media site aimed at renters, over-indexes against current homeowners.

Figure 6: In this example, a media site aimed at renters, over-indexes against current homeowners.

For this particular campaign, the ability for the retailer to validate certain audience assumptions using real demographic data was critical, as well as the ability to leverage the distinction between two types of potential customers: home owners, and renters. Additionally, getting real audience metrics beyond a publisher’s media kit or self-declared audience information enabled the retailer to craft its creative and messaging in a highly specific way that increased conversions.

When it comes to audience validation and campaign optimization, here are three keys:

  • Know Your Data: In today’s technology-driven marketing world, knowing how to leverage the data available to you is critical to both understanding and targeting your audience. Make sure your marketing investment decisions are driven through the analysis and usage of 1st party data, including registration data for demographic modeling; 2nd party data, such as ad server and search data for behavioral modeling; and 3rd party data, such as available audience segments from providers like Nielsen and Datalogix, for audience validation, matching, and lookalike modeling. Data is not just about buying audience segments for targeting; it’s about trying to get a 360-degree view of your ideal customer.
  • Choose the Right DMP: There are DMPs for every marketer, so be careful to choose the right one. Big Data needs call for pure play DMPs that can stitch together highly disparate data sets that include all data types, and make both insights, audience segments, and lookalike modeling available in real-time. Marketers looking to buy from a variety of 3rd party audience segment providers should choose a data marketplace such as Exelate, or be willing to access a more limited number of data sources inside a DSP such as AppNexus.
  • Leverage Audience Measurement: Finally, there is a lot that audience segments can bring to the table in terms of audience insights. Understanding the audience composition of who saw, clicked on, and converted after seeing your campaign gives you the ability to learn about your target customers, their online behaviors, and (most importantly) find more of them. Your DMP should have the ability to marry audience and campaign data to give you a highly granular level view of your best (and worst) performing audience types—down to the creative level.

Learnings from this case study, and other valuable information, can be found in my upcoming “Best Practices in Digital Display Media,” coming in January 2012 from eConsultancy.com.

[This article originally appeared in ClickZ on 1/4/2012]

 

Signal to Noise

December 5, 2011 Leave a comment

What Data Should Inform Media Investment Decisions?

The other day, I was updating my Spotify app on my Android device. When it finally loaded, I was asked to log in again. I immediately loaded up a new playlist that I had been building—a real deep dive into the 1980s hardcore music I loved back in my early youth. I’m not sure if you are familiar with the type of music that was happening on New York City’s lower east side between 1977 and 1986, but it was some pretty raw stuff…bands like the Beastie Boys (before they went rap), False Prophets, the Dead Boys, Minor Threat, the Bad Brains, etc. They had some very aggressive songs, with the lyrics and titles to match.

Well, I put my headphones in, and started walking from my office on 6th Avenue and 36th street across to Penn Station to catch the 6:30 train home to Long Island…all the while broadcasting every single song I was listening to on Facebook. Among the least offensive tunes that showed up within my Facebook stream was a Dead Kennedys song with the F-word featured prominently in the song title.  A classic, to be sure, but probably not something all of my wife’s friends wanted to know about.

As you can imagine, my wife (online at the time), was frantically e-mailing me, trying to tell me to stop the offensive social media madness that was seemingly putting a lie to my carefully cultivated, clean, preppy, suburban image.

So why, as a digital marketer, would you care about my Spotify Facebook horror story?

Because my listening habits (and everything else you and I do online, for that matter) are considered invaluable social data “signals” that you are mining to discover my demographic profile, buying habits, shoe size, and (ultimately) what banner ad to serve me in real time. The only problem is that, although I love hardcore music, it doesn’t really define who I am, what I buy, or anything else about me. It is just a sliver of time, captured digitally, sitting alongside billions of pieces of atomic level data, captured somewhere in a massive columnar database.

Here are some other examples of data that are commonly available to marketers, and why they may not offer the insights we think they might:

– Zip Code: Generally, zip codes are considered a decent proxy for income, especially in areas like Alpine, New Jersey, which is small and exclusive. But how about Huntington, Long Island, with an average home value of $516,000? That zip code contains the village of Lloyd Harbor (average home value of $1,300,000) and waterside areas in Huntington Bay like Wincoma, where people with lots of disposable income live).

– Income: In the same vein, income is certainly important and there are a variety of reliable sources that can get close to a consumer’s income profile, but isn’t disposable income a better metric? If you earn $250,000 per year, and your expenses are $260,000, then you are not exactly Nordstrom’s choicest customer. In fact, you are what we call “broke.” Maybe that was okay back in the good old days of government-style deficit spending but, these days, luxury marketers need a sharper scalpel to separate the truly wealthy from the paper tigers.

– Self-Declared Data: We all like to put a lot of emphasis on the answers real consumers give us on surveys, but who hasn’t told a little fib from time to time? If I am “considering a new car” is my price range “$19,000 – $25,500” or “35,000 – $50,000?” This type of social desirability bias is so common that reaearchers have sought other ways of inferring income and purchase behavior. When people lie about themselves, to themselves (in private, no less)  you must take a good deal of self-declared data with a hearty grain of salt.

– Automobile Ownership: Want to know how much dough a person has? Don’t bother looking at his home or zip code. Look at his car. A person who has $1,800 a month to burn on a Land Rover is probably the same person liable to blow $120 on mail order steaks, or book that Easter condo at Steamboat. Auto ownership, among other things, is a great proxy for disposable income.

It would be overly didactic to rehearse all of the possible iterations of false data signals that are being used by marketers right now to make real-time bidding decisions in digital media. There are literally thousands—and social “listening” is starting to make traditional segmentation errors look tame. Take a recent Wall Street Journal article that reported that the three most widely socially-touted television shows fared worse than those than shows which received far less social media attention.

Sorry, but maybe that hot social “meme” you are trying to connect with just isn’t that valuable as a “signal.” We all hear the fire truck going by on 7th Avenue. The problem is that the only people who turn to look at it are the tourists. So what is the savvy marketer to do?

Remember that all data signals are just that: Signals. Small pieces of a very complicated data puzzle that you must weave together to create a profile. Unless you are leveraging reliable first-party data, second-party data, and third party data, and stitching that data together, you cannot get a true view of the consumer.

In my next column, we’ll look at how stitching together disparate data sources can reveal new, more reliable, “signals” of consumer interest and intent.

[This article was originally published in ClickZ on 12/2/2011]

I Fought the Facebook, and the Facebook Won

December 4, 2011 Leave a comment

Some of the 40+ apps running on my Facebook account.

How the Power of Platforms is Transforming Ad Technology

Last month, I wrote about my unfortunate experience with Facebook, which took it upon itself to broadcast my entire Spotify listening experience to the world, seemingly without my knowledge or permission. This aggravated me to the point of proclaiming, quite publicly, that I was going to “commit Facebook suicide” and end my relationship with the social media behemoth. It turns out that is easier said than done.

As I was downloading my Facebook file to prepare for the big quit, I went to check in with my Yahoo Sports Fantasy Football league—and logged in using my Facebook credentials. I immediately realized that Yahoo was merely the tip of the iceberg. Facebook suicide wouldn’t only make it nearly impossible for me to hit the waiver wire and grab newly available Green Bay Packers receiver Donald Driver, it would actually create the Internet version of losing your wallet.

Right now I have 41 applications that interact with Facebook, mostly for credentials, but some with deeper integration: Crunchbase, Yahoo, Business Insider, Bing, Foursquare, Spotify, Quora, Klout, CityPath, Slideshare, Eventbrite, LinkedIn, Gist, Xobni, Plaxo, Microsoft Live, Photobucket, TweetDeck, Nintendo DSi, AIM, Yelp, Scribd, Pandora, HootSuite, WordPress, OpenTable, Loosecubes, and TripAdvisor.

Facebook is also a place for me to post articles, my database of “friends” (many of whom are schoolmates and acquaintances (as I am to many of them), but ones I like to keep in touch with. You never know when a connection may come in handy. A Facebook desertion would impact my Klout score (heaven forbid!); make me remember by Photobucket password, which I registered for about 5 years ago; and make RSVP’ing to my friend’s Christmas party a lot harder than it needs to be. In short, for the active Web user, life without Facebook is like living in Los Angeles without a driver’s license. It’s weird and it’s hard.

Facebook is the definition of sticky. Not only because there is data in there that’s hard to organize elsewhere, but its basic utility makes the cost of switching extremely difficult. Not to mention the fact that there is little to switch to. Google Plus is great, but a bit too late to the party. Nobody wants to manage two social networks. One is more than enough.

So, how did Facebook become the site that’s impossible to leave? Facebook is a great example of the power of platform technology. My former colleague, a longtime Microsoft employee, taught me a lot about the power of platforms and introduced me to this simple definition, written by Marc Andreessen in 2007.

A “platform” is a system that can be programmed and therefore customized by outside developers — users — and in that way, adapted to countless needs and niches that the platform’s original developers could not have possibly contemplated, much less had time to accommodate

 Andreessen identified three types of platforms (and we can associate these definitions with modern examples):

Level 1: Platform’s apps run elsewhere, and call into the platform via a web services API to draw on data and services (e.g., Google Maps, Flickr)

Level 2: Platform’s apps run elsewhere, but inject functionality into the platform via a plug-in API. Most likely, a Level 2 platform’s apps also call into the platform via a web services API to draw on data and services. (Facebook, Firefox, Adobe Photoshop)

Level 3: Platform’s apps run inside the platform itself—the platform provides the “runtime environment” within which the app’s code runs. (Salesforce.com, Ning, Facebook more recently)

My friend tells me that Microsoft somewhat accidentally created the platform business model, and they continue to nurture the ecosystem of development and innovation around Windows with great success. Microsoft was one of the first companies to support outside developers with financial and intellectual resources, and continues to make what they call “Developer Platform Evangelism” part of their DNA. My colleague also rightly pointed out what a shock it was when Apple took a page from the Microsoft playbook and starting cultivating a developer-driven platform approach. (How many applications are available for the iPhone at the moment? Half a million?) Building a flexible, extensible platform upon which others can build businesses is not about creating a product; it is building a living, breathing, sustainable ecosystem that can grow on its own.

Advertising technology is probably the best example of an industry crying out for open platform technology. The now familiar Kawaja map has become the rallying cry for integration, and marketers are looking for smart technologies that can bring disparate systems and point solutions together in a way that actually offers efficiency and performance (rather than being yet another tool to log into). Whether it’s managing digital advertising workflow, or wrangling a mess of 1st and 3rd party data, the answer can be found in a new breed of “open” platforms. When choosing a partner to work with, ask yourself these questions:

  • Security: Is the platform safe? It may seem counterintuitive, but the most open platforms require the greatest levels of security. Look no further than Facebook’s recent deal with the Justice Department to see just how serious platform security is to its ultimate ability to succeed. This is important for all platforms, but most critical when it comes to data management, where a great deal of 1st party data is stored and aggregated.
  • Extensibility: Does my platform solution enable me to extend it’s utility via API (application programming interfaces)? In other words, how easy is it to plug in my billing numbers into my ad management platform, to make the reconciliation process more manageable? Your platform should provide clean, well-written API documentation, and support the access to wide variety of data and services.
  • Adoption: How viable is the platform? A good yardstick of long-term viability is the acceptance rate from the development community. Is there an active and passionate community of businesses and/or individual users developing applications against the platform’s web services?

These are great starting points when considering leveraging a platform technology for your business, but you should also ask yourself how your company can leverage the principles of platform technology to be more successful. This is happening every day, as companies leverage Saleforce.com’s awesome platform technology and cloud infrastructure to create new internal or client-facing applications. How about online publishers? Instead of constantly putting together reports for their advertisers, what if they leveraged a platform that enables their biggest advertisers to build their own reports, and mix them with internal data to get new customer insights? The possibilities are endless.

I recently found out that is was impossible to quit Facebook. Understanding platform economics may inspire you to leverage technology to generate an ecosystem that your customers can’t leave either.

[This article was published in eConsultancy blog on 12/12/11 ]

When Big Data Doesn’t Provide Big Insights

November 9, 2011 Leave a comment

The right DMP solution can be golden for finding audiences.

What big marketers should look for in a next generation data management platform

“Big Data” is all the rage right now, and for a good reason. The other day, I was switching computers, and wanted to move about five gigabytes of photos and videos unto my new laptop, and my largest thumb drive was a measly 1 gig. I ended up getting an 8GB thumb drive for about $8 at the K-Mart in Penn Station. Think about how cheap that is. That’s less than half a cent per song, if you consider the typical 8GB MP3 device can hold about 2,000 high-quality recordings. Two terabyte drives are selling for about $130 from Western Digital. I don’t know about you, but I am not at the point where I need 2TB of data storage, and I hope I never get there. The point is that storing tons and tons of data has gotten very inexpensive, while the accessibility of that data has increased substantially in parallel.

For the modern marketer, that means having access to literally dozens of disparate data sources, each of which cranks out large volumes of data every day. Collecting, understanding, and taking action against those data sets is going to make or break companies from now on. Luckily, an almost endless variety of companies have sprung up to assist agencies and advertisers with the challenge. When it comes to the largest volumes of data, however, there are some highly specific attributes you should consider when selecting a data management platform (DMP).

Collection and Storage: It’s all About Scale, Cost, and Ownership

First of all, before you can do anything with large amounts of data, you need a place to keep it. That place is increasingly becoming “the cloud” (i.e., someone else’s servers), but it can also be your own servers. If you think you have a large of data now, you will be surprised at how much it will grow. As devices like the iPad proliferate, changing the way we find content, even more data will be generated. Companies that have data solutions with the proven ability to scale at low costs will be best able to extract real value out of this data. Make sure to understand how your your DMP scales and what kinds of hardware they use for storage and retrieval.

Speaking of hardware, be on the lookout for companies that formerly sold hardware (servers) getting into the data business so they can sell you more machines. When the data is the “razor,” the servers necessarily become the “blades.” You want a data solution whose architecture enables the easy ingestion of large, new data sets, and one that takes advantage of dynamic cloud provisioning to keep ongoing costs low. Not necessarily a hardware partner.

Additionally, your platform should be able to manage extremely high volumes of data quickly, have an architecture that enables other systems to plug in seamlessly, and whose core functionality enables multi-dimensional analysis of the stored data—at a highly granular level. Your data are going to grow exponentially, so the first rule of data management is making sure that, as your data grows, your ability to query them scales as well. Look for a partner that can deliver on those core attributes, and be wary of partners that have expertise in storing limited data sets. There are a lot of former ad networks out there with a great deal of experience managing common 3rd party data sets from vendors like Nielsen, IXI, and Datalogix. When it comes to basic audience segmentation, there is a need to manage access to those streams. But, if you are planning on capturing and analyzing data that includes CRM and transactional data, social signals, and other large data sets, you should look for a DMP that has experience working with 1st party data as well as 3rd party datasets.

The concept of ownership is also becoming increasingly important in the world of audience data. While the source of data will continue to be distributed, make sure that whether you choose a hosted or a self-hosted model, your data ultimately belongs to you. This allows you to control the policies around historical storage and enables you to use the data across multiple channels.

Consolidation and Insights: Welcome to the (Second) Party

Third party data (in this context, available audience segments for online targeting and measurement) is the stuff that the famous Kawaja logo vomit map was born from. Look at the map, and you are looking at over 250 companies dedicated to using 3rd party data to define and target audiences. A growing number of platforms help marketers analyze, purchase, and deploy that data for targeting (BlueKai, eXelate, Legolas being great examples). Other networks (Lotame, Collective, Turn) have leveraged their proprietary data along with their clients to offer audience management tools that combine their data and 3rd party data to optimize campaigns. Still others (PulsePoint’s Aperture tool being a great example) leverage all kinds of 3rd party data to measure online audiences, so they can be modeled and targeted against.

The key is not having the most 3rd party data, however. Your DMP should be about marrying highly validated 1st party data, and matching it against 3rd party data for the purposes of identifying, anonymizing, and matching third party users. DMPs must be able to consolidate and create as whole of a view of your audience as possible. Your DMP solution must be able to enrich the audience information using second and third party data. Second party data is the data associated with audience outside your network (for example, an ad viewed on a publisher site or search engine). While you must choose the right set of 3rd party providers that provide the best data set about your audience, your DMP must be able to increase reach by ensuring that you can collect information about as many relevant users as possible and through lookalike modeling.

For example, if I am selling cars and I find out that my on-site users who register for a test drive are most closely matched with PRIZM’s “Country Squires” segment,  it is not enough to buy the Nielsen segment. A good DMP enables you to create your own lookalike segment by leveraging that insight—and the tons of data you already have. In other words, the right DMP partner can help you leverage 3rd party data to activate your own (1st party) data.

Make sure your provider leads with management of 1st party data, has experience mining both types of data to produce the types of insights you need for your campaigns, and can get that data quickly. Data management platforms aren’t just about managing gigantic spreadsheets. They are about finding out who your customers are, and building an audience DNA that you can replicate.

Making it Work         

At the end of the day, it’s not just about getting all kind of nifty insights from the data. I mean, it’s big to know that your visitors that were exposed to search and display ads converted at a 16% higher rate, or that your customers have an average of two females in the household. It’s making those insights meaningful.

So, what to look for in a data management platform in terms of actionability? For the large agency or advertiser, the basic functionality has to be creating an audience segment. In other words, when the blend of data in the platform reveals that showing 5 display ads and two SEM ads to a household with 2 women in it creates sales, the platform should be able to seamlessly produce that segment and prepare it for ingestion into a DSP or advertising platform. That means a having an extensible architecture that enables the platform to integrate easily with other systems. Moreover, your DMP should enable you to do a wide range of experimentation with your insights. Marketers often wonder what levers they should pull to create specific results (i.e., if I change my display creative, and increase the frequency cap to X for a given audience segment, how much will conversions increase)? Great DMPs can help built those attribution scenarios, and help marketers visualize results. Deploying specific optimizations in a test environment first means less waste, and more performance. Optimizing in the cloud first is going to become the new standard in marketing.

Final Thoughts

There are a lot of great data management companies out there, some better suited than others when it comes to specific needs. If you are in the market for one, and you have a lot of first party data to manage, following these three rules will lead to success:

  • Go beyond 3rd party data by choosing a platform that enables you to develop deep audience profiles that leverage first and third party data insights. With ubiquitous access to 3rd party data, using your proprietary data stream for differentiation is key.
  • Choose a platform that makes acting on the data easy and effective. “Shiny, sexy” reports are great, but the right DMP should help you take the beautifully presented insights in your UI, and making them work for you.
  • Make sure your platform has an applications layer. DMPs must not only provide the ability to profile your segments, but also assist you with experimentation and attribution–and provide you with ability to easily perform complicated analyses (Churn, and Closed Loop being two great examples). If your platform can’t make the data dance, find another partner.

[This post was originally published in ClickZ on 11/9/11]

 

 

Down and Dirty Platform Guide

October 14, 2011 Leave a comment

What's powering your agency's black box?

Currently, Donovan Data Systems and MediaBank own the advertising platform space, with more than 80% market share among agencies, which use the platforms extensively for buying offline media, and use their systems to bill digital media campaigns. Neither have a very sophisticated digital offering, which may be why the two companies teamed up to create MediaOcean (a merger currently pending approval from the government). They will have the best shot at aggregating all the workflow for media planning, buying, and billing—across all media types. Ultimately, their ability to succeed will depend upon their willingness to build the type of “ecosystem-like” platform described below—and the appetite of ad agencies to work with one, dominant provider. Many agencies continue to leverage their legacy platform for offline media, and are looking at new solutions for managing digital media.

Quite a few start-ups have arisen to try and answer the digital media gap left by MediaOcean. Advertisers and agencies are currently using a mix of various resources to meet campaign needs. They can be broken down into the following categories:

Workflow Platforms: Workflow platforms aim to consolidate the process of discovering, buying, serving, and reporting on digital display campaigns in one interface. By leveraging this technology, agencies can eliminate some of the rote planning processes (collating Excel spreadsheets, faxing insertion orders, and compiling ad serving reports) and take action against data they see in the dashboard, enabling faster optimization. Platforms like TRAFFIQ also include robust planning data, appended by third party demographic data from Nielsen, as well as the ability to access audience measurement data (from PulsePoint’s Aperture tool). Centro’s Transis offering is more of a lightweight management tool, while Facilitate Digital provides a big agency approach that marries ad serving with global currency and language support, and sophisticated tools for generating insertion orders and bills. As mentioned previously, MediaOcean will try and build a next generation digital platform that enables all of that functionality—and tie it to their widely adopted offline media management tools. This is really the future of digital media planning. You should be testing multiple workflow platforms and making sure that you are letting systems perform the menial tasks in digital media management, rather than expensive account and media personnel.

–  Trading Desks: Large holding companies have all universally created teams that handle real time audience buying. In an effort to distintermediate ad networks, and thus recapture lost media margins, agency “trading desks” have popped up to handle reach and performance campaigns for their clients. Many leverage existing DSP technology, such as Turn or MediaMath (see below), and all of them are focused on leveraging their media buying volume to capture audience data at scale. WPP’s Xaxis, launched in June 2011, is an example of how holding companies are aggregating their technology assets to do this:

In forming Xaxis, WPP brings together a broad portfolio of audience buying capabilities that have been independently developed and optimized in various parts of GroupM and WPP Digital over the past three years in businesses including B3, targ.ad, GoldNetwork, GroupM DSP and the GroupM Marketplace.  In 2010 alone, the businesses that have combined to form Xaxis executed approximately 4,000 campaigns for more than 400 GroupM clients. Xaxis will be led by CEO Brian Lesser, who previously served as global general manager of the Media Innovation Group (MIG), WPP’s digital marketing technology company.

Undoubtedly, they will seek to leverage other data insights from Kantar and SEM technologies to deliver performance marketing across multiple digital channels at scale. Other holding company Trading desks include Accuen (Omnicom), VivaKi (Publicis), and Cadreon (IPG). Smaller media groups also have their own desks, including Adnetik (Grupo ISP) and Varick Media Management (MDC Partners).

Obviously, if you are part of an agency holding company with access to the technology tools and services offered by a trading desk, you have the potential to leverage these assets, but must weight them against the (often high) costs. All of the trading desks execute buys on a managed service basis, rather than exposing a user interface, which does not enable individual agency planners/buyers to get real-time buying expertise. Additionally, many of the services the holding company trading desk offers are available directly through DSPs and their managed service teams.

The inherent conflict of interest in agency trading desks must also be taken into account when deciding the best approach to audience buying for your agency. As Mike Shields recently wrote in Digiday in his article entitled, “The Trouble with Trading Desks”:

According to multiple industry sources, some prominent brands are growing increasingly uncomfortable with their digital agencies funneling money to sister company trading desks (the holding company divisions that purchase ad inventory on exchanges). They are asking questions about how these trading desks earn revenue and whether clients are being charged more than once for executing the same media plan. The shift to programmatic audience-based ad buys through exchanges is undeniably an important advance to the online ad model, but agency holding companies have also taken it as an opportunity to update their own outdated business models in ways that are likely to leave some procurement chiefs scratching their heads.

The questions are murkier when it comes to the issue of “mandates.” There has long been talk that orders have come from the highest levels of agency holding companies for its agencies to redirect spot ad buys through the in-house trading desk rather than ad networks. Holding company and agency reps rebuff questions on this, but their words don’t always match up with reality. In some cases, holding companies are incentivizing their individual agencies’ media planning teams through revenue goals and even bonuses, according to several sources.

For example, Digiday was shown an email from a planner at a top Publicis agency stating that her team was not allowed to work with any networks and exchanges. “We are not authorized to buy networks and exchanges,” read the email from a buyer at a major media agency. “We are required to use [Publicis trading desk] Audience on Demand.” One prominent agency executive explained that over the past year her planning team was given quarterly goals to allocate more client budgets to exchanges, which she ignored. Other agencies compensate their teams for shifting more spending to trading desks; it’s actually in some planners’ contacts, she said. This is causing major friction in some cases between planning agencies and their trading desk partners, said a source.              

 –  Demand Side Platforms: An increasingly common part of the modern digital marketer’s toolset is the DSP, or demand side platform. Obviously, if you are working within one of the holding companies, you would be encouraged to deploy your audience-targeted media through the preferred Trading Desk, all of which leverage one or more independent DSPs. The top DSPs in the space at this time are Invite Media (acquired by Google), Turn, MediaMath, DataXu, X+1, and Triggit. Invite recently raised their minimum pricing to reportedly $50,000 per brand, per month, putting their services out of reach for the typical mid-sized agency. Among the rest, MediaMath has a reputation for having the most proprietary trading strategy, and unique optimization algorithms, with Turn not far behind. Most DSPs provide a blended service approach to trading, offering a mix of self-service tools and managed service support. Almost all of them utilize similar algorithms—and all of them have access to a wide variety of data providers for audience targeting. In considering your business’ approach to leveraging currently available DSP technology, the best strategy is to test as many as possible alongside each other. Most offer trial periods with discounted monthly minimums.

Choosing the right DSP partner has a lot to do with the amount of display volume you anticipate running on an annual basis. Larger providers can charge anywhere between $2,500 and $10,000 per month in minimum fees. Triggit and XA.net offer more competitive pricing for small and mid-sized agencies. For those agencies and advertisers that plan on having trading expertise in-house, and just want to leverage DSP technology, AppNexus is a great choice. Appnexus has built a fully-featured self-service platform (called the “AppNexus” Console, formerly called “DisplayWords”) on top of a broad ecosystem of exchange inventory and data, to create a veritable Sam’s Club for real time buyers. With over 800+ inventory sources available (Google, MSN, OpenX, Admeld, PubMatic, Rubicon) and a good amount of embedded data providers (eXelate, TargusInfo, Datonics, Bizo, Proximic, Peer39, etc.), AppNexus aims to be a one-stop shop for demand side customers looking for their own DSP solution. In addition, they make APIs available to prospective partners interested in building their own media UI on top of their bidding and ad serving technologies. AppNexus has great product support, but is designed for the customer that wants to have total control. For those who want AppNexus capabilities with a managed service layer, Accordant Media would be a great place to start.

Many agencies and advertisers are still struggling with whether or not they should deploy DSP technology to drive display media buying—and with their choice of provider. I think that Nat Turner, Invite Media’s CEO probably summed it up best in his 2010 AdExchanger article, which offered a list of key characteristics that define a “true DSP:”

  • The DSP must provide a fully self-service interface.  Clients should be able to have complete control via the interface and build an expertise around its use.
  • If the DSP provides managed services help to the agency, the DSP should be using the same interface that the agency would be using.  The technology should not require any manual work behind the scenes to activate or “set live” a change or a campaign.
  • The DSP must remain neutral and have zero allegiances to any publishers, exchanges, data providers or other vendors.  A true DSP should embody the word “platform” and not just be conduit or pretty interface to a pre-existing business.
  • The DSP must be fully transparent, starting with pricing and fees.  All fees that the DSP earns should be exposed in the interface, and every penny that the DSP makes should be known and visible to the agency.
  • The DSP should not mark-up media cost without the agency knowing.
  • The DSP should not mark-up data cost without the agency knowing.
  • If the DSP works with a publisher directly, it should be in an effort to make that publisher’s inventory “biddable.”  The DSP should not earn any additional margin from revenue sharing with the publisher or arbitraging the inventory.
  • The DSP must allow the agency to use its own exchange seats.  This allows the agency to always have visibility into the exact cost of media to ensure the DSP is not taking any additional margin.
  • Just like media, the DSP must allow the agency to buy or negotiate data cost directly, but flow through a common integration.  Data should be treated like media, it’s another part of the “supply side” that is purchased by the agency and thus should be transparent in cost.
  • The DSP should not, under any circumstances, own or operate an ad network.  This is in direct conflict with the neutrality aspect.
  • The DSP’s goal should be to expose any feature or tool that a supply source provides (either ad exchange or data provider) and not to try and obfuscate/hide or re-brand certain components (ex. “DSP Auto Segment #1″, with no transparency into what that means).  If a supply source provides it, the DSP should expose it for the agency self-service and let the agency decide whether to use it or not.
  • The DSP should not “bulk buy” media in order to re-sell to its clients.  This could either be a function of another way to make margin, a lacking of technology, or a combination of the two.
  • Related to the above, the DSP should not take on media risk.  Every impression should be purchased on behalf of a platform user at that time based on an active campaign that that platform user has created targeting that impression.

These DSP “principles” have not changed since 2010, and continue to be a great set of guidelines for choosing your real-time bidding technology provider. Ultimately, you want to be able to have total control over your bids, insights into the type of traffic available in the platform, and expect complete transparency with regard to your vendor’s pricing model. The right DSP relationship should reduce your dependence upon ad networks, lowering your overall media costs, and increasing campaign performance.

[This is an excerpt from the upcoming "Best Practices in Digital Display" whitepaper, available soon from eConsultancy]

MediaOcean: So wrong, yet so right…

September 28, 2011 Leave a comment

MediaOcean: So Wrong, yet So Right!

A “platform” is a system that can be programmed and therefore customized by outside developers — users — and in that way, adapted to countless needs and niches that the platform’s original developers could not have possibly contemplated, much less had time to accommodate.  – Marc Andreessen, 2007

Last week’s news of the merger between DDS and MediaBank was certainly exciting. In digital media management terms, it’s kind of akin to rooting for the Yankees; only their fans want to see them grow more powerful, because it sure ain’t good for baseball. These two behemoths have been fighting over agency budgets for the last four years, and have managed to steal a bit of market share from one another, while advancing the cross-media efficiency agenda slightly. The stated hope for this merger is that the corporate combination will give them enough firepower to finish the golf swing and solve the insanely complicated digital media puzzle, making cross media management possible in a real way.

Is this merger good for the digital media ecosystem? Maybe. Here are the three factors that will determine whether MediaOcean will become the digital media industry’s defacto system:

Standards are good: First off, it helps when everybody is reading from the same sheet of music, and there isn’t an industry that hasn’t benefitted from a common, accepted set of standards. The IAB has done a great job in terms of helping standardize ad sizes and out clauses, and some of the systems and procedures that help oil digital business transactions. An argument could be made that having 80% of agency dollar volume running through the same system brings efficiencies to the entire media buying landscape, but I’m not sure anyone in the industry would say that this was the case when DDS had larger market share.

For digital marketers, a significant hassle has been bill/pay and reconciliation, and that has been an area of focus for DDS and MediaBank across digital and traditional media. There is no doubt they can help standardize the process by which advertisers and publishers reconcile delivery even just by being the largest player – they can bring a de facto standard to bear, but how quickly can they really react to a rapidly evolving space with myriad nuances in ideal workflows for almost every customer? If they can change their DNA, they will be a force to be contended with.

– Platforms are good:  Secondly (and most importantly),  the right approach to solving this problem is an open platform approach. But none of the leaders in this space have shown any predisposition for opening things up.  This is in large part because the technology landscape has evolved so fast that the legacy companies haven’t been able to adapt their systems to keep up.  The market needs an open, extensible platform approach to solve its numerous problems, the question is can any of the existing leaders in the space, including MediaOcean, provide that?

My colleague, Eric Picard, learned about the power of platform effects while working at Microsoft over the last several years. He recently educated me on the varieties of platform approaches that could be taken in our space, and has offered to let me publish that here:

Systems vs. Platforms: The first thing to discuss is that most companies in our space have built systems – not platforms (despite everyone using the word platform for everything.)  A system simply exists on its own, is proprietary and closed – it doesn’t allow third parties to build on top of it.  This describes almost all the offerings in our industry today.

 

Simple Platforms – or Mashups: Most of us have experienced a ‘mashup’ in one shape or another by now. This is where a tool or web site is built that calls to numerous remote services (APIs or Web Services) to build one cohesive interface.   In this case, the platform is really all the multiple different systems used ‘behind the scenes’ to create one simple application that you could use.  Many web sites use this technique, using various content management systems, ad servers, etc… A lot of the SEMs and DSPs use this approach, building their own interface that hits each of the Paid Search providers or Ad Exchanges via API.

 

Consumable Back-End Platforms: Lots of companies now offer API access to their systems.  This kind of ‘back-end’ access is then used by third parties to ‘mash-up’ the functionality with either their own or other third party functionality.  AppNexus, Right Media Exchange, Atlas, DoubleClick, and numerous others provided this kind of back-end access by API.  Some of the more sophisticated providers, like AppNexus and RMX even enable third parties to extend their functionality to some degree – but they don’t make that extension generically consumable.

 

Ecosystem-like Platforms: A great example of this is Salesforce.com – which has built out a platform that really begins to live up to the market opportunity that the industry should be looking for.  Salesforce enables numerous services that can be consumed, like the platforms and mashups we discussed above.  But they also let third party vendors come in and extend the functionality of the core Salesforce platform.  They even provide an App marketplace, similar to iTunes, that allows third party vendors to distribute their applications to existing Salesforce customers.  This is a powerful approach, but requires a whole new set of skills that most companies in the ad technology space are not quite able to pull off.

 

Within this overall context of platforms verses systems, you can see the variety of approaches being taken by the various parties in the ad ecosystem:

Google offers third parties APIs to write against, but keeps the vendors playing in the search ecosystem on their toes by frequently changing the APIs, and it’s fairly clear that their goal is to be both the platform and the applications that run the advertising ecosystem.  They support third parties, but only as it furthers their end-game. 

The ad servers understand that their value is in the engine, much more-so than their workflow.  And they’ve opened up APIs to let other workflows plug in and become mashups that ultimately are powered by the smarts of the ad servers behind the scenes.   

Donovan Data Systems has brought one mashup workflow to market, their iDesk product.  It interfaces with DDS’s other applications fairly well, and can integrate with the dominant ad servers.  MediaBank has done somewhat similar things with their application suites, but has taken a more “Google-like” approach when it comes to their business – investing in their own DSP and automated media buying systems. This investment in products that compete directly with the very vendors that would need to integrate into the combined system causes me to pause a bit.

At the end of the day – it’s hard to understand who might have the right DNA among these constituents to actually roll out the right platform to solve the industry’s needs.

–Creativity is good: Finally, I think a development like this is excellent, if it actually creates an environment that transforms where digital media people spend their time. Right now, digital agencies spend most of their time and effort trying to wrangle an “ecosystem” of nearly 300 technology, data, and media providers. They spend the bulk of their time trying to execute media plans, rather than coming up with creative strategies to engage consumers. The mess of systems, lack of standards, multiple log-ins, and unmanageable hoards of data that each system throws off has created the ultimate irony: digital media is becoming the least creative, least profitable, and least measurable channel for marketers. If the merger brings us one step closer to making the digital execution piece easier, and gets the conversation back to creative, than I think it’s a step in the right direction.

After being out in the field, and talking to over 400 agencies about their digital media needs, I know that a standardized platform is what everybody wants. Whether or not MediaOcean is going to be nimble and creative enough to deliver a system that meets the needs of our growing ecosystem is very much in question. Technology has always thrived on choice, flexibility, and open standards. I believe that the company that can deliver on all three will end up winning.

[This commentary appeared in Adotas on 9/29/11]


Traffiq integrates Nielsen site audience data (Interview)

September 21, 2011 Leave a comment

Media management software firm Traffiq has partnered with audience measurement company The Nielsen Co. to provide advertisers access to Nielsen’s target-marketing platform @Plan. The integration will go live on Sept. 21 for all roughly 400 registered customers of Traffiq’s display ad-buying platform, said Chris O’Hara, SVP of sales and marketing at Traffiq.

Customers “are able to come into Traffiq, throw on a campaign and get @Plan data appended by Nielsen [which is] really great demographic information and do decisioning on whether they should advertise based on that information,” O’Hara said.

Nielsen’s @Plan platform will display websites’ number of monthly unique visitors as well as site visitors’ demographic information, such as gender, age, education level, household income, ethnicity and marital status.

Previously, Traffiq customers only had access to publishers’ self-reported data, which was “not that accurate,” said O’Hara. In addition to supplementing site audience data for the 3,000 publishers available on Traffiq’s platform, the partnership adds data for 7,000 publishers collected by Nielsen, he said.

O’Hara said the partnership marks the first time Nielsen has made the @Plan platform available to non-@Plan customers.

[This post appeared in Direct Marketing News on 9/21/11]

The Great Publisher Disruption

April 27, 2011 Leave a comment

ADOTAS – Remember when you used to really depend on your local paper? For finding jobs, houses, getting the local weather forecast, selling that boat in your yard, and getting last night’s sports scores? I still do…but barely.

Most of what your local paper offers can be found in greater abundance (and at higher quality) elsewhere and, now that everyone is glued to their iPhone, rather than flipping newsprint on their commute, most of that content is only a click (or, more likely, a finger touch) away.

Jobs Section –> Monster.com
Real Estate Section –> MLS, Zillow
Business News –> WSJ.com
Weather Report –> Weather.com
Classified Sales –>Craigslist
Sports –> ESPN.com
Travel Section –>TripAdvisor.com
National News –> WSJ.com
Gossip –> PerezHilton.com

As the above demonstrates, the only area of superior content the local news website has left is local news, and even that has suffered as papers reduce reporting staff and rely more upon outside content providers to fill pages. Although local papers came to the online party rather late, they managed to quickly build reliable websites and leverage their most valuable content effectively.

Monetizing that content has fallen far short of revenue expectations for the most part. The AAAA’s recent report that ad agencies lose up to a third of their media cost servicing digital media buys (as opposed to only 2% with television) was eye opening, but probably nothing compared to what publishers feel.

Back when I was running sales for a Nielsen group, we were struggling with the fact that the same $100,000 once earned by selling a small schedule of print ads was now taking an enormous effort to create.

With print, you are simply selling space. The advertiser provided the content (a PDF) and you put it inside a magazine or newspaper, alongside compelling editorial. Publishers focused on producing the content they wanted and advertisers produced brand ads that appealed to a like audience.

Then, all of the sudden, advertisers started to lose interest in print advertising alone. Sure, maybe they still ran a small print schedule, but now they wanted some content to go along with it: maybe a “microsite” or a custom series of events, or perhaps an advertorial.

Then publishers found themselves allocating resources to writers, designers, and photographers—and acting like a small agency on behalf of their clients. Kind of cool, but the problem was that the advertiser had the same $100,000 to spend. They were all over you, and they wanted stuff like “ROI.” Publishers’ margins were compressed, resources (once dedicated mostly to producing their own content) were misallocated, and their employees were getting burnt out.

Let’s take this to 2007, and the emergence of social media. Now advertisers didn’t even need publishers to develop their content, because they could create their own blogs from scratch (Blogger) and start building online communities (Facebook). Enter Twitter and now every employee in the building has their own mini PR platform which could be leveraged for the company.

Talk about disruption. With thousands of really smart writers, photographers, and designers willing to work cheaply, from home — and with access to free, web-based tools equal or more powerful than any in-house software a publishing company could provide, now publishers were losing the only edge they had: the ability to produce content at scale.

The Googles of the world will always argue that they “need” content providers like The New York Times to continue to provide thought leadership, but web-based content marketplaces like Associated Content and others have only validated the concept that traditional publishers (no matter how big their websites are) are losing their power positions when it comes to content. (Except WSJ, which produces content so exceptional that people are willing to pay for it, but that’s for another article).

So, in this new reality, the publisher is left trying to protect his last tangible asset: his online advertising inventory. He can’t sell subscriptions, he can’t pay to have leadership in any other category besides local news, and now huge sites can geotarget ads to create larger audiences than he has. Spot quiz: who has more unique users in the Anchorage, Alaska DMA: Yahoo or the Anchorage Daily News? I don’t know either, but this is part of the problem.

When the starting point for most computers is search, local media misses the boat on what used to be their wheelhouse. Search for “Anchorage restaurants” on Google, and Fodors, Yahoo, and the local visitor’s bureau sites come up before ADN.com.

In response to this atmosphere of ever-increasing margin compression, competition, customer dilution, and constant need to understand and embrace new technologies, local publishers turned to the experts in online revenue monetization: networks, exchanges, and aggregators. Now (with networks and exchanges), as simple as placing a few ad tags throughout their pages, newspapers could monetize the 70% of inventory they couldn’t sell directly.

Establishing a daisy-chain of ad calls to backfill their unsold inventory was easy, and at least there was some visibility into revenue (amount of impressions available, divided by 1,000, times 65 cents). Despite the ease of use, the rates continue to be painfully cheap, and you never can really tell what the tolerance level of your audience is for an endless stream of teeth whitening, tanning, diet, or Acai berry offers will be.

Aggregators like Centro, LION New Media, Quadrant One, or Cox Cross Media offer a much better solution: real advertisers that need and respect real local inventory. These aggregators provide a great one-stop shop for advertisers and agencies that may not have the depth of knowledge (or personnel) to negotiate and service a multitude of small buys on dozens of local media sites.

As a result these aggregators earn the money they arbitrage by providing the expertise to buy local media at scale. Smarter companies like Centro are leveraging the in-house systems they have developed over the years to navigate this process and making it available to agencies directly (Transis).

However, when it comes to selling premium inventory, specialized sponsorships, or anything beyond standard inventory, the aggregators can’t really play in that space at scale; advertisers still need to partner with local media to make those deals happen.

Ultimately, I see local websites winning by being able to offer more than just inventory. For them, hustling uniques and impressions is a zero sum game. They will never compete against the networks and (with 65-cent CPMs on their remnant space) the networks and exchanges aren’t exactly their best allies.

What agencies need is for technology to help them scale the way they reach advertisers, in an open and transparent way—and systems that give them the ability to do more than place an ad tag on their pages and pray for a good campaign to hit the transom.

We feel the future for publishers is an open marketplace that enables good local media sites to package their premium inventory to advertisers who truly value the local audience: the regional ad agencies across the country who service the local hospitals, schools, banks, and businesses that need local content aimed at local customers.

Ultimately, publishers need systems that can give them placement level control over their inventory, total pricing and deal point control, and access to both agencies and direct advertisers in the same environment. There should be a place between getting a 75-cent Acai berry ad on your homepage and running a $50 CPM rich media expandable.

Publishers need to be able to negotiate both types of deals, and do them at scale, with total control. An open and transparent marketplace that enables publishers to market their entire inventory—not just remnant—is where the future is headed.

[first published in Adotas, 4/1/2010]

Digital Marketing Questions in Search of Answers

September 13, 2011 Leave a comment

Over the course of the past year, my colleagues and I have gone around the country speaking to more than 400 agencies about their digital advertising businesses. These agencies represent the lifeblood of American business: They are the regional shops that market the local hospital chains, regional tourism, restaurants, and retailers. Whether they are in Anchorage, Miami, Sioux City, or New York City, they are all facing similar digital media challenges.

The 300,000-channel world of digital marketing is exponentially more complicated than the not-so-distant past when radio, broadcast, and out-of-home advertising were the only games in town. “Most clients expect some level of digital services from their agency,” according to Tammy Harris, the media director of Neathawk Dubuque & Packett, a leading healthcare marketing firm based in Richmond, Va.

This makes it much harder for agencies to deliver impeccable plans, provide great analytics, and continually ensure better rates and performance. Plus, clients want to use analytics to uncover how their products are selling in a new, connected age. The old black box of television offered a model that worked for a long, long time; if you had enough money to feed it, the television produced an audience broad enough to justify the marketing expense. Agencies fed the beast with commercials and earned market share. Now, with an audience splintered into hundreds of cable and satellite channels, and with 25 percent of the audience fast-forwarding through the commercials with their DVRs, that model is broken. Radio is better off, but even that is being corroded by pay-to-play models. Besides, it has always been hard to build a brand verbally.

So, agencies are faced with the need to build client brands online through websites and Facebook pages. They have to get customers to those pages via search marketing and display ads. Is it that hard to figure out where the digital audience for a product lives? Of course not. Agencies that want to reach young men can find themselves on ESPN or Break.com’s media kit within the space of 60 seconds. Want to reach people with hyperhydrosis (excessive sweating)? There’s a whole section of WebMD dedicated to it, and the site would be delighted to sell you a sponsorship. Want to build a Facebook page and stock it full of fans you can constantly tweet to? A few recent college graduates can have that up and running and packed full of content in a week or two.

The problem isn’t executing a digital marketing strategy or finding an audience. The problem for agencies is that is really hard to do it at scale — and even more difficult to make any money doing it. A recent study by AAAA cited that the cost of servicing digital campaigns averages 30 percent of an agency’s media cost, as opposed to 2 percent for television buys. That sounds hard to believe, but not when you think about the back-end an agency needs to be truly successful in the digital space.

As Harris puts it, “The bulk of the time required to plan and place traditional media happens up-front, while digital media requires attention throughout the run. The ability to track, optimize, and report so many metrics requires many hours, and because digital media often costs less than traditional, it means agencies are doing more work for less money.”

Even if you are just a media shop, you need some serious tools to get the job done. First off, you need to be able to build and maintain cutting-edge websites, and that capability encompasses a lot of expensive, technical personnel. Researching sites with any credibility means having access to expensive Nielsen or comScore subscriptions. Doing SEO and SEM? You better have a young employee to head up your search and analytics practice, and these folks aren’t cheap. If you want to serve ads with any volume, and have access to your own data, you will need your own ad server. How about tracking website activity? Enter Omniture, or other analytics software. What about optimizing campaigns, tracking conversions, putting up and taking down ad tags? Get ready to hire and maintain a serious ad operations team. And it doesn’t end with the campaign.

After all of this, in even the most successful online marketing effort, the billing and reconciliation game is just beginning. A client might ask, “My server says you served 100,000 impressions, and you are charging me for 125,000?” To which the agency might respond, “Who pays, based on whose numbers, and when am I getting paid anyway?” It goes on and on. In some ways, it’s hard to imagine how agencies make any money on digital advertising at all.

For Marci De Vries, former head of media of Baltimore-based IMRE, and now a small-agency owner herself (MDV Interactive), digital marketing can quickly become a zero-sum game. “If the developer of these tools can make money on expensive tools, then good for them,” she says. “What I’ve seen lately is that those expensive tools are bought by 10 percent or less of their market, and then are underutilized because only a few license seats are purchased. The overall value to an agency of expensive software is close to zero. Meanwhile, the web community is copying the functionality, databases, and ability to provide meaningful information and distributing it for free or almost free. The overall value to agencies is very high, although it also levels the playing field between small shops and big shops. The web community likes to level the playing field.”

Kent Kirschner, the owner of The Media Maquiladora, a Latin American specialty agency with offices in Sarasota and Mexico City, says the problem is starting to get even more pronounced as multicultural agencies begin to come to the digital party. “Margin compression is a phenomenon affecting all aspects of the industry,” he says. “The rise of CPC, CPA, and other performance-based pricing has compelled all marketers to think that our profession now should be held to a different measure. Our creative and strategic work is now almost inevitably met with skepticism if there isn’t some direct and easily identifiable performance metric attached to it. So clients value what we do less and drive us to wring more and more out of our media partners and our teams. In many cases, they don’t pull their own weight in developing appropriate data measurement systems to identify the impact of our work.”

It’s not only measurement that impacts an agency’s margin and daily workflow. Real in-house innovation must continue to be what differentiates agencies from each other — and the host of widely available tools on the market. “The internet continues to drive the price point for traditional agency materials down to zero every day,” De Vries says. “There is a community on the web that is in favor of sharing repeatable work so that more money can be spent on real innovation. To help eliminate what they consider mundane tasks, they offer free design templates, CMS platforms with extreme performance, and in some cases even free logo work.”

Peter Gerritsen, well-known ad man and now Transworld Advertising Agency Network (TAAN) head, feels the same way. “The squeeze of economic conditions on the advertising community, and on marketing budgets, has created an environment of cost-control at any price, even to the detriment of quality,” he says. “While this is short-sighted, it has become the lead in negotiating compensation. In many areas, it has become not about the value of doing it best, but how little it will take to just get it done. The advertising industry has commoditized many of the steps required to produce communications. A commodity is measured by cost, not by quality. Expertise is measured on outcomes and value. The experts command premiums for their work. Agencies need to position themselves as experts in defined businesses. Deep expertise is better than commoditized capabilities.”

Agencies are now forced to do what they always do when it comes to margin compression: share the pain with their publishing partners. The good shops send out a brief to 20 sites, collect creative ideas from them, and collate the best five into a plan that fits from the standpoint of budget and practicality. Usually, the largest sites get on those plans simply because the agency wants to create the least amount of friction when closing a deal. Want to reach young men? Look no further than ESPN.com.

Agencies that are charged with performance simply go to networks, which find them the cheapest “targeted” inventory they can. Agencies don’t know where their clients’ ads are running, but how else do you get geo-targeted, contextually targeted, user-targeted, and re-targeted inventory for less than a $10 CPM? But what have the agencies really done? They don’t know how they got the performance, or how to find it again. They don’t own any part of the value chain of that process: the sites, the targeting, the data, or the analytics. Scary. Sounds like something the client can get directly — for 15 percent less.

Gerritsen values the media mix more on performance than delivery. “The value is in the insights and the delivery of successful outcomes,” he says. “How this is delivered may not be through internal resources, but as a trusted method of information exchange between media, agent, and marketer. It’s not necessarily about who owns the data, but rather, about the creative use of the information to produce success. I don’t like the term ‘aggregator.’ It doesn’t demonstrate any value, just the ability to cobble together a pile of stuff. The value of the best networks and exchanges is the shared responsibility to balance costs and benefits to all participants.”

For agency owners like Kirschner, there is no question about maintaining control of publisher relationships. “Despite the fact that there is such a proliferation of options in the digital space today, it has never been more important for agencies to maintain direct relationships with publishers,” he says. “While networks and exchanges offer convenience and supposedly compelling pricing, the reality is that the publisher at the end of the loop ultimately wants to see a campaign succeed, and he or she has the direct experience and audience knowledge to ensure that happens. There are many tools available that allow these personal relationships to scale within a large media department, so the appeal of networks and exchanges diminishes.”

I currently work for a company that is trying to help small to mid-sized agencies tackle some of the technology aspects of buying and selling digital media. In most sales jobs, it takes a while to get a meeting with a decision-maker. Frankly, I was surprised at how quickly CEOs, CFOs, and digital media VPs agreed to meet with our company at first. Sure, we have a captivating sales pitch, but the reason we get so much uptake is that there is real pain out there on the agency side.

The online media industry is far from being sorted out. Until a standard set of practices and tools gets established (which might never happen), agencies are going to need reliable, trusted partners to help them profitably navigate the digital landscape. Agencies will forever be evaluating new platforms, networks, exchanges, ad servers, data providers, and myriad other tools and services. But, for the agencies we talk to every day, it’s not the tools that make the agency — it’s how the tools are used that ultimately makes the agency successful.

As De Vries says, “Agencies that were built on a manufacturing model (paying inexperienced employees to send mailers all day long) now need to focus on innovation instead because that’s where the money is now. It’s hard to innovate every day in an agency.”

Looking for the Best Salesman? Find the Best Writer.

April 28, 2010 Leave a comment

Today’s Dependence on Written Communication Means Your Next Great Salesperson May be an English Major

A headhunter recently asked me if she could help me recruit some new salespeople to our organization, and asked me what qualities I was looking for I told her, “Find me a great writer, and I’ll make a salesperson out of him.”

Why a writer? Look around. I’m riding on the 7:17 AM train from Cold Spring Harbor to Penn Station right now and, for the bulk of the 56 minute ride, 70% of the people on the train will be doing some writing—mostly pecking into their mobile devices. That’s a big change from 15 years ago. Back then, writing was something that happened in a more formal setting, when you sat in front of your workstation and crafted a memo, or wrote a proposal after a sales call. Back then, your prospects mostly communicated by phone—and would even answer it once in a while.

What does that mean for today’s online sales organization? A lot. First of all, your prospects are online…all day long. They are answering internal e-mails, reading newsletters, web browsing, checking their twitter feeds, and updating their Facebook status. They let phone calls go to voicemail, and comb through their messages once or twice a day. If you are in my business, your prospects are being assaulted by 30 e-mails a day from new start-up companies in the space, all promising to solve the problems of modern media, each with their own compelling value proposition. So, how do you break through all that noise and clutter, and get your prospect to acknowledge you?

Good writing.

Did you ever read an e-mail that made you laugh right off the bat, or had such a compelling subject line that you simply had to open it? How about an e-mail that felt like it was written exactly for you, or one that automatically answered a business question you’ve been asking for a while?  Those are the e-mails that get opened, read past the second line, and flagged in your inbox for later action….the ones that break through all the noise and make a connection. They are hard to write, and finding the people that can write them is even harder. But in a world where the written word is truly king, those that can communicate the most effectively in writing will be the leaders.

For Randy Daux, a recruiter with Howard Sloan Keller, the leading retained search firm in the media space, it’s all about knowing your audience. “Writing allows for a connection between writer and reader and is a demonstration not just of intelligence, but empathy and understanding, as well.  How many times has each of us read a cover letter or marketing email which, directed at a broad audience and without an understanding of our business objectives, we simply moved to the trash?  Competent, targeted, and emotive writing is capable of cutting through our increasingly frenetic and multi-tasked lives, and really making someone stand out.  Moreover, with everyone tied to a computer or iPhone (or Blackberry) 24/7, there’s little excuse for lack of communicative capability.”

Luckily, finding the best writers among your prospect list is fairly simple: look at their cover letters and judge them on the merits. Few candidates understand that, in sales, the easiest thing you can sell is yourself. If you can’t make a compelling argument for your own employment as a salesperson (knowing the “product” as well as you do), then I don’t want you selling something of mine. The cover letter is your gateway to understanding the way a good candidate thinks and, more importantly, expresses himself in written form. Here are some things to look for:

* Your Name: Did she get it right? Or are you “Whom it May Concern” or, worse yet, “Hiring Manager?” If your company has an “About Us” section, then your candidate should know who is in control of the hire, and address the cover letter appropriately. Even if you are not listed on the masthead, if your company has a phone number, then your candidate should be able to get the name and e-mail address of the hiring manager or HR person in charge of the hire. Would you let a salesman send a “To Whom it May Concern” e-mail to a prospect? Of course not.

* The Knowledge: Does your candidate know the first thing about your company and its hiring needs? Does she spell the company’s name correctly (don’t laugh…this is not uncommon), and know what the company does? Does the cover letter reference the actual job title in the body of the e-mail? Hint: if you get a cover letter for a “Sales Director” position that talks about “the exciting Director of Business Development position,” then you’ve just been mail-merged. Would you allow a salesperson to send 20 strategically important prospects a canned cover letter like that? No, you wouldn’t. Randy Duax, whose firm recruits for Pointroll, the Huffington Post, and The Knot, expresses a similar sentiment:  “I can’t tell you how many times I’ve Googled a sentence or two from a cover letter a candidate sent me to find it was copied and pasted from a stock cover letter/resume website.  If someone is going to put minimal effort into interfacing with me in such a fashion, how are they going to act when they’re actually in a sales role?”

* What Can I Do For You? Too many cover letters focus on the needs and skills of the salesperson, rather than the needs of the company that is hiring. You don’t have to be trained in the Huthwaite methodology to know that the first rule of sales is to get to know the customers’ problems before you try and solve them. The candidate that leaps right into his pitch without demonstrating knowledge of your needs is like a salesman who goes into a meeting and immediately leaps into a 30 slide PowerPoint. Do you want a salesforce that “sprays and prays,” or a consultative seller that can break down the digital media ecosystem, and explain your company’s place in it, relative to the issues your prospects are facing? The latter, of course. If your candidate leads by putting your needs before his, that’s one sign of a seasoned seller.

* The Close: Last, and never least, is the close. What is the “ask” your candidate is making? For an interview? Is the candidate’s “collateral” being left behind (her resume) compelling? Does the candidate reference anything besides her resume, or lead you to a place where you can find out more about her (a article or write paper she wrote, her LinkedIn page, or even an industry article you might be interested in)? Being a good salesperson means always getting a yes, no, or a continuation. Look at your candidate’s close, and see if it makes you want to take the next steps. If she can’t get to second base with you (an engaged “prospect” if there ever was one), then it’s likely that she can’t get there with one of your customers, either.

There are a lot of good salespeople out there, but few great ones. The great ones in the modern era are going to be the ones that can break through the clutter, and deliver the messages that your prospects want to read. They are the ones who not only communicate through e-mail the most powerfully, but the ones who write the Twitter messages that tend to get retweeted, and maintain a blog with their industry observations, and post the Facebook messages that don’t make you want to immediately “hide” them. The best salespeople know what you want, and deliver the content that addresses that need. Finding them is as easy as being a great reader.

[This article originally appeared in Adotas, 4/28/10]

Agencies: Working Hard or Hardly Working?

March 12, 2010 Leave a comment

A recent meeting with a large agency’s digital planning team left me wondering who is doing the real work these days: agencies or ad networks? I was there to talk about our solution for making sense of an increasingly crowded and complicated digital space. Today’s media planners and buyers have to be able to navigate through a 300,000 channel world for their clients — and be able to take advantage of dozens of new creative executions, placements, and targeting capabilities. Their clients trust them to find a receptive audience wherever they are on the web — and deliver enough scale and performance to make it effective and affordable.

One of the planners in the room was responsible for a seven-figure pharmaceutical budget. When I asked him how he was evaluating new traffic sources, he said, “I buy on two networks. They find me headache suffers and my client is satisfied, why would I want to risk it by moving money around?”

“I buy on two networks.” Surely he couldn’t be serious.

After I left the meeting, I continued to be astonished by the reply. Sure, buying on those networks was easy (and probably pretty effective) but what was the agency bringing to the table? Why wouldn’t the client simply place those two network buys themselves, and gain an extra 10% in performance by eliminating the agency’s fee?

Furthermore, what if the client’s CMO asked that planner where his ads were running? He couldn’t tell him with any certitude. It seemed to me like a pretty expensive and risky marketing strategy.

The agency is passing along their job along to a network, who is keeping all the data from the campaign. Even if the company sold a ton of migraine pill prescriptions, they still don’t know how they were successful—and who responded to their ads. Even worse, that network can now go and pitch all of the client’s competitors, who now stand to gain for the investment they made building an audience.

If I were the client, I would be justified in firing this agency.

The successful agency not only continually works to discover new pockets of high-performing traffic for their clients but they actively manage the campaign, and share performance results with them. If I want to reach migraine sufferers, the easiest thing in the world is to call WebMD and sponsor their migraine section; I am guaranteed a contextually-relevant placement in a high quality setting. Easy.

Same thing as buying a car. If I want a really reliable German automobile that seats 5 adults, with leather seats, all-wheel drive, and impeccable handling, I just go the Mercedes dealer and pick up a new S-Class.

The problem starts to arise when I get my monthly bill. Is $1,200 a month too much to pay when I can get to work in the same relative comfort in a $600 a month Audi, or a $350 a month Volkswagen?

Maybe, as a media planner, I can find five health sites that target migraine sufferers and string together the same audience for a lot less money. In addition, maybe there are premium opportunities I can get on smaller, more vertically focused sites that the leading site cannot or will not offer me?

Don’t get me wrong, WebMD is a great place to advertise. But that’s something even my mother knows. Do you really need to pay 15% to an agency for them to recommend that strategy?

So, how hard is your agency working for you, anyway? Every advertiser who uses the services of a media agency for their media planning and buying should ask themselves and their agency this question every single day. If they did, I think they would unfortunately find in many cases, the answer to be: not very hard.

How can an agency then justify the fees that they are collecting? They can do it by continually looking for better performing traffic. The only way to do that is to spread dollars around, find pockets of traffic either through other networks, or direct-to-publisher sites. They can do it by deploying smaller per-publisher budgets, while benefiting from smaller incremental risk.

Sure, it will take more work, but that’s what the client is paying for.

[This originally appeared in Adotas on 3/9/2010]

Being There

Today’s Marketer Isn’t Choosing Between DSPs, RTB, and Guaranteed Buys. He Wants it All.

The brave new world of digital display advertising seemingly offers it all. Using the latest and greatest platforms, marketers can access technology that enables them to identify their product’s audience, and reach them at the very moment they are ready to make a purchasing decision. With hundreds of already identified cookies floating out on the web, packed full of personal information, I can find a “42 year-old male with a household income greater than $200,000, who is coming off a GM vehicle lease” and sell him financial services by offering up a dynamically generated banner ad at the very moment he is engaged in financial research. Welcome to the world of DSPs (Demand-Side Platforms), real time bidding (RTB), dynamic creative, and all the 3rd party data you can shake a stick at. Sounds great, doesn’t it? It’s certainly good for advertisers. Since the advent of “ROI” smart marketers have always looked to technology to find better audiences and serve them ads. That has been true since the first direct mail marketing list was produced, and is still true today. It is the reason Google AdWords gets the lion’s share of digital dough, and you can be sure the next huge wave of addressable advertising (location-targeted mobile ads, perhaps?) comes online in a significant way. For the direct marketer that needs to reach an audience of buyers at scale, this will never go away. Yet, I wonder how much this technology which promises to bring us closer to our true audience is truly achieving that goal. For the brand advertiser looking to build affinity with a certain user, is true context being ignored?

Let me explain what I mean by “true context.” Rather than just looking at what kind of text is on the webpage at the of the visit (context in the current, technical, sense), why aren’t we still concerned with user engagement, which includes not only the time a user spends on the content itself (measureable), but the quality of that content, and the user’s affinity for the brand that produces that content? The latter two metrics are hard to measure, but extremely valuable. There is a reason why the Wall Street Journal commands outsized CPMs, and it’s not only the fact that they have a great audience of high income businesspeople. It also has a lot to do with the fact that people simply love the Journal and, more importantly, they trust the Journal’s content implicitly. This is extremely hard to measure, and impossible to buy at scale in the non-guaranteed space.

Maybe Mindset data added to 24/7’s  inventory can help me buy into an audience where “assertive” people are “52% more likely to be an entrepreneur,” but where am I reaching these people, and what might be their mindset at the time I serve them an ad? Back in the days when people still read business magazines you knew that, by placing a 1/3-page vertical for enterprise software alongside the monthly IT procurement column, you were guaranteed that a good Systems Admin decision maker would be spending some quality time on a page that featured your messaging. More importantly, your prospect was reading highly relevant content while he was in a business frame of mind—with a trusted content source that he subscribed to. Many of the demand-side platforms purport to be able to leverage proprietary and third party data to bring you those users in a brand-safe environment, but the promises are currently just that.

Having to choose between guaranteed and continuously-served display inventory is a straw man argument set up by the providers in the space, advocating for their own platforms. In reality, there is room for all types of buying for the modern banner advertiser, and the three main buckets that agencies seem to place buys in are:

-          Deep and Direct: No exchange or network can offer the power and pure branding play that comes with buying a custom sponsorship on a premium web property. Agencies that have quality brands always make room for affinity publishers that are a good match for brands. Advertisers will always find real value in deep engagements with publishers, through homepage takeovers, sweepstakes, sponsored content, “advertorials,” and everything in between. These ad engagements require the one thing technology cannot provide: creativity. It is hard to see a day when brand advertisers will ever give up the practice of buying deep and direct. In this segment, the mutual fund marketer may work with a publisher to build a co-branded “retirement calculator” and offer educational videos related to investment strategy.

-          Premium Mid-Tail: Not many marketers have committed to exploring the middle range of content sites on the web, but this segment is worth exploring. If you are looking to reach investors online, it’s damn easy to call WSJ.com and call it a day, but the smart marketer can do better. Instead of paying sky-high CPMs on “name” sites, why not engage with brand-safe mid-tail sites like RagingBull, SeekingAlpha, or InvestorPlace that deliver the same audience in a highly engaged environment? It’s essentially the difference between a department store and a boutique. The merchandise (audience) may be similar, but your chances of delivering a more impactful brand experience are always better in a less crowded (less uniques) environment. And the pricing and availability is much easier to work with.  In this scenario, the mutual fund advertiser may select the top 10 mid-tier financial sites and use standard Flash banners to engage with the right demographic audience that’s engaged in investment content.

-         Long Tail: Of course there is always the need to go wide and cheap. It always surprises me that there is so much written about Superbowl ad costs. At an average $30 CPM, this is expensive, but how else are you going to reach 90 million people at the same time? Plus, compared to some newspaper rates, the Superbowl looks cheap. Today’s web marketer is much luckier. With the variety of networks and exchanges out there, you can go extremely wide for a lot less money. Decent reach plays start at $.50 CPMs, and reach with all the bells and whistles (behavioral, geotargeted, contextual, re-targeted) rarely exceeds $10. This type of advertising has been around forever, and will never go away. Technology will continue to drive down the cost of identifying and reaching audience segments, and this is something positive for the industry. In this scenario, a marketer leverages the power of real-time ad serving and third party data, to deliver a targeted, dynamic ad to an “investment intender” based on his cookie profile and the page context.

Guess what? None of the three scenarios are going away—and most agency marketers are interested in taking advantage of all three types of banner buying. That being said, both the “deep and direct” and the “mid-tail” plays offer the modern advertiser a way to engage with readers in a way that respects both their frame of mind when reading—and the quality of the content itself. While the automated ad platforms hint at the ability to reach users in the right place, there is no way to ensure that the user will be found in both trusted content where he is truly engaged.

I think the platforms of the future will provide open architecture that enables the smart marketer to take advantage of all three display buying tactics (and eventually be able to plug into mobile ad platforms, where the future lies). Publishers with focused content that engages their readership in a trusted environment will always be able to command premium rates. Large publishers will always be challenged by mid-tail players with more niche audiences (whether regional, or by specialty). That’s great for the business, as it means more choice for the reader, and more outlets for advertisers seeking greater granularity in content and, therefore, audience. Finally, the emerging class of reach players that can combine data and tools to make audience targeting better and more affordable (on a ROI basis) will always be a great option for the savvy advertiser.  By the time the platform wars are over, using a “DSP” (or whatever they will eventually be called) to reach audiences tactically at scale will be as easy as logging on to your Gmail account.

Agencies and direct advertisers should insist that all three buying tactics be part of the future of digital display, and make sure that the platforms they are adopting are the ones that leave as many options on the table as possible.

[This article appeared in Adotas, 5/28/10]

The Next Printing Press

Today’s Magazine Publishers have to be Sales, Content, and Technology Organizations to Survive

By Chris O’Hara

 

I am sitting at the airport bar in Dallas, trying to get back to 2010. After attending the Dallas Ad League’s Magazine Day event at the Fairmont Hotel, I feel as though I journeyed to 1995 and back again. Not that I have anything against attractive, skirt-suited southwestern sales directors and their handsome, eminently polite male counterparts. Nor do I have contempt for the magazine industry in general, as many “new media” bloggers seem to. I came from a magazine background, and love magazines. But the atmosphere was decidedly 1999: folding tables stuffed with magazines, sharply dressed sales reps talking about “custom opportunities” and “special sections,” and not a computer display in sight. The lunch itself promised a lively panel discussion that would inform the 200+ attendees what the “digital future” of magazines would be, but the forum was a panel discussion, bookended by two gigantic monitors featuring a single, non-interactive PowerPoint title slide for most of the two hours.

A large portion of the day’s panel discussion was dedicated to the new, $90 million “magazines” campaign, designed to make advertisers feel better about spending money in their products (the “interactive” portion of the event featured the “magazines” video where Jann Wenner (the former editor and publisher of Rolling Stone) and Catherine Black (President of Hearst) get all feisty about audience engagement). Did you know that, during the 12-year lifespan of Google, magazine readership increased by 10%? Or, that “ad recall” has increased by 13% over the last five years? Neither did I, which is why this campaign is so important. Despite the bloodletting of the past several years, magazines remain a highly relevant part of the media landscape. “Magazines have enduring values for readers and advertisers that have gotten a little neglected and misunderstood in the era of Internet instant buzz and chatter,” said Jann Wenner, chairman, Wenner Media. “Magazines are beloved and powerful in people’s lives for very good reasons that need to be remembered and reinforced. That’s what this campaign is about.” Although, I am not sure how one can “misunderstand” a magazine, Wenner’s point is well taken.

The panelists (David Carey of Condé Nast, Michael Clinton of Hearst, and Stephanie George of Time) all did an admirable job of toeing the line. That being said, anytime you see those three so buddy-buddy on stage, you better watch out. Obviously, this new industry love-fest has a lot more to do with survival than pure affection. If their consortium can produce more than a print advertising campaign (irony alert! The best concept these guys could come up with to save their industry was a print ad campaign!), they might actually be dangerous.

The takeaway? These companies were training their employees for the digital age (“some are really adapting, and some are struggling with making the transition,” according to George). They are doing oodles of “custom media” for their advertisers—and even acting like agencies for many of their clients (something that I am sure the WPPs and Omnicoms of the world are enjoying), according to Clinton. And all of them are “building apps.” Lots and lots of apps.

Sounds good.

I wondered, however, when these guys all decided they didn’t want anything to do with the platform itself. The “power of the press” was always based on the fact that the average Joe didn’t have much of a voice, because he couldn’t afford a multi-million dollar printing press. Sure, he could shout from the rooftops and rabble-rouse in the local coffee shop, but that was basically it. The major publishers controlled the loudspeaker, and they could decide to what purpose they would drive their message (start a war, make scads of cash, anoint a president, etc.). Sure, print’s voice got diluted with the emergence of radio and television, but print journalism (the real stuff) still drove the message and shaped the conversation. Anyway, there is really no need to dig up this old conversation; we all know how the internet gave everyone their own printing press (blog), television station (YouTube account), and the means to capture “stories” as a “citizen journalist” (mobile phone).

When did the publishers decide to give up their platform? Why aren’t they leveraging everything they have to standardize the content creation business, and building the next great platform? It’s because they were focused on being sales organizations, rather than content organizations, or even technology organizations. At a certain point, a long time ago, things got mighty comfortable in publishing land. The industry that created the ability to print a trillion newspapers every night and get them into America’s driveways by 5AM, got fat and happy on loads of advertising money, and they started building immense sales organizations, and dedicated all of their creativity and emotion to increasing readership, ad pages, and revenue.  In the meantime, the very platform that they were building this organization on top of was thinning out, and starting to teeter, as disruptive technologies ate away at the foundations.

The magazine business is still a very powerful beast, though. Some 300,000,000 magazines were sold last year, and they generated $19.45 billion in advertising revenue, according to the Publishers Information Bureau. As our panelists pointed out, the average newsstand consumer still just about trips over themselves to shell out $4 to read the latest about Lady Gaga and poor, bamboozled Sandra Bullock, so magazines aren’t exactly dead yet. They still control some very powerful content, and they are starting to get themselves in a position to undo some of the damage they inflicted upon themselves (it should be noted that all of the panelists issued very refreshing mea culpas when it came to the ginormous mistake of making all of their online content free, and depending on banner advertising revenue to fill the gap. Needless to say, that gap only grew wider over the last 15 years, creating the monstrous chasm that exists today). To fill it, these magazine publishers are looking at the iPad as the greatest thing since the PDF replaced film in their production departments.

Early iterations of online magazine publishing “solutions” tried to bring the advertiser value by taking that PDF and putting in online, where readers could see full-page ads, and enjoy the beautiful layouts that make print so special. Later iterations—featuring in-page video, ad “hotspots” with enhanced product information, and other interactive features—also failed, due to the nature of the engagement. When a reader goes to the web, he is often looking for “quick bites” of content, not necessarily the longer, more relaxed, engagements that he ordinarily sets aside for a magazine reading session. The iPad and other smart mobile devices promise a reader that wants an interactive experience, but is more engaged and willing to spend time with content. Maybe he is being held captive by a plane, train, car ride, or (dare I say it) boring business luncheon. The iPad user expects interactivity, and something more than just printed content, and he is willing to pay for it.

The last part of that sentence is really what today’s Ad League Luncheon was really all about. Magazines are the king of the opt-in relationship. People pay good money to get magazine subscriptions, and advertisers know that they are reaching people who are truly engaged with that content. That’s the only kind of validation that’s truly important, and it’s so much more reassuring to an advertiser than a Quantcast or ComScore data pull. People have limited time, and limited money. As an advertiser, I know that I will at least have a chance to “have a conversation” with the reader that has plunked down his hard-earned money to spend some quality time with the content my ad is alongside. That translates to the web, when I start being able to charge for subscriptions—and ultimately lifts CPMs (called WSJ.com lately)? And it translates to high CPMs for whatever advertising we will start to find on iPads and other mobile devices where consumers are willing to pay for applications.

For today’s print publishers to truly recapture the ongoing attention of the modern advertiser, and stay relevant in the post-print era of modern advertising, the prescription is obvious, although difficult:

Make it Exclusive: What sets the price for any product is its supply vs. its demand, whether it’s coffee, hotel rooms, or content. New York City Mayor and media tycoon Michael Bloomberg didn’t get rich because he had the best content. He got rich because he has access to proprietary content that no one else had. The successful content organization has to be able to have the research, stories, and data that no one else has—or present that content in a format that nobody else can match. Whether you are the National Enquirer buying off Perkins’ waitresses to get the Tiger Woods scoop, or you are a B2B publisher with a trade magazine that rounds up the day’s prices for pork bellies on the Chicago Mercantile Exchange, you have to lead with content that people can’t find anywhere else easily. The nature of the content always defines the value of the audience, and content companies always win when they can charge enough to break even on the content production, and make the advertising the gravy on top.

 

Make it Expensive: It’s funny how people will plunk down good money for a magazine subscription, but hesitate to pay even a few dollars a month for that same content online. A magazine is an object of beauty, with some heft, and (depending on the title), conveying a certain image. Like it or not, reading the New Yorker in an airport lounge says something about you—just as digging into an issue of ESPN Magazine, or the Economist. Magazines are consumer products, and sold like them, their covers designed to spur us to pay a good amount of money to grab them off the shelf. If I am an advertiser, shouldn’t I expect a reader to be willing to pay $30 a year for all the content you produce? Shouldn’t I demand evidence that your publication is more valuable than the thousands of other free content sources available in your vertical? I think some magazine publishers are finding out that their content isn’t quite as valuable or differentiated as they would like to think. Maybe, after underpaying writers, editors, designers, and developers for decades on end, the reason many hot content producers set off on their own is because they see the opportunity to get paid higher prices for their content (or at least, be able to own it outright). The modern magazine publisher has to get back to producing exclusive, expensive content that readers are willing to pay a premium for.

Make it Interactive: About 4 years ago, I was working for Nielsen and getting pitched by a highly progressive interactive company that was taking magazine reading to the next, interactive level. They had an online magazine that blended social media, video, in-page advertising, and a great package of analytics to tie it all together. You could literally look at a typical magazine fashion shoot, mouse over the various products within the photo, and get instant product information, pricing, and find out where to buy the object(s) of desire. Now, add in location-based marketing with mobile devices, and you have a whole new, highly relevant type of interactivity that today’s publisher can leverage. The fact that most magazine websites are still HTML-based and feature standard banner units speaks volumes. The problem wasn’t the concept or pricing of some of the great online magazine ideas. The problem was that AOL (and other online players) defined the platform before the best content producers could. The magazine industry came up with the 468×60 banner (Hotwired.com), but AT&T had to buy into it to create the standard. Now, it seems as though the advertisers have more say in the process of establishing advertising standards than the publishers. Chris Schembri, VP of Media Services from AT&T (the sole advertiser on the panel) made it clear that marketers were looking for leadership from their publishing partners around creating the digital content standards of tomorrow. Advertisers like Schembri need their publishing partners to create new standards that leverage technology to make their advertising more relevant to today’s audiences. Publishers cannot let their advertisers (or online portals, platforms, and ad networks) tell them what they can sell.

Own the Platform: The biggest challenge facing today’s magazine and newspaper publishers is getting back control over the interactive delivery platform itself. Look how the music industry lost control of their delivery system, and the billions of dollars in lost revenue that engendered. Once technology made it possible to remove a song from a CD and share it with hundreds of people for free, the music industry was sunk. Like publishers today, they found themselves looking to Apple to build a modern platform that would once again value their content. They are finding a rough peace with the 99 cents a song deal they got from Steve Jobs. If the iPads, Kindles, and Sony Readers of the world end up creating the standard for published content, the content owners will have once again been commoditized by technology players and lack control of their own destiny. Publishers need to think about designing the next printing press, rather than have Apple do it for them.

All of this hyperbole aside, I don’t think magazine publishers will ever go away. Over the years, printed magazines, newspapers, and books will be a great luxury. People who would rather read a solid copy of Moby Dick, or fold the Wall Street Journal on the train, or flip through Architectural Digest will be afforded the opportunity to do so—at a premium price. The future for these content manufacturers, however, will be around taking back ownership of the delivery mechanism and setting the standards of tomorrow when it comes to content creation, distribution, measurement, and (most importantly) ad formatting and delivery.

That’s a panel discussion I believe would be worth listing to.

[This article originally appeared as a two-part feature in Adotas from 7/13/2010 and 7/14/2010]

PLATFORM WARS #1: Endangered Ecosystem?

July 14, 2010 Leave a comment

Is the Current “Digital Advertising Ecosystem” Endangered by Overpopulation?

I am looking at an “ecosystem map” by LUMA Partners banker Terence Kawaja.*It is an 11×8.5 Pantone-hued logo vomit of incomprehensible names:  Blue Kai, AdXpose, Yieldex, AppNexus, Dataxu, TRAFFIQ (full disclosure: I work for the latter one, pronounced “Traffic”). From left to right, the landscape depicts the players in the business of digital display advertising, from those that buy the ads (agencies and marketers) to those that sell them (online publishers) and everyone in between. Over the last few years, not only have the players on either side increased but, thanks (or no thanks) to technology, the broad middle ground between the two has exploded.

Now, the advertiser can access a buying platform , buy on an exchange which uses cookie data to target an audience found on multiple websites, whose audience composition are verified by a third party, who are then served an ad by an ad server, with a creative that may be dynamic, and finally reconciled and billed by yet another software provider. And this is just the run of the mill stuff. Even in an industry rife with middlemen, the noise in the marketplace for the average media buyer is epic. What is happening out there, and why is it so confusing?

To the optimist, all of this wonderful technology is helping marketers buy the audience they have always wanted to target. Instead of having to buy ESPN.com at double-digit CPMs, now the advertiser seeking “sneaker intenders” can plug into a million cookie-appended sites and hit users with a dynamically generated running shoe ad that hits the reader as he is accessing jogging content on a favorite long-tail blog, and deliver him a geotargeted ad that shows him coupon on his size Asics from the nearest shoe store. And all for an $8 CPM. So what’s the problem?

For the publisher, the problem is that it’s way too cheap. After years of publishing all of their content for free, and placing a dozen network and exchange ad tags on their sites to monetize remnant inventory, the world is overwhelmed with banner inventory. Publishers—who sell only 30% of their total banner inventory on a good day—are stuck monetizing the large majority of their banners at an industry average $0.75. Yet, the networks and exchanges who have co-opted the publisher’s very audience via cookie data, are making a cozy $5 CPM selling “audience segments” and “behavioral targeting.” Ouch. You wonder when the (decent) publishers of the world will finally wake up and firewall all of that content they’ve paid a fortune to create and distribute.

In addition to the fact that publishers have been caught flatfooted by the broader trend of buying audience vs. buying the place where it is found, they haven’t really learned to leverage the tremendous power they wield: Owning some very nice eyeballs on one of the most important screens in the market today. Are television ad sellers dependant on several dozen third-party intermediaries who skim 90% of their revenue? No. The money that they have lost due to channel explosion, they have found other ways to make up: namely, monetizing their content through different distribution (DVD sales and rental, DVR rental, overseas distribution, and cable licensing).

The introduction of the iPad was another painful reminder of how poorly publishers are doing when it comes to content monetization. Essentially, they have allowed the ultimate 3rd party (Apple) monetize all of their mobile content for them, and they are left begging at Steve Job’s table for scraps. Oh wait—the “ultimate 3rd party” is actually Google, and they have already let them control their site traffic and much of their content monetization through search. Oops.

So, what is my point, anyway?

The point is about control, and who is exercising it in this increasingly complicated landscape. Looking at the publisher’s dilemma, it is clear that they have (for the time being) surrendered control to a variety of 3rd parties with technology expertise in the hopes of staying relevant in a digital advertising economy. In addition, today’s advertising agencies are increasingly becoming irrelevant, as they are increasingly dependent on the dozens of technology companies that control the way ads are created, displayed, measured, and transacted upon. The agency value proposition of publishers (we have the audience) and agencies (we know how to reach them) has eroded, which essentially opened the door to this new horde of technology players.

Yet, I am pretty sure both sides have only started to fight to get some of that control back. On the agency side, we have seen agencies building their own DSPs, so they can control the inventory and targeting capabilities. On the publisher side, smart companies like Glam are building their own ad platform (GlamAdapt) promising to “a 3rd generation ad platform built for emotional digital branding,” whatever that means. Both sides are trying to take control of the value they create by building platforms, which is admirable. But, in doing so, aren’t they building closed systems that, over time, will create their own ecosystems and be unable to quickly adapt to changes in the market? In other words, are they building Windows, rather than leveraging Linux?

This battle for control is going to see many of the ecosystem players in the middle get absorbed by the larger players on either side of the equation, and an explosion of platforms designed to make sense of the large array of choices and ultimately organize the ecosystem as a whole. The real battle will be among those companies that are building open, scalable platforms that enable both agencies and publishers to choose among the various moving parts, based on their need. In tomorrow’s platform, an agency will register, plug in what ad server they use (Atlas), their primary 3rd party data provider (Comscore), their existing publisher relationships, the different data companies they use (BlueKai, etc), and their billing system (Advantage)—and have a single interface to manage their search and display. Publishers will log into the same system and be able to participate in a marketplace where they set their own rates, and are able to leverage in-system data providers to create discrete audience segments and match them with advertiser needs. Tomorrow’s ad platform will also include both guaranteed buying (great for brands) and RTB buying (great for performance).

In the end, for such a system to exist, all players must start by ceding more control back to the buyers and sellers at the end, and the parties in the middle of the ecosystem must develop the APIs and integration paths that make systems interoperable. As a series, “Platform Wars” will look at all the different players in the space, and the ongoing battle for control as digital media technology evolves, and winners and losers are chosen.

*from his excellent May 3rd presentation at IAB’s Networks and Exchanges keynote address,  with the delightful title of “Parsing the Mayhem,” back when he was at GCA Savvian.
[This article originally appeared in iMedia Connection on 7/14/2010]

PLATFORM WARS #2: The Future of Display

October 6, 2010 Leave a comment

The Future of Display Advertising will depend on Content, Data, Integration, and Control

It’s funny, but if you are around the display advertising business long enough—whether on the agency, publisher, or technology side—you tend to forget that the acronyms “DSP” and “RTB” didn’t even exist until recently. Now, we take for granted that we live in this “digital ecosystem,” surrounded by technology and data everywhere we look. But, what does the future of digital display look like?

** * Content: It is the content, stupid. Always has been and always will be. It’s why WebMD, WSJ, and TripAdvisor get $30 CPMs and everyone else gets $2. You want to buy audience? Why not buy it from the sites that have the right content to attract it? And, guess what? Those are the same consumers who have the “purchase intent” and you don’t need a million data-injected cookies to tell you that. The future of display advertising is bright for publishers that produce the kind of content that warrants high CPMs, and insist on valuing their content. I think that much of that content will inevitably be stored behind pay walls, creating two distinct Internets: the free, ad-supported one; and the paid one.

***  Data: The world is changing, and the data marketplace we know isn’t going to be very long-lived. Even if you believe (as I do) that cookies are fairly harmless and somewhat convenient (I would personally rather see relevant ads than not), you know the current situation must change. The Wall Street Journal’s recent “Data: What They Know” series simply stirred an already simmering pot a half-turn. The future is going to involve a great deal more transparency, and the ability for consumers to opt in and out of a cookie pool easily.

***  Integration: Tomorrow’s winners will also have to embrace open technology. Everybody knows the symbiotic relationship that display and search share. Why, then, is it so difficult to mate data from the two disciplines in a meaningful way for the average advertiser? Why is it so difficult to manage audience buying and guaranteed buying with the same tools? The future in display will offer advertisers the ability to easily discover, buy, and manage display buys—powered by insights that go beyond stale panel-based analytics. Imagine being able to model, in advance, how a display buy will perform alongside a complimentary search campaign, and then optimize both with the same tool? We are very close. Display is not going to be about display anymore.

***  Control: The future is a world where the publishers and advertisers wrest control back from the technology players. Why are agencies building their own DSPs? Because they are being disintermediated by technology players who know how to get the advertising performance that they don’t. Hell, if finding a bunch of quants and coders is what it takes to stay in the game, it’s only money, right? Holding companies have never been afraid to invest their clients’ money on the latest and greatest technologies and trends over the years. Why are publishers building their own platforms (i.e., Glam)? Because they getting $1 CPMs for their content, and exchanges are selling it for $8. All of that is going to end—badly. Over the next 2 years, the winning platforms will be those that offer both sides of the market transparency and control over buying and selling media.

So, all of this speculation is certainly very exciting. Then again, it’s the year 2010 and most agencies are still buying digital media by using fax machines and collating spreadsheets. What is very clear is that the current display advertising ecosystem is unsustainable. The wide array of technology players layered between advertiser and publisher is already shrinking, as companies consolidate or are absorbed, and the winners and losers are chosen. The conversation has been dominated by data lately—and that’s where it should be. Most of the display advertising out there is the kind of commoditized inventory that is worth only 75 cents, and data can play an important role in making even the worst inventory find a relevant audience. However, one of the reasons that companies like AdVerify are gaining so much steam, is the fact that an abundance of low-quality goods inevitably leads to a gray market.

The future of display will be one in which brand advertisers use technology tools to mix audience buying and guaranteed buying—informed by search (and other) data—in the same platform. Buying campaigns from reputable publishers will be painless and easy, and marketers will be able to make optimization decisions based on real data—both historical and forward-looking. Brand advertisers will buy premium audience segments through opted-in cookie pools from top-quality sites, and pay commensurate CPMs. Performance buyers will still be able to buy audience from networks and exchanges, but may settle for lower quality audience segments (cookie pools from publisher networks with lower quality content).

I am looking forward to the future.

[Published 10/6/10 in iMediaConnection]

What are we Selling?

December 2, 2010 Leave a comment

Most of us that are involved in sales, marketing, or business development (they are same thing, actually) in the media space don’t really know what they are selling. And I don’t mean that the sales director or your DSP or data company don’t really understand the way their technology works (which can be the case at times). Surely, the digital media salesman can be relied upon to deploy the latest buzzwords, acronyms, and business jargon at the drop of a two-sided, logo-besmirsched business card. (see everyone’s favorite web humor from the year 2000). We all know what product we are selling.

That doesn’t really cover it, though, does it?

What we are really selling is a dream. The dream of a digital future, and the hope that technology continues to be the solution to the problem, rather than another problem itself. It’s becoming a tough sell out there for a few reasons. I think it all started with the flying car. Ever since the car was invented and the first guy has to wait more than 10 seconds for a traffic light, we have all dreamed of the flying car. The personal hovercraft…essentially the DeLorean from Back to the Future, without the time machine capabilities. That thing was promised to us (coming soon!) way back in the 1950s. It was even clear, not so far back as the 70′s, that we would–with certainty–have something like that by the turn of the century. Well, it’s 2010 and we are all still waiting. The way traffic is getting around New York, Los Angeles and China (they had a traffic jam that lasted a week, recently), we are going to need them soon. Now, even though we still want them, nobody ever talks about them anymore.

I hope that’s not what happens to us. We are out there selling the future of advertising, and the future of how it’s measured, bought, sold, traded, served, shown, billed, and reconciled. Whether you are out there “pimping uniques and impressions” as some like to say, or selling SaaS model software for selling or buying display ads, or hawking premium data sets to ad networks, exchanges, and DSPs–you are selling the dream. You are an evangelist, a technology tent-revivalist of sorts, going from one campaign event to the next, trying to convince people  to take a nice sip of the technology Kool-Aid It tastes pretty sweet at first.

It seems that, with all the technology and measurement tools, that this business is worthy of being proselytized. We are offering  a world that has changed dramatically for the better. Instead of (in the print days) selling some vague subscriber that is self-described as “recalling your ad” and “passing along the magazine an average of 2.3 times,” you are selling results. Doesn’t matter how they pay for it; in the end, everyone is measuring by CPA (including yours, if your software/media/data cost is counted into the equation). The basis for that CPA comes down to the numbers, and the numbers don’t lie. Or, more precisely, they lie in ways that are harder to argue against.

What you are out there selling is control, which is the ability as a buyer to control exactly who you are reaching, and where they are being reached. Control over pricing, which means knowing how that audience is being valued, whether on an impression-by-impression, or guaranteed future audience. Control over what data you use to make decisions about that audience, and control over the technology you use to disperse your messages across the many screens of the interconnected web. We are far away from the time when the dream of total transparency and control over media is as easy as, say, updating your Facebook profile.

But, after the dust settles and an emerging class of technology winners in the media space emerges, we will see how well the dream was sold…and who ended up really buying it.

(Hopefully it’s not all Google).

Chris O’Hara heads up sales and marketing for TRAFFIQ.

[This article appeared in DIGI:day Daily on 12/2/10]


PLATFORM WARS #3: Back to the Future

December 8, 2010 Leave a comment

Are you Old School Enough to Win in the New Ecosystem?

The online advertising ecosystem is starting to feel a lot like The Matrix. Thousands of tentacles of code are stretching out from every technology company, intertwining, and joining the collective. Companies like AppNexus have been built on the idea of the Matrix—an active ecosystem of APIs, linking together supply and demand with centralized data. Everyone is welcome to play in this new RTB universe, and Brian O’Kelley is only too happy to lay the pipes and switches that let everyone’s ads flow through the cookiesphere.

Are you using a centralized bid management system for search marketing yet? If not, you should be. Google, Yahoo, and Bing make their search data easy to manage in systems like Clickable, Marin, or Click Equations. At this point, search has become so highly commoditized that any company with a reasonable monthly SEM spend has access to analytics and management tools that provide 10 times the data and control the average marketer needs. Want to “manage social?” There’s little mystery left in that, either. Anyone with a computer and $50 can walk right up to the most powerful social ad platform in the universe (Facebook) and launch an ad campaign in 5 minutes flat.

How about the “data ecosystem?” Isn’t that fully commoditized also? The real data players haven’t changed (Experian, IXI, Targus, etc), but the way data companies slice and dice the data has somewhat. Products like Datran’s Aperture enable marketers to get a household level view of their advertising audience like never before, and at very reasonable CPMs. If you aren’t leveraging data to understand your client’s shoe size, then your competition is. Data is ubiquitous, cheap, and effective. Once you’ve overlayered a dollar’s worth of Blue Kai intent data on top of an RTB buy and seen conversion lift, there’s really no going back, is there?

So, in a world where everyone can buy any display ad they want in real time, everybody has access to highly powerful SEM tools, and data is available to everyone…what is left?

Well, the obvious answer is the creative. Marketers better have the best stories to tell, and ones that can quickly make an impression across a three-screen world. I think the agencies and marketers that will win in the future are going to be the ones with the greatest creativity.

But this column is about media. In a real time world, where audience is king, but audience and data are available to anyone with the right (and increasingly ubiquitous) tools, who are the winners going to be? Clearly, the people that own the pipes are in a good spot. In search, that means Google, Microsoft, and Yahoo. In display, the winners will be AppNexus and other switch builders. They are the Ciscos of the advertising world. You don’t really see them, but nothing happens without going through a piece of their equipment. So, when everyone has access to search and RTB, what’s left?

Guaranteed display.

Yes, I said it. The future of this industry is going to belong to the companies that can manage the one aspect of digital that will never go away: guaranteed, upfront buying. No matter how much real-time bidding a marketer does, there is always going to be the need to build brand associations, and reach audience where they go to be found. Was Absolut the tastiest vodka in the world, or was their packaging and ultra-cool print ads in high-end magazines what made the brand?

As a marketer, I will probably put performance display and SEM into every campaign I do, but I am always going to need to buy that homepage takeover on ESPN.com for my sneaker campaign…or take over a condition-specific section on WebMD for my pharmaceutical campaign.  That is never going away…nor should it. The combination of inventory commoditization and the growing cookie backlash is going to make premium guaranteed buying more important than ever. This is great news for the publishers that produce quality content…the type of content that attracts the best audiences.

In a world where everyone has access to everything, the winners may actually be the companies that can help marketers find the best data insights from search, real-time buying, and guaranteed buying. The conversation in the online space has been about the real time ecosystem and the data and technology that drives it, and that’s where it should be. But, the future of online advertising is going to belong to the content providers who will increasingly segment their quality inventory from the machines. When that day comes, the companies who provide an efficiency solution for premium guaranteed buying will reenter the conversation. Get ready for the past.

[This article originally appeared in iMediaConnection 12/7/10]

Choosing between Performance and Branding in Digital Display?

January 12, 2011 Leave a comment

Depending on how you are measuring success, maybe you don’t have to.

The New Data Ecosystem

According to Blue Kai, I am a tech savvy, social-media using bookworm in the New York DMA, currently in the market for “entertainment.” At least that’s what my cookie says about me. Simply by going to the Blue Kai data exchange’s registry page, you can find out what data companies and resellers know about you, and your online behavior and intent.

In this brave new world of data-supported audience buying, every individual with an addressable electronic device has been stripped down to an anonymous cookie, and is for sale. My cookie, when bounced off various data providers, also reveals that I am male (Axciom), have a competitive income (IXI), 3 children in my family (V12), a propensity for buying online (TARGUSinfo), and am in senior management of a small business (Bizo). I am also in-market for a car (Exelate), and considered to be a “Country Squire,” according to Nieslen’s PRIZM, which is essentially a boring white guy from the suburbs who “enjoys country sports like golf and tennis.” Well, I am horrible at tennis, but everything else seems to be accurate.

As a marketer, you now have an interesting choice. Instead of finding “Country Squires” or “Suburban Pioneers” on content-specific sites they are known to occupy (golfdigest.com, perhaps), now I can simply buy several million of these people, and find them wherever they may be lurking on the interconnected web. This explains why you suddenly see ads for Volkswagens above your Hotmail messages right after you looked at that nice Passat wagon on the VW website. Today’s real-time marketing ecosystem works fast, and works smart. But, what are the advantages of buying users versus the place where they are found?

Putting aside the somewhat “spooky” aspect of web targeting (such as using insurance claim data to target web visitors based on their medical conditions), I think every marketer agrees that these capabilities are where online media is going, and they present a powerful opportunity to both find and measure the audiences we buy. But, how do you decide whether to buy the cookie, or the site?

A Different Way to Measure Performance

Most marketers will insist that audience buying is meant for performance campaigns. This is largely a pricing consideration. Obviously, if I want to sell sneakers to young men that are well down the purchase funnel, it makes sense to buy data, and find 18-35 year old males who are “sneaker intenders” based on their online behavior and profile, and reach them at scale across the ad exchanges. Combined data and media will likely be under $4CPM, and probably less since both the data and media can be bid upon in real time. For most campaigns with a CPA south of $20, you need to buy “cheap and deep” to optimize into that type of performance.  It sounds pretty good on paper. There are a few problems with this, however:

What are they doing when you find them? Okay, so you found one of your carefully selected audience members, and you know he’s been shopping for shoes. Maybe you even retargeted him after he abandoned his shopping cart at footlocker.com, and dynamically presented him with an ad featuring the very sneakers he wanted to buy, and you did it all for a fraction of a cent.   The problem is that you reached him on Hotmail, and he’s engaged in composing an e-mail. What are the chances that he is going to break task, and get back into the mindset of purchasing a pair of sneakers? Also, what kind of e-mail is he composing? A work-related missive? A consolation note to a friend who has lost a loved one? Obviously, you don’t know.  Maybe you reached that user on a less than savory site, or perhaps on a social media site, where he is engaged in a live chat session with a friend. In any case, you have targeted that user perfectly…and at just the wrong time. This type of “interruption” marketing is exactly what digital advertising purports not to be. Perhaps a better conversion rate can be found on ESPN.com, or a content page about basketball, where that user is engaged in content more appropriate to your brand.

How do you know where the conversion came from? Depending on your level of sophistication and your digital analytics toolset, you may not be in the best position to understand exactly where your online sales are coming from. If you are depending on click-based metrics, that is even more true. As Comscore’s recent article points out, the click is somewhat of misleading metric. There are a lot of data that contribute to that notion but, put simply, clicks on display ads don’t take branding or other web behavior into account when measuring success. Personally, I haven’t clicked on a display ad in years, but seeing them still drives me to act. Comparing offline sales sales life over a four week period, Comscore reports that pure display advertising provides average lift of 16%, pure SEM provides lift of 82%–but search and display combined provide sales lift of 119%. That means you simply can’t look at display alone when judging performance—and you really have to question whether you are seeing  performance lift because you are targeting—or whether you are achieving it because your buyer has been exposed to a display ad multiple times. If it is the latter, you may be inclined to save the cost of data and go even more “cheap and deep” to get reach and frequency.

How do you value an impression? Obviously, the metric we all use is cost-per-thousand (CPM), but sometimes the $30 CPM impression on ESPN.com is less expensive than the $2 RTB impression from AdX. Naturally, your analytics tools will tell you which ad and publisher produced the most conversions. Additionally, deep conversion path analysis can also tell you that “last impression” conversion made at Hotmail, might have started on ESPN.com, so you know where to assign value. But, in the absence of meaningful data, how do we really know how effective our campaign has been? I really believe that display creates performance by driving brand value higher, and some good ways to measure that can now be found using rich media. When consumers engage within a creative unit, or spend time watching video content about your brand, they are making a personal choice to spend time with your message. There is nothing more powerful than that, and that activity not only drives sales, but helps create lifetime customers.

For today’s digital marketer, great campaigns happen when you understand your customer, find them both across the web and on the sites for which they have an affinity—and find them when they are engaged in content that is complimentary to your brand message. Hmmm…that kind of sounds like what we used to do with print advertising, and direct mail. And maybe it really is that simple after all.

[This article appeared 1/12/11 in AdWeek]

The New, New Agency Model

February 18, 2011 Leave a comment

Is Your Digital Agency Configured for Success?

With all the new technology and access to data, you would think running a digital agency in 2011 would be tempting. After speaking with a few hundred digital agency principals over the last several years, I think I would rather work at a car wash. At least you are outdoors doing low-value repetitive tasks. Let me explain.

I think most digital agencies were started by really smart people who saw the opportunity to provide their clients with the “magic” of media. Interactive ads, true measurement, real user engagement, ROI, and cross-platform messaging that reached consumers where brands wanted to be found. That is still true. The early ones nurtured their accounts from direct mail to e-mail, and then from broadcast into the web, a little budget at a time. When digital media truly arrived, digital agencies were at the vanguard of a new era: technology-driven creative shops and data-driven media agencies that crammed brand messages into the 728×90 mini billboards we love to hate, but occasionally produced some real internet marketing magic.

After a while, the magic was gone.

Digital campaigns have a tendency to suck every penny of margin out of an agency. The client wants to serve rich media, but doesn’t want to pay for it. They have $50,000 to spend but they want 10 A-tier sites on a plan, all of which have a $25,000 minimum. They want to run 5 creatives per placement, and switch them every two days, based on performance. They need their ads pixeled, and hooked up to their Google Analytics platform, which reports traffic numbers that never match up with their ad server. Then they want to know why. Most importantly, they want to be billed correctly, and that means making demand-side and publisher-side ad servers talk together, and agree on impression amounts (which, from my experience over the last 15 years, has never happened once). That’s an awful lot of work.


That’s why (as the 4As reports), digital margins can be 10 times lower than the margins on traditional media campaigns. That’s called mucho trabajo, poco dinero. Since digital agencies don’t seem to be going away anytime soon, they are going to have to figure out how to make more margins from their business, rather than leverage the traditional agency model of overworking extremely young employees until they burn out (essentially, the mucho trabajo, poco dinero cheap labor model). Here are a few things the modern digital shop must embrace for long term success:

1)      Use a Platform (or two): I paraphrase from David Kenny’s remarkable keynote address at the OMMA 2010, “if you are still using people to do work that servers can do, you are already irrelevant.” What value is there in providing ad operations for your clients (none, they just want their ads to work properly). How about reconciling and billing against different delivery numbers? Again, how does that provide value for your client? Those are low-value tasks that must be accomplished, but things that don’t make you a better agency for your clients. There are many systems out there that can centralize these low-value tasks (ad trafficking, billing reconciliation, reporting, etc) so your agency can focus on your clients.

2)      Hire some Nerds: I’m talking about math nerds. Media used to be about finding audience based on panel-based surveys. Now, media is about finding audience by using data, and then using performance and audience measurement data to perfect that audience—and using quantitative analytics to bid on that audience and optimize your results. Since media seems to be about understanding and leveraging data, you are going to need a few people who speak the language. They aren’t the same old English majors from liberal arts colleges in the northeast, either. And the good ones are expensive.

3)      Be Strategic: This sounds obvious, but sometimes the definition of “strategic” gets lost in the weeds when it comes to digital. Sometimes, an agency feels it is being “strategic” when they partner with enough technology companies that offer their clients a variety of digital tactics (social, video, mobile). But having those partnerships and capabilities is far different than using them smartly, in a way that gives your shop the edge over your competition (they have access to all the same technology as you do). True strategy involves finding what works for your clients and creating repeatable processes that lead to long term success. When your clients say they “want to do social” are you smart enough to determine whether they simply need access the Facebook API—or are they looking to find their customers through conversational density around their products, such as Buzz Logic offers? How you offer “social” to your clients should come with its own, unique strategic model.

4) Partner: Agencies are really just an extension of their clients, and they should operate that way. Now, we are seeing agencies building their own technology to leverage media buying power (and even earning commissions from inventory sources), and acting a lot like technology and media companies. I’m not sure (at least for media agencies) this is sustainable. Building great creative that drives forward brands (whether through sales, or just audience exposure) is key—and finding new audience to interact with those brands in the new multiple screen world is where the core competency of today’s digital agency should be. Let the technologists build the technology. They are happy to let you use it, and willing to partner (with both their technology and people) to share success.

Looking around at all the different technology available to digital agencies these days, we aren’t far away from when starting an effective campaign, building amazing creative, deploying it to the exact audience you need, measuring it, optimizing it, and billing it will be as simple as….well, doing it on Facebook. That means that, once you and every other agency begin to avail yourself of that technology, you better be left with something unique to sell your clients.

[This article appeared in ClickZ on 2/18/11]

PLATFORM WARS #4: Ecosystem Bubble?

February 17, 2011 Leave a comment

The Coming Consolidation of the “Digital Display Technology Landscape”

If I had to pick “bravest guy in this business” I would pick Luma Partners banker Terence Kawaja. Back when he was at GCA Savvian, he tried to actually put the business of digital display advertising into one 8 ½ by 11 document, and give it some order. Ever since then, every technology executive, VC, industry analyst, and agency executive has been waving it around like a flag. It’s kind of like those illustrated town maps, where some guy paints Main Street, and every business with $300 gets a spot on the map, along with their logo and maybe even a cartoon depiction of the owner.

Our map, festooned with what I have been calling “logo vomit” contains several hundred microscopic logos, broken out into various categories that our industry has sub-segmented into, bracketed by the ever-powerful “advertisers” and “publishers” on each end. It’s not quite accurate. If importance were the measure by which logos were sized in the “landscape” sandwich, then the bread would be 10 inches thick and the companies in between would be mere condiments, with a cornichon-sized AppNexus in the middle. The influence of Gorilla-sized agency holding companies like WPP and elephant-sized “publishers” like Google are not properly represented.

Little red dotted lines encircle those lucky enough to get gobbled up by the bread. Ad exchanges have been a popular acquisition target (after all, someone has to figure out how to sell commoditized inventory. Ad servers even more so (that’s where the data comes from and, looking at the map, data seems to be the glue that binds the murky middle of the ecosystem together). So, how about all of those wonderful companies in the middle?

Some of those companies are struggling. A few are doing pretty well. Most (at least those that have been VC funded) are looking forward to Gobble Day, when Google writes them a check at a valuation that ignores their upside down cap table, and lets their founders avoid the inevitable cram down from yet another round of venture funding. Many of the companies in the middle will not survive. I’m not sure, but maybe there is a bubble in the Ecosystem. Certainly, it is tough to see it growing any bigger.

Data: A healthy supply of good audience targeting data (Experian, TargusInfo) is the foundation of the Ecosystem. As you will note, most of the players have been around for a long time, and they are going to quickly assimilate any new players with interesting data sets. What will slim down is the Data Aggregators category. Agencies don’t care who provides the data, as long as it works, and most players just spin the same data everyone else has. The company that can build the best hooks into inventory supplies wins, and they win by creating implementation “friendly” APIs. End of story. Companies like Exelate and Bizo seem to be executing well.  Other companies are struggling to get integrated into next generation systems such as AppNexus, and are starting to reconfigure their business models to align with the world of ubiquitous data usage. The winners are going to be the companies that are also configured to survive the coming legislative tsunami, and let companies bring their own data to the party (both publishers and advertisers). The work that Quantcast is doing in this area is very intriguing.

Creative Optimization: This area of the Ecosystem is interesting for a few reasons. In a world of commoditized inventory and data, it is the stories that agencies can tell that become important. In other words, the creative. Since not every agency can build viral ads on demand, a certain amount of technology is going to be necessary to wring performance from the most critical part of the value chain: the ad itself. People want targeted ads, and creative optimization can magically deliver me a coupon to my local Whole Foods since it knows I live in area code 11743, then I become a happier consumer. The problem? Doing creative optimization correctly—and in a way that an agency is willing to dedicate the time to—is very hard. Not many of these smaller companies will survive, because doing it right needs very tight ad server integration. Look for companies like MediaMind to start dominating here. Tumri is another one that is starting to unlock the puzzle.

Media Management: Companies in my little corner of the Ecosystem map (I work for TRAFFIQ) were very proud recently to get a category upgrade (we were once lumped in with “Ad Operations”). This is another highly interesting area of the map. You have the big legacy companies like DDS trying to find relevance with their digital offerings, and smaller start ups like Facilitate and TRAFFIQ providing disruption in the space, and media arbitrage companies like Centro pulling their technology forward with “self serve” platforms. Winners here will be the companies that can quickly centralize the cumbersome process of digital media workflow, create access to the systems that agencies depend on (data, serving, billing), and find a pricing model that continues to enable efficiency. These companies are in the business of using technology to try and lasso the disparate parts of the Ecosystem together, so this is a fun space to watch. Success here will be time- and capital-intensive, but the winners will be a part of every media transaction—on both sides—so the potential spoils are large.

Media Buying Desks: This is another fascinating area. A lot of conversation in the space has been around the Cadreons, Vivakis, and Adnetiks of the world. When you can leverage that much demand and tailor a technology platform just for your agency, that is the type of “start-up” build-out anyone would like to be a part of. I wonder how sustainable it is, however. Whether the technology is proprietary, or has been built on top of other DSPs, I am not sure closed systems can truly succeed in a world of open standards. With AppNexus, suddenly the formerly closed world of exchange trading gets more democratized, and you’ll see other platforms adopt this type of technology—and start to create their own pipes into exchange streams. Big agency buying desks are not going away anytime soon—but more competition is on the way, which may lessen their ability to dominate the space.

Retargeting: This area has been hot, but do we really need 10 different companies that can serve an ad to someone who has been on your website before? The better companies (and those built specifically for seamless integration into existing media systems) will find themselves to be nice tuck-ins for larger technology players. The name “retargeting” alone suggests more of a capability, than a category onto itself.

Networks: The “Custom” and “Targeted” networks in the map are surrounded on all sides. Both loved and hated by our industry for so long, networks continue to give both sides of the aisle what we want, when we want it. For the demand side, networks offer cheap, targeted inventory available in a variety of flavors (contextual, behavioral), and a one-stop shop for hundreds of publishers. For the supply side, networks were the magic money machine. Simply drop some javascript, and wait for your check. Networks basically enabled publishers, in their never-ending quest to append every page on the internet with a banner ad, to devalue their entire inventory (but that’s another article). These days, agencies are coming to the table with their own data, own way to measure performance, and a desire to bid on audience in real time, rather than have it packaged for them. The networks that survive must find a way to (profitably) plug into trading desks and DSPs—and offer a unique type of targeting ability. A tall order. Here, quality counts. Companies that have exchange trading in their DNA (Contextweb) are poised to succeed in this new ecosystem, as well as vertical networks that have curated high quality content sources (Glam).

Some larger trends to look out for:

-          Data: Legislation is going to be a fact of life, and it’s going to shrink available audience pools, and make data segmentation and targeting much harder and more expensive. As a publisher, you need to own the customer relationship and his data. As a technology enabler, you need to make sure you can let your advertiser bring his own data to the table, rather than relying on third parties. That’s what makes Facebook so powerful.

-          Power and Control: It doesn’t seem fair, but the companies that use technology to give the “bread” of the Ecosystem sandwich (Advertisers and Publishers) more power and control will win. You can’t “disintermediate” advertisers like P&G. They know more about their audience than we ever will. But, we can partner with their agencies so let them leverage technology to be more successful. Same with publishers. How can you help the content players understand their audiences, and package them in a way that lets them value them properly? The technology companies that partner with publishers to do that (rather than encourage them to “monetize” more of their cheap content) are also going to win.

The Landscape is ever changing, and we should all thank Terence Kawaja for putting his map on Slideshare and updating it frequently. He’s going to be busy doing that for a while, it seems.

Chris O’Hara works for TRAFFIQ, a web-based workflow solution for digital media, where he is responsible for business development and marketing. He can be reached through his blog at www.chrisohara.com

[This article appeared on 17 February in Adotas]

The Agency of Procrustes

March 16, 2011 Leave a comment

Is Your Media Shop the Right Fit for the Digital Age?

Nassim Taleb’s marvelous book of aphorisms is called The Bed of Procrustes, named after the myth of Procrustes, a cruel owner of a roadside estate between Athens and Eleusis in ancient Greece. According to Taleb,

He abducted travelers, provided them with a generous dinner, then invited them to spend the night in a rather special bed. He wanted the bed to fit the traveler to perfection. Those who were too tall had their legs chopped off with a sharp hatchet; those who were too short were stretched.

Taleb’s point is that we humans tend to “squeeze the world into crisp, commoditized ideas.” In short, we try and fit things we don’t understand into our particular worldview. But, what if the new things don’t fit?

As a digital media agency owner faced with keeping up with the times and (more importantly) earning margins from notoriously labor intensive digital campaigns, it is tempting to fall back on time-worn models. If you think about the tried and true “agency” model, it is exactly what the dictionary says it is: “a consensual fiduciary relationship in which one party acts on behalf of and under the control of another in dealing with third parties.” In other words, the client can do the work himself, but would rather stick to making widgets or selling plane tickets than have 300 different media and technology relationships to contend with.

The problem? That’s not enough anymore. What clients want—and an increasing number of them expect, is a different definition of “agency.” Maybe even a legal understanding of the term: the person or thing through which power is exerted or an end is achieved. Is your digital agency exerting true power on behalf of your clients, or are you just buying media? I believe that, in a world where technology enables most agencies to have ubiquitous access to media and software tools, the modern digital agency needs to go beyond traditional notions of “agency” and provide their clients with unique expertise.

The traditional agency “bed” is still rather misshapen for the world of emerging technology. Most shops still don’t have a cohesive social strategy (beyond Facebook); the technology to properly target audiences through exchanges; or the ability to leverage technology to wring performance from digital creative. Some do, and are leveraging relationships with social technology providers, DSPs, and creative optimization companies. The problem here is that many of those technology providers are going directly to your clients as well.  So, how do you defend against disintermediation and start building proprietary expertise to enable you to win and retain digital business in the future?

  • Data: Create it, analyze it, tie into your clients’ data, and make it actionable. I know an agency in upstate New York that only gets paid every time its client performs an oil change. The agency is tied into their client’s POS system, and gets a true end-to-end view of attribution. They know how they are getting people to the business, when, and how they are getting them to return. I know other agencies that, through tools like Datran’s Aperture, are getting a household-level view of who is converting on their online campaigns, and using online data to go offline to seek new customers and reengage them. If you are not leveraging the data you currently have—and seeking to partner with your client to create or get access to new streams of data, then you are not being an extension of power to your client.
  • Technology: How is your shop leveraging available technology to gain efficiency? Media platforms like Transis, Facilitate, and TRAFFIQ (disclosure: I work for TRAFFIQ) offer agencies the ability to let workflow technology handle the blocking and tackling of digital media (RFPs, AdOps, billing, etc) so agencies can work on things that have value (strategy, creative execution, data analysis).  What about real time bidding technology that uses machine learning to auto-optimize campaigns based on performance data? If you are not leveraging technologies like these, then you are already in danger of becoming extinct.
  • People: If you are in fact going to leverage data and technology to transform your agency business, then you are going to necessarily need different people. In the good old days, you could hire a 22-year old for $25,000 and bill them out at $40,000. Unfortunately, the 22 year old wants $35,000 these days, and by the time you train them to be a “digital media expert,” a larger shop will pay them $50,000 to take advantage of the free training you gave them, and start billing them out at $75,000. Also, that 22 year old media person who used to good at collating spreadsheets and ignoring publisher e-mails is not the person who is going to transform your business. Someone who can dive into data to determine media placements—or someone who is passionate about the social space and understands the new social technology ecosystem are the folks that are going to make a difference (and profit) for your agency now.

In the end, Procrustes faced poetic justice. One of his guests was the mighty Theseus, of Minotaur-slaying fame. Theseus invited Procrustes to lie in his own bed and, seeing it slightly too small for his frame, decapitated him to create the perfect fit. Your agency may not currently be the right fit for clients that need advanced digital agency help. The answer, however, is to make your bed fit your clients better, rather than shrink them down so they fit into your legacy paradigm.

[This article originally appeared in Adotas 3/16/11]

Changing the Game

April 18, 2011 Leave a comment

The Evolution of Real Time Bidding Means Better Inventory, and Higher Bids

For years, publishers have devalued their inventory by letting a daisy chain of remnant inventory networks and exchanges leverage their audience. Because every publisher was willing to place ads on every single page, sheer scale created the opportunity for 3rd parties to extract value by adding the splash of data that changed CPMs from pennies into dollars. As third party data shrinks, the opportunity for publishers to profit from partnering with technology and data companies also shrinks—but the near ubiquity of real time bidding also creates many new and exciting opportunities for publishers to package and sell their higher value inventory and audiences. Here are three tactics critical for succeeding in post-legislation era:

1)      Change the Bids: Although real time bidding has gone from obscure, future-facing media theory to being part of the ongoing media conversation, demand-side players still put RTB in the same bucket as remnant networks. When inventory is being traded in a true exchange that is agnostic with regard to pricing, it is assumed that some inventory will be priced high, and some low. Today, the preponderance of inventory available in both private and public exchanges is composed of the same low-value impressions most networks offer. This will change. Once supply side players start selling their high-value inventory inside exchanges, the game changes. Look for private, exchange-based marketplaces to crop up that connect prime demand side customers with the best inventory available on the planet. This is the future of RTB.

2)      Own the Data: Given the coming legislative tsunami, the common wisdom is that there will be severe shrinkage in the cookie pool, leading to a decline in targetable audience. Consumers will have to opt into targeting—or have much easier access to browser-based tools that enable them to opt out more easily. Either way, it seems apparent that cookie-addressable audiences will decline. For publishers, this may be the greatest thing that ever happened. At what point did publishers decide to let 3rd party technology companies know more about their audiences than they did? While that is somewhat of an exaggeration, I think the successful modern publisher must have a strategy for targeting their own inventory using first-party data.

3) Stop the Madness: Many publishers realize they have a inventory management problem. Like addicts, they know exactly what their problem is doing to their lives but, when confronted by the source of their addiction, easily crumble. For digital publishers, the crack pipe is called remnant inventory and monthly checks from network and exchange enablers keep the ads flowing.  Back in the old days of print publishing, we understood that ads didn’t have to appear on every single page. The expensive ones were in the front, and the cheap ones (classified) were all crammed in the back. Not a bad strategy. I wonder who decided that every single page on the internet had to have 3 standard IAB-sized ads on it. Maybe the time has come to end “value-added” impressions, and cut back the number of remnant ads available on your site. That day won’t come for a while, which is why companies like Rubicon and AdMeld, and PubMatic exist.

As the real time universe becomes more ubiquitous, more than just remnant inventory will be bought and sold on a bidded basis. For publishers, the challenge will not only be how to squeeze every penny out of the cheapest inventory with remnant optimizers, and managing the declining availability of targetable inventory (based on 3rd party data availability). The challenge will be balancing the decline in remnant revenue with the rise in bidded high value inventory. How much of your premium audience will you make available in real time to your existing and new advertisers in open exchanges? Getting that mix correct will make some publishers (and private publisher inventory pools) extremely profitable, and kill other publishers altogether.

[This article appeared on 4/18/11 in iMediaConnection]

Notes from DPS 2011

April 4, 2011 Leave a comment

Going Beyond Content and Delivering Value in a Multi-Platform World

Deer Valley, UT – If there is one thing I learned after spending several days at Digital Publishing Summit 2011, is that the people in this industry really love what they do. It’s not easy walking past world class spring skiing in what is arguably the United States’ best ski area, and enter a dim conference room to listen to a speech on “Auto-nomous Data Management,” but every session played to an SRO crowd of media and technology executives. The crowd was a veritable who’s-who of the “Digital Display Advertising Landscape” (LUMA) map, so I suppose you could argue that these guys got where they are today by skipping lots of fun, and building advertising and media technology instead.

Among the highly informative (albeit sometimes sales-y) content at the conference, there were some gems to be had. So, here is DPS 2011, organized by quote:

“Value is shifting from those that produce the content, to those that deliver the experience of consuming it.” – Saul Berman, IBM

Saul Berman’s keynote address touched upon the disruption happening in our space, but even the overhyped keyword “disruption” doesn’t touch upon the true chaos happening as publishers learn how to navigate the through all the new social media, exchange-based sales, and various technology partnering opportunities out there. Do you make Facebook Connect your friend (as Kristine Shine from PopSugar Media does), to drive new unique visits, and build your audience? According to Shine, for her organization, the call was to “go all in” with Facebook. For others, like Todd Sawicki, CRO of Cheezburger, Facebook can kill publications by migrating all of their native traffic (like message board comments) to their environment, without returning the favor.

So, for publishers, the challenge is not just continuing to produce quality content, but to make it for a multi platform world, where consumers are just as likely to value the way they are consuming it. That means having a multi-platform approach—and a multi-revenue approach as well. Why does a full song from iTunes cost $0.99, but a 10-second sliver of that song, sold as a ringtone, cost $3.00? In that case, it is the application of content in a clever way that adds value, a nice use case for anyone monetizing content in an experiential way.

“Media will be sold like pork bellies” – Frank Addante, Rubicon Project

There was quite a bit of discussion around pricing at the conference, and the founder and CEO of the Rubicon Project was not wrong in insisting that, without significant changes, media would indeed be as commoditized as the humble pork belly. Unfortunately, this trend has already happened. Addante was right to highlight the unfortunate fact that the same article in the NY Times commands a $20CPM in print as opposed to $2CPM online. That value gap, Addante argues, can be closed by “realizing the true value of digital experiences.” Rubicon would like to see one big gigantic “open market” that enables the industry to expand the digital advertising pie from $40b to $400b with full participation, but the details were cloudy. If that market concept involves having publishers suddenly not to sell their entire remnant inventory into an exchange, then maybe we can avoid the pork bellies fate.  Addante may be on to something, however. What the industry needs is one trusted third party aggregate high quality inventory, and create value around it, but that battle is in its very nascent stages.

That being said, a good bit of the conversation was around pricing. Both Saul Berman and Tim Cadogan of OpenX deployed the airline pricing scenario, to argue for dynamic pricing models. For Cadogan, three levels of inventory equate to three levels of seating: Exclusive (first class), Premium Guaranteed (business class), and Non-Guaranteed (coach). Just as airlines frequently change the configuration of their seating to account for their routes, seasonality, and passenger mix, so must the industry dynamically price inventory, based on its placement and value. The OpenX Enterprise server hopes to achieve that by putting guaranteed and real time exchange inventory into the same platform, and use smart decisioning  technology to maximize yields. A very smart idea.

For Berman, it was not only about “having 5 different passengers, paying five different prices,” but also about exploring entirely new revenue models, like Apple did in “switching the razor blade model” with the iPhone (expensive “razor,” cheap “blades”). Publishers must go beyond monetizing their content through advertising, and start looking at generating revenue from the larger  ”marketing” bucket. Right now, that is called “selling apps.”

“Premium brands need to be associated with premium content” — Eric Klotz, Pubmatic

Truer words have never been spoken. Klotz explored some recent survey data which asked publishers and advertisers how the way they are buying media is shifting. The results were fairly predictable: more and more budget is finding it’s way into real-time bidding environments, as brand and direct marketers seek new ways to target their desired audiences. That’s nothing new. What is changing rapidly, however, is that all marketers are demanding more placement control, increased transparency, and brand safety. Brands want the same direct connections with publishers they have enjoyed with guaranteed buying, with the ease and cost efficiency of exchange-based buying. The takeaway? If you are a publisher, and not looking at building private exchange connections with your demand side partners, you are in trouble.

That sentiment was hinted at in a panel called “Selling in a Cluttered Market.” For Jonas Abney of Hachette Filipacchi, “general content gets beaten by specific content every time.” Marketers are looking for laser-focused, topical content that captures user intent, rather than more generalized content. Moreoever, today’s advertising sale is more educational than ever. For panelists like AdMeld CEO Michael Barrett and PubMatic’s Andrew Rutledge, a sales force cannot simply have media experience–they have to know the ecosystem, and be prepared to add value by educating clients. For Whitepages VP of Sales Craig Paris, it is simple math: Agencies get 100+ unique sales calls a month, from an increasing amount of new technology and media companies. Unless you differentiate yourself, you are not going to win business. “Thirty percent of your day should be spent reading the industry trades so you can have credibility, and provide insights to your customers.”

“Nielsen says people visit 2.9 sites a day, and one of them is Facebook” — Greg Rogers, Pictela

Last minute speaker Greg Rogers of Pictela provided some insights on how premium advertising units (specifically the new IAB 300×1050 “Project Devil” unit from AOL) can drive user engagement. If the above quote is true, it means that brands have to find a way to engage the user more deeply on the the sites they visit every day, and that way is through interactive units. Rogers has data that points to “dramatic” CPM increases from premium RM units, and makes a case for replacing three 300×250 units with the single 300×1050 “devil” slot. Patch and Huffpo have seen great results, and advertisers are getting good engagement, and plenty of reporting. Highly premium, brand-safe, engaging advertising…sounds like something from the past called “premium guaranteed.” I bet PopSugar’s Shine would agree. She has built a virtual in-house agency to build premium campaigns for her customers, and demands ”150% control over every ad unit on the page.”

“Cookie Targeting Doesn’t Scale” — Michael Hannon, Aperture

Sort of a dark horse moment for me was Michael Hannon’s first slide, which threw down the gauntlet on cookie targeting. All the energy in the space for the last several years has been about  targeting using 3rd party data . But what if it doesn’t work? This is the 900 lb. elephant in the Ecosystem. Not only have many marketers had difficulties achieving significant scale when overlaying data on top of exchange buys, but the legislative tsunami of “Do Not Track” threatens to reduce that scale even further. Hannon makes an elegant argument for real audience measurement, and doing so in a cookie-less way.

That leads me to a great conversation led by Alan Chapell, a lawyer specializing in just these types of issues. In a room full of ad publishing and ad technology executives that depend on using data to identify target audiences, there was a great deal of confusion regarding how our industry is getting on top of what may be a very severe problem. More direction from the IAB in the form of specific self-regulatory principles and mandates is needed, and needed fast. For Chapell, inaction may cause the “privacy disaster, which enables Google, AT&T, and Facebook to own all the data,”  leaving the rest of the industry on the side.

[This article originally appeared in Adotas on 4/4/11]

Rise of the Machines

April 14, 2011 Leave a comment

Where do People Fit into a World that Promises Endless Media Automation?

Ever since man tied a rope to an ox, there has been a relentless drive to automate work processes. Like primitive farming, digital media buying is a thankless, low-value task where results (and profits) do not often match the effort involved. Many companies are seeking to alleviate much of the process-heavy, detail-oriented tasks involved in finding, placing, serving, optimizing, tracking, and (most importantly) billing digital media campaigns with various degrees of success.

Let’s take the bleeding edge world of real-time audience buying. Trading desk managers are often working in multiple environments, on multiple screens. On a typical day, he may be logging into his AppNexus account, bidding on AdBrite for inventory, bidding for BlueKai stamps in that UI, looking for segmentation data in AdAdvisor, buying guaranteed audience on Legolas, trafficking ads in Atlas, and probably looking at some deep analytics data as well. If he is smart, he is probably managing that through a master platform, where he can look at performance of guaranteed display and even other media types. How efficient does that sound?

To me, it sounds like six logins too many. Putting aside the obvious fact that an abundance of technology doesn’t lead to efficiency (how’s “multitasking” working out for your 12 year old, by the way?), I wonder we aren’t asking too much of digital as a whole. How many ads have you clicked on lately? If the answer is zero, then you are in a large club. Broken down to its most basic level, we are working in a business that believes a 0.1% “success” rate is reason to celebrate. But the “click is a dead metric” some say. Really? Isn’t the whole point of a banner ad to drive someone to your website? When did that change?

All of this is simply to illustrate the larger point that the display advertising industry, for all of its supposed efficiencies, is really still in its very nascent stages. Navigating the commoditized world of banner advertising is still very much a human task, and the many machines we have created to wrestle the immense Internet into delivering an advertiser the perfect user are still primitive. For a short while longer, digital media is still the game of the agency media buyer…but not for long.

Let’s look at the areas in which smart media people add value to digital campaigns: site discovery, pricing, analytics and optimization, and billing.

Site Discovery

In the past, half the battle was knowing where to go. Which travel sites sold the most airline tickets? Which sites indexed most highly against men of a certain age, looking for their next automobile? What publisher did you call to get to IT professionals who made purchasing decisions on corporate laptops? Agencies had (and still have) plenty of institutional knowledge to help their clients partner with the right media to reach audiences efficiently and—even with the abundance of measurement tools out there—a lot of human guidance was needed. Now, given the ability to purchase that audience exactly using widely available data segments, the trick is simply knowing where to log in. I just found the latter IT professional segment in Bizo in less than 2 minutes. So the question becomes: how are you leveraging data and placement to achieve the desired result, and how efficiently are you doing it?

Pricing

It used to be that the big agencies could gain a huge pricing advantage through buying media in bulk. Holding company shops leveraged their power and muscled down publisher rate card by (sometimes) 80% or more with promised volume commitments, leaving smaller media agencies behind. Then, a funny thing happened: ad exchanges. All of the sudden, nearly all of the inventory in the world was available, and ready to be had in a second-price auction environment. Now, any Tom , Dick, and Harry with a network relationship could access relatively high quality impressions at prices that were guaranteed never to be too high (in a second-price auction, the winning bid is placed at the second highest price, meaning runaway “ceiling” bids are collapsed). Whoops. With their pricing advantage eliminated, large agencies did the next best thing: eliminated the middleman by building their own exchanges, which we have been calling “DSPs.” So, you don’t need human intervention to ensure pricing advantages.

Analytics and Optimization

What about figuring out what all the data means? After all, spreadsheets don’t optimize media campaigns. Don’t you need really smart, analytical media people to draw down click- and view-based data, sift through conversion metrics, and build attribution models? Maybe not. Not only are incredible algorithms taking that data and using machine learning to automatically optimize against clicks or conversions—but programmatic buying is slowly coming to all digital media as well.  In the future, smart technology will enable planners to create dynamic media mixes that span guaranteed and real-time, and apply pricing across multiple methodologies (CPM, CPC, CPA). Much of that work is being done manually right now, but not for long.

Billing

Sadly, much of the digital media business comes down to billing at the end of the day. Media companies struggle tremendously with reconciling numbers across multiple systems, and agency ad servers don’t seem to speak the same language as publisher ones. The bulk of a media company’s time seems to be spend just trying to get paid, and an incredible amount of good salary gets burnt in the details of reconciliation and reporting. This is slowly changing, but the advent of good API development is starting to make the machines talk to each other more clearly. The platforms that can “plug in” ad serving and data APIs most easily have a lot to gain, and the industry as a whole will benefit from interoperability.

So, are people doomed in digital media? Not at all. There are going to be a lot less digital media buyers and planners needed—but what agencies are really going to need are smart media people. Right now, you need 4 people to manage 10 machines. In the near future, you will need 1 smart person to manage 1 platform—and the other three people can focus on something else. Maybe like talking to their clients.

[This article originally appeared in ClickZ on 4/14/11]

The Problem of Ubiquity

Is Your Technology Offering Differentiated Enough to Win in the Digital Media Advertising Landscape?

Media buying desks are so 2009. I mean, who doesn’t have access to 800+ exchange inventory sources and 30 different 3rd party data providers?  In a world where well-heeled demand side customers have all of the tools to buy audience efficiently, how do internet marketers effectively communicate?

At this moment in time, digital display advertisers love the idea of audience buying because it seems unique. The concept of buying an audience, rather than the site it is on, is truly revolutionary and will be a continuing part of the digital media conversation for a long time to come. However, many technology companies are being funded, started, and run on the foolish misconception that audience buying vs. site-specific buying is a binary choice. It is not. Large holding company shops are trying to migrate client budgets over to their media buying desks, demand side platforms are trying to displace ad networks, and ad “platforms” are attempting to skim the media cream on all real time transactions by promising better performance through centralization. All of these tactics are doomed to fail.

Context

Unless you are going cheap and deep by buying remnant inventory at under $0.50 CPMs—or going data-heavy and spending upwards of $5.00 CPMs using segmentation to find highly specific premium audience—you are going to need context. In the former case (running wild with sub-$0.50 bids across exchanges) you face the issue of low CTR and the accompanying issue of low brand safety. Your ad is getting out there, but God knows where it’s serving. Then again, at $0.50, why not “spray and pray?” With machine learning, you can easily optimize against a conversion pixel, and let your bidding technology find all the performance that a cheap CPM can yield.

On the other end of the spectrum (using expensive V12 or Bizo segments, for example), you have a highly targeted audience—but a problem achieving scale against such specific targeting goals. Also, while you may be hitting your desired segment, you may be hitting them at the wrong time. As a frequent traveler, I have been frequently targeted with exactly the right ad (Cheap JetBlue flight to SFO) at exactly the wrong time (during my Yahoo! fantasy baseball draft).  Context does matter. Reaching premium surfers when they are engaged in consuming premium content is still relevant. That’s why people pay what they do for full page ads on the Wall Street Journal and that’s why WebMD will never accept “3rd party” advertising. Context matters, intent matters, and a user’s mindframe matters. When I am reading an article about Carmelo Anthony on ESPN.com, and I am in the market for basketball sneakers, I am simply more likely to buy them…because I am in a basketball mindset. Catch me with the same sneaker ad when I am replying to my friend on Hotmail, and it’s highly unlikely that I will break task and respond.

Engagement Methodology

Almost as important as context, is the way that an ad is served.  The majority of online audiences visit about three sites a day—and one of them is Facebook. It’s kind of tough to get into the media mix for the average site. There are two approaches the modern digital publisher can take can deal with this reality. The first is to SEO the hell out of their site, and drop enough tags to ensure an automatic, steady flow of exchange and network advertising. Another method is to firewall their exclusive content and only serve guaranteed advertising. Hybrid models are the norm, but publishers must manage the inevitable channel conflict and data leakage that come from opening up premium ad slots to networks and exchanges. Getting this blend right for websites is step one.

Modern publishers also have to go beyond the website. Today’s publishers are not only offering a blended approach to solving these marketing needs in modern RFPs—they are going beyond the typical RFP response to craft unique digital offerings that reach users that are engaged with digital content on multiple screens. You can’t effectively target pure audience yet on iPads, iPhones, or Android devices. Buy that’s where a lot of content consumption is rapidly shifting, Companies like Phluant (adapting online rich media ads of mobile browsing) are on the forefront of adapting display advertising to the new, mobile environment where they will be seen.

If your development plans do not include interoperability with the multiscreen media world we live in currently, then you are already becoming irrelevant. In the near future, there will be no such thing as “mobile networks” and “in-app” advertising. There will be platform solutions which enable cross-platform messaging (and accompanying analytics) in real time.

Price

A lot of the biggest mistakes modern media buyers make can be attributed to pricing. Todays’ digital media options do not lend themselves to a single RFP, with a static pricing range. The typical marketer looking to find high-income middle-age men who are “auto-intenders” may top out at $12 CPM. This is ridiculous. Marketers (especially old school direct mail marketers), know the value of finding their exact audience may be in the $100 CPM range (if they know they are reaching that exact, qualified customer), or it may be in the $1.00 CPM range (if they simply want to blanket my message to “men” in certain geotargeted area). Audiences are variable—but buying methodologies are not. In the near future, media buying will become programmatic, enabling marketers to populate a more robust RFP template with data—and receive systematic buying templates that span both buying methodologies (guaranteed and real-time) and pricing methodologies as well (CPM, CPC, CPA).

Choice

Today’s world is about choice. The modern digital marketer doesn’t have to face the straw man argument between choosing guaranteed vs. real-time audience buying; neither should he make the false choice of deciding between rich media and standard banners, when both can be deployed seamlessly across a single campaign. Moreover, it is now simple to leverage broadcast creative digitally, and run video advertising units on television, on the web, and on mobile devices simultaneously. As technology rapidly enables interplatform operability, marketers will be able to focus more upon the (all important) creative, than the delivery methodology itself.

As digital delivery systems evolve, marketers will live or die by the power of their creative to captivate. When technology companies finally enable marketers to broadcast their advertising across multiple digital channels at once (online display, video, mobile, DOOH, and cable set-top), the challenge will once again turn to creativity. In a technology-driven media world that enables marketers to produce and stream an advertising message seamlessly into the ether—it’s all about the ad, rather than where it is seen.

Up until now, the conversation in the space has been about delivering ads (by “DSPs” and RTB systems). As digital advertising delivery systems evolve, and every marketer has near ubiquitous access to platforms that enable scale and cross-platform delivery, the conversation is going to shift back to who is producing the best creative.

That’s a conversation I am looking forward to.

[This post originally appeared on 5/12/11 in eMarketing & Commerce]

Dawn of the Dead

April 28, 2011 Leave a comment

Is Your Ad Technology Company Disruptive, or Just Another Zombie?

AdTech 2011, San Francisco CA – Every year, San Francisco is abuzz with hope and opportunity as thousands of ad technology executives pour into a  few square blocks around the Moscone Center to try and turn technology dreams into riches. On the inside of the convention center, an odd assortment of e-mail and affiliate marketing tools vie for the jaded eyes of direct marketers. On the outside, more seasoned media technology executives find themselves in and out of luncheons and panel discussions, mostly trying to figure out the real time landscape, and the data surrounding it.

There is a lot of high risk venture capital fueling the ad technology business, as a very crowded LUMA map can attest. The Kawaja logo vomit slide never seems to shrink, although the dotted red lines indicating acquisitions appear from time to time. Burst Media is probably getting updated on the map as we speak.  Its recent acquisition by Blinkx at a 1-time gross revenue valuation is a stinging reminder that not all dreams (even those with scale) turn to gold. Despite reaching some 61% of the US Population, Burst lost $3M in its last year as an independent operation.

At the recent AdWeb 3.0 conference, venture investors Josh Stein of Draper Fisher Jurvetson (Glam, Skype, Targetcast, Cafe Mom) and Jon Soberg of Blumberg Capital (Legolas, HootSuite, DoubleVerify) talked about what is getting VCs excited in the space…and those companies that are not. Obviously, mobile is seeing an influx of early stage capital as next generation media technology application development progesses. For Stein, “the engagement in mobile is extreme—you may only be getting 3 minutes [of a consumer’s attention], but it is full engagement.” Video is also an area that will see significant investment capital as more and more video content finds its way onto computer, mobile, and tablet screens. YouTube’s recent moves with “Next” around original content creation were cited as positive developments in the space. Also mentioned was the growing area of social curation of video content (using social media technology to make sense of the potentially thousands of “channels” in the ether).

On the other side, Stein questioned the “long term economics” of Groupon and its many clones and also threw cold water on Foursquare by wondering aloud whether  “checking in” is a “long-term, sustainable” business model.  An audience member inquired whether we are currently “in a bubble” in terms of media technology, but the question was quickly dismissed. Unlike real financial bubbles that sweep up pension funds and real estate, “this bubble will likely pop on VCs…not consumers.” I suppose that is refreshing enough for the average consumer, but it is likely that many of the technology executives at AdTech have the fear of being popped along with their overinflated companies.

Lumascape

The recently updated "Display Lumascape" (as of 6.7.2011)

That leads me to the heart of the conversation: what our venture capital friends think of the crowded ad technology landscape, and their assessment of the companies within it. Jon Soberg seems to think that there are a lot of “walking dead” companies on the LUMA map: those companies that “can get quickly acquired by Google for $10 or $20 million, but don’t move the needle for venture investors.” Looking at the LUMA map, I think it is hard to argue with Jon. There are a lot of hands in the middle of the transaction between advertiser and publisher, and many of the companies therein aren’t adding as much value as they are taking out. The difference between truly valuable and exciting companies can easily be summed up by one word: disruption.  In other words, is your company’s technology doing something completely different and revolutionary, or is your company merely adding another incremental improvement or technology layer on an existing process?

It seems like most companies in the middle of the map are the type of companies that are walking dead. “Nice to have” technology rather than “must have” technology that will drive our business forward. So, what advice does the investment company have for the current companies in the space—and those that are looking to raise capital and jump into the crowded ad technology pool?

  • Disruption: As Soberg points out, “it’s not about shaving at the margins, it’s about disruption.” For Soberg, the value of facilitating real time media trading is interesting, but is being “squished out,” making it entirely possible for companies to “arbitrage themselves out of existence.” For me, this simply means that being a bolt-on technology for media trading is not the path to riches, only the path to a low-value exit. Your technology must create value with your data, rather than simply creating more of it.
  • Publishing: How can technology add value to the media transaction to publishers? This is an area ripe for investment and plenty of high value exit potential. In a world of highly commoditized inventory, where publishers have (foolishly) undervalued and overexposed their inventory, technology has a chance to fix things. How can the recent “app” revolution (where people actually pay for content) “reset” online publishing, and start to create higher value inventory? Glam and Tremor were cited as two companies that “add value in the middle of the transaction.”  Technology that enables publishers to “figure out” mobile and video (rather than just helping them sell more remnant inventory) are going to win.
  • Creative: One quote that struck me was Josh Steins’ excellent observation that “the Madmen [advertising] model wasn’t efficient…but it was profitable.” In other words, much of the magic and creativity in advertising has been replaced by technology, but technology isn’t what makes advertising effective. It’s ideas. Absolut bottles represented in every way possible…subservient chickens…the things which get and keep our attention. Maybe technology will standardize a good part of the transactional process of advertising, but the real winners in the ad tech space will be those technologies that help agencies put their focus back on creativity, rather than figuring out month-end billing and reconciliation.

It’s a crowded landscape out there, and there are many more red dotted lines to be added to the LUMA map. The ones that offer disruptive technology ideas that start returning value back to the advertisers and publishers, and away from the murky middle, will be the ones that avoid death…or “walking death.”\

[This article appeared on 4/28/11 in Business Insider]

Ecosystemopoly

LUMA Partners amusing "Adtechopoly" game

DIGIDAY: Target, New York, 5 May 2011 – If you work for one of the companies within the famed Kawaja logo vomit map, the only place to be today is at DigiDay Target. The event, in which every single presentation referenced or displayed the famous slide in question, is the nexus point for ad technology executives, publishers, advertisers, and investors looking to understand—and profit from—an increasingly volatile industry.

“The Ecosystem Map is a DR game” – Terence Kawaja, LUMA Partners

From the top down, the digital display advertising ecosystem map may actually look like a Chinese menu from which large, SaaS model companies can select best-of-breed players to consume. Over the coming months and years, most of the companies within the map will either become profitable or (better yet for the acquirer) battered down in valuation, and subject to an exit scenario. The slightly profitable ones will become features of larger platforms. The fun new twist on the LUMA map is the recently unveiled “Adtechopoly,” in which companies appear as Monopoly board game properties, and the players traversing the board are Google, Yahoo, AOL, Microsoft, IBM, and Adobe.

Most properties will leverage themselves and go bankrupt (do not pass go, do not collect $200M exit). Many will be acquired, and few will exist as independent businesses. So, what is the prognosis? Here is what I heard this morning:

–  Bubble: What bubble? Just because VCs are pouring lots of risk capital into questionable businesses, doesn’t mean we have a bubble. After all, a VC has to have a fairly low success rate to return value to investors. Unfortunately, according to Kawaja, “over half of the 35 deals in the last year didn’t produce a return on capital.” Kawaja expects that number to increase over time. But bubble? Not really. According to Kawaja, based on 2007 levels, multiples are not nearly where they were, so “it doesn’t feel like a bubble” to him. Unfortunately, it may feel that way for many of the ad technology folks in the room.

–  Who’s going to Take Over: The general consensus has been that Google is going to own most of the decent technology powering the advertising ecosystem, but Kawaja admits to “spending lots of time with IBM, SAP, Adobe, and Oracle.” For big SaaS companies, advertising is just one more industry to power with technology. That being said, “there are some really cool companies trying to piece together a stack” that will aggregate and organize the disparate technologies in the space.

–  Agencies: The holding companies on the new Ad Monopoly map cleverly appear as the railroads. Big, entrenched, and monopolistic, holding companies continue to command the lion’s share of advertiser budgets, but struggle to continue to be relevant to their clients. Agency trading desks were somewhat derided for having nothing more than “pretty logos,” instead of pure play technologies. Clients are looking to their agencies to be system integrators, and evaluate and deploy new technologies on their behalf but…they are agencies. In other words, agencies are not the first thing that comes to mind when you hear “systems integration.” Companies like SAP are. When the SAPs of the world are in the game, and having “big company to big company” process discussions with advertisers, do you think Omnicom will not be in the room? Me neither. As Kawaja correctly notes, “inertia is the agencies’ friend” but things are moving pretty quickly.

–  Remarketing: As for this highly popular and effective part of the ecosystem, “these companies only work because of failure.” In other words, according to Kawaja, remarketing to consumers only has to occur because advertiser sites are so non-engaging that the marketer has to pay (again) to bring that consumer back to the site. As advertisers work with their technology and agency partners to build more compelling online experiences, this need will shrink. For me, these companies suggest more of a feature, than a business onto themselves.

–  Where’s the Beef? For Kawaja, “the meat in the sandwich is the intelligence layer.” If we believe that advertising will continue to be more science than art going forward, the companies that win will be those that build the engines that decide “if this, then that” and create performance. Right now, the technologies in the industry are focused on direct response advertising, which provides a hyper intense proving ground for the technologies that purport to inject performance into campaigns, and get data insight out of them. The future, however, will depend on how those technologies adapt to the premium brand advertiser.

–  Creative: There’s been a lot of talk about the need to transfer the rich experience of magazine reading (beautiful photos and design) to cluttered online pages, filled with flashing, annoying, interruptive ads. Project Devil is leading the way in bringing an “engaging, beautiful” experience online, so look for more entrants who can migrate truly interactive (rich media and video) experiences online at scale.

I will have more to come on a very exciting and high quality seminar…including what seems like some virulent industry backlash on 3rd party data and RTB players.  For now, industry players should spruce their properties up as the players warm the dice in their hands, and get ready to traverse the board. The moves your ad technology company makes in the next few months may make the difference between being located at Boardwalk…or Baltic Avenue.

[This post was referenced on the 5/10/11 edition of AdExchanger and published in  Business Insider]

PS: Does anyone else find it hilarious that AOL is the dog?

There’s No App for That

Building the Technology Stack for Next Generation Digital Media Buying and Selling

Last week’s IAB Network and Exchanges conference was full of the usual self-congratulatory “use cases” of byzantine, data-based strategies for squeezing conversions from web-based display banners for direct response campaigns—or, alternatively, helping to drive “branded performance,” based on the listener’s preference. I was sitting next to an attorney from a large media company, tasked with making sense of the ad technology business. “I have to be honest,” she said, “I have been looking at this business for 18 months, and I still don’t understand what you people are talking about half the time…and I’m a smart person.”*

Unfortunately, that is the exact sentiment of many media planners, account managers, and marketing managers confronting the vast array of choices in display advertising. Once they figure out the alphabet soup of DSPs, RTB, and (now) DMPs, they start to wonder if they actually want—or need—the technology in question. Agencies are trying to figure out how to be the gatekeepers, and advise their clients on the best technologies and practices to drive branding and performance, but the work required to string together all of the various options makes earning money difficult. Digital media margins are in the toilet right now, and will remain there until agencies can manage all of these disparate systems with efficiency.

In the ad technology business, there’s an “app” for almost any way one wants to find and buy an audience—and many more applications for getting and understanding performance. Unfortunately, there is no operating system that can host all of these and make them work together seamlessly. The ideal scenario would be a world in which marketers could bring the different media applications they want to use into a single, unified system. Call it a “media dashboard” that would enable an agency to create a campaign, plug in their 3rd party research data, ad server of record, segmentation data licenses, audience measurement/verification providers, and billing system and enjoy access and control from a single interface. Down the road, as more mature APIs become available, the OS would enable marketers to “plug in” their mobile ad providers, video DSPs, and bid management tools for search marketing.

Almost everyone agrees that this is the future of the business. A famous media investment banker recently remarked that “there are some very smart companies out there

Are you developing your ad technology for the wrong system?

building a technology stack” to address these very issues, but wondered whether SAP or Oracle will be first to the party. My opinion is that the IBMs and SAPs of the world will let a smaller company fight through the growing pains, and let the preferred standardization technology come to light, before swooping in. The big boys can afford to be patient—and nobody wants to be the guy who backed Betamax. The question now isn’t Betamax or VHS—or even PC vs. Mac. The question is, what will be the operating system of next generation digital media, who will support it, and can an active “ecosystem” be maintained that enables technology companies to develop smart applications for it?

I think the answer is yes—and that the next 12 months will be critical in determining what companies will fit into the increasingly complex landscape and those that fail to meet the task. Not long ago, it was extremely difficult to buy from a variety of networks and exchanges efficiently. In comes AppNexus, and suddenly every Tom, Dick, and Harry has access to over 800 inventory sources, and a great bid management tools to boot. Their OS for real time bidding creates real efficiency for marketers—especially when they go through the pain of integration on your behalf. I know quite a few AppNexus users—but very few who will work with data segments that are not natively available in the platform.  The next great media technologies are going to be built for integration into specific systems, offer APIs that enable “easy” data export and ingestion, and flexible so that others can customize them for specific needs.

Evolution is natural to the technology business. Networks become “platforms”…data providers become “DMPs.” Technology companies will forever try and stick their hand in the middle of the transaction between the demand and the supply side, and shave off a sliver of the pie. But, eventually, evolution becomes “revolution” and the game changes for everyone. We are about to find out who has the capital, talent, and vision to devise the next generation operating system for digital media. That system is going to be the one that every company has to develop an “app” for and support, and that system is going to shape the way digital media is bought and sold for a very long time.

As an ad technology company, it’s time to start figuring out how your technology will fit into the larger puzzle if such an OS becomes standard. Is your technology built for an open system, or does your technology (and, more importantly, business model) only thrive in a closed environment? There are a lot of “platforms” out there, but eventually there will only be one operating system. I think there are a lot of really awesome “apps” out there waiting to be plugged into this new operating system, which would benefit from standardization and an installed base of users.

There’s definitely an “app for that.” We are just waiting for the OS.

*That sentiment was also expressed wonderfully in Doug Weaver’s amazing keynote presentation which he was kind enough to make available this morning on iMedia.

[This post appearred on 5/23/11 in Business Insider]


Fish Don’t Know He’s Wet

June 23, 2011 Leave a comment

If Your Company Depends on RTB, Put Your Helmet On.

The 5 Reasons RTB is less important than you think

All the hype in the display advertising industry has been around real time bidding for the last several years, and rightly so. Finding audiences with precision (cheaply) is marketing nirvana and, with all of the startup companies willing to work their tails off to make their “platforms” work for advertisers, the promise of media, layered with great technology, and tons of free service was hard to resist. Conference after conference, our industry leadership (well, actually I think it’s just the 30-odd people that speak at every conference) prognosticates on the latest data-driven success story, and ponders the meaning of the famed Kawaja logo vomit map, hoping that their flavor of audience technology gets acquired. But, like the old George Clinton lyric goes, the fish don’t know they are wet. After drinking the RTB Kool-Aid for so long, the real time practitioners may not realize that this fundamental driver of the display advertising ecosystem may not be as important as we all think. Here are five reasons to hedge your bets with RTB:

Quality Matters: Sorry, exchanges, but inventory quality still matters—a lot. The notion that you can splash a little bit of data on top of $0.25 CPM banner inventory and turn it into $5.00 gold was never really real in the first place. The great thing about RTB isn’t the enormous amounts of data you can apply to a media buy—it’s the enormous scale and price advantage that exchange buying brings. In a CPA-driven world, the most important metric is the cost of media. Today’s bidders give advertisers the ability to scour 800+ exchange inventory sources and buy cheaply and deeply into remnant inventory like never before. But, when you look at the reporting coming back, the clicks and conversions tend to happen where quality content appears. I’ve seen it time and time again: An RTB advertiser lucks into a bit of Tier I or Tier II inventory and finds performance. Unless publishers start changing their habits and stop putting banner code on every single web page they publish, there will continue to be a dearth of quality placements available in real time, and average real-time CTRs will not eclipse their .03% average.

Cookies Don’t Scale: This is the dirty little secret of the display media industry, and something that Datran’s Aperture team is out actively pushing. Anyone who has used a DSP can tell you that even a little bit of segmentation data applied to a media buy drops impression availability by a large factor. Cookie-based targeting is enormously complicated, and getting all the gears to turn in the same direction is not easy. How many people are in the market for a BMW are there in any given 30 day period, anyway? Well, according to AppNexus, I can find about 81,689 unique users that fit that description, and access up to 1.3M impressions if I win every single bid I place. Let’s go crazy and say that I am prepared to pay $30 CPM for every single one of them (I can probably win them at $8, though). That means, this month there is the potential of $40,000 of inventory to be sold for “BMW intenders.” Add in “Connecticut” and “Men” as additional segments, and you might as well call each potential buyer on the phone, or rent a plane and drop pamphlets on their house. But wait—you could probably mail them something really nice and reach them that way. Now that sounds like a business!

Legislative Tsunami: Many fish don’t understand what “Do Not Track” and other legislation is going to do to real-time bidding. Even if you take the most conservative reckoning, you would have to admit that some sort of consumer protections need to be built into our industry. I can’t tell you how many people are fascinated—and sort of bummed out—when I introduce them to www.bluekai.com/registry Personally, I have no problem being targeted (except for the relentless onslaught of industry-specific ads I seem to be targeted with). No matter how our industry tries to spin it, the fact that I just looked at flights for North Carolina, and am being targeted by travel ads two seconds later as an “in market travel intender” makes almost everyone uncomfortable, and it’s not a winning long term strategy. We need to turn over choice to consumers, rather than convince them that we are “protecting” their data. Watch out for companies that don’t run without the fuel of 3rd party data. Conversely, bet big on companies that collect tons of 1st party (volunteered) data like Facebook…at least until the government has a problem with that too.

Premium on the Rise: Call me a Project Devil fan. With people visiting an average of 3 sites a day (one of them being Facebook), it’s kind of hard to argue with the

It's Time to Break out of Pure RTB Business Models

fact that advertising needs to be engaging on the page. Whether it’s video, over-sized RM banners, in-app ads, or sponsored apps, advertisers are looking to engage users directly, rather than drive them to a site. These opportunities are the opposite of commodity-based exchange buying. You can’t standardize them…and you can’t buy these engaging units cheaply. Advertisers are starting to rebel against the low quality of exchange-based media, and publishers are really starting to rebel against the returns they are seeing on exchanges. They want technology that helps them understand and sell their own audiences, rather than technology that disintermediates them and sells their valuable audiences for them. Maybe we finally jumped the shark with the Admeld acquisition. Wouldn’t it be nice if technology helped advertisers find the right audiences where they wanted to be found, and publishers sell their audiences for more than $0.50? Was there ever an industry that sustained itself by crushing their main suppliers down on price?

Big Guys Have More Data than You: I don’t care how many cookies you have out there on the Web. Is it 150 million? 200 million? It doesn’t really matter. How many Facebook subscribers are there? How many Google Gmail users? We have given the biggest publishers absolutely every single piece of information about ourselves (including, for some Congressmen, too much information), and shared it with our friends, and shared our friends’ data with everyone too. Where cookie-based targeting doesn’t scale, first party data targeting on sites like Facebook scales plenty. You would think the ability to reach users with such specificity would be expensive, but no. Facebook ads are the best deal in town. I have never paid more than $0.50 CPM for my audience, no matter how many “segments” I want to apply. I can’t remember winning many display media bids in for that price. If you consider that Google is just starting to get into display—and Facebook is just starting to look at display, doesn’t that make you want to change your data strategy a little bit? If your business depends on the sheer amount of your data, you may need to get a longer ruler and think about just how much scale you really have.

There are a lot of ad technology fish swimming in the RTB sea right now, and every single one of them is wet. My advice to them is to break the surface of the water for a second, and see what else is around. RTB will be a part of advertising for a long time, but it will not displace premium, guaranteed advertising. It will also look nothing like today’s RTB in a few years. The advent of private marketplaces, higher value audiences exposed in real time environments, and the emergence of smarter branding metrics (via Vizu and others) is going to turn the conversation back to premium quickly. Jump in…the water is going to be fine.

[This post appeared on 6/23/11 in AdMonsters]

Beyond Bidding

June 30, 2011 Leave a comment

Why Real Time Bidding is More Important than you Think

Last week, I wrote that companies that depend on what we think of as “RTB” are in danger of missing larger opportunities. I argued that RTB technology is important, but that advertisers still need inventory quality, contextual relevance, and scale—something that today’s real time platforms are struggling with. If the game is truly about utilizing data to target audiences, companies are also burdened by an uncertain legislative environment—and the fact that big players like Facebook have an impossible data advantage. My point was not to dismiss the technology itself, only that RTB is only a single piece of the larger digital media puzzle. Getting RTB right is also the key to success for many of the companies in the digital media ecosystem. Here are the trends to look for over the next 18 months:

Moving Upscale

Let’s face it: agencies want to buy what they want, when they want. It doesn’t matter how cheap the prices are. The problem isn’t that agencies don’t understand that some inventory is better delivered through RTB. The problem is that their clients want their ads seen in certain places, and they want to know exactly where those ads will appear, and when they will appear. Clients also tend to want their ads to appear on sites that they have heard of, not necessarily “OpenX  Longtail” or “PubMatic Default” no matter how great the performance is. Human nature is all about exerting control over those things we can control, and it’s no different with advertising. The desire for control in real time bidding leads naturally to demand side domain grouping, in which advertisers carve out limited tranches of pre-approved inventory into which to bid, and forego many of the pure remnant options.

Now that publishers have spent some time exposing their inventory to DSPs, they now have more experience working the systems, and a better sense of what floor prices to set for certain inventory types. I recently had lunch with a large vertical publisher who told me that he recently discovered that a small amount of his inventory was consistently being won at a $1,700 CPM (it appears as though some DSPs do not offer a pricing cap for automatic bids)! At one time, technology companies understood how to monetize inventory better than publishers, but that dynamic is rapidly evolving—and for the better. After a few years of premium and remnant monetization, most publishers have a sense for where their inventory sells and performs best, and they are quickly realizing the benefit of putting more premium inventory up for bid to a trusted pool of advertisers. Watch over the next several months as more publishers take the lessons of exchange-based inventory selling, and start turning $5.00 CPM inventory into $10.00 CPM inventory by leveraging RTB technology to create small, private exchanges for their best inventory.

Private Exchanges

Will building private exchanges be the way ad tech companies score big with their demand and supply side customers?

These private exchanges are more than just a way for publishers to create increased competition for their premium impressions for an installed demand base. Private exchanges are an important piece of the entire monetization puzzle for publishers. Salespeople are motivated by commission plans, not necessarily corporate strategy, and they are also expensive. Reducing the cost of sales—while insuring that every premium impression is monetized properly, and at full value—is top of mind for all publishers right now. They got beat on remnant inventory technology, and you better believe that they won’t get fooled twice with their premium supply. They are going to figure out a way to let technology help them control and monetize it, and they are going to keep the lion’s share of the revenue for themselves. Innovative companies like aiMatch are helping to revolutionize this effort.

Private exchanges are going to enable publishers to place their entire premium inventory into biddable buckets, and let their advertisers have “seats” that enable them to get access. Ultimately, certain publishers will have upfront markets, in which the most premium inventory is sold for holiday times—and an active “spot market” in which the remainder of their premium inventory is sold at prices that exceed variable floor prices. Publishers will employ trading desk operatives that control the inventory they place in all exchanges (remnant and private), and employ fewer salespeople to hold the biggest clients’ hands. RTB is simply not about making cheap inventory better anymore. It’s about creating new market dynamics that raise the cost of the valuable inventory—and lessen the cost of sales.

Beyond Display

So much energy in the Kawaja logo vomit map has been created by companies in the real time display space that I believe we, as an industry, are somewhat blind to the opportunities happening in real time elsewhere. Digital media marketing is about marrying best practices in display, search, affiliate marketing, mobile, and video to get results. As branding becomes more measurable (thanks to Vizu, Aperture, and other technologies), more and more brand money is going to the digital pie. It’s quite simple: brand money goes to where the eyeballs congregate, and they happen to be cast upon computer screens, mobile phones, and tablets as much as television and newspapers these days. However, putting all of that together is not easy for the modern digital marketer. Real time can help.

Real time buying systems are slowly migrating from pure display into multi-channel media management systems that can find cost efficiencies across display, search, and mobile. AppNexus recently released Windows Mobile inventory into its exchange, and Android browser inventory is sure to follow. Now, you can bid for eyeballs seamlessly in the same platform, without regard to where they may be focused on. Enter programmatic buying technologies that can allocate spend across differing mediums (search display), buying methodologies (guaranteed, real-time), and pricing methodologies (CPM, CPC, CPA)—and suddenly you have real time systems that aren’t about “RTB” if you follow me. They are about getting all of the combinatorial values of an effective media plan correct, using campaign attribute data—and historical performance and pricing data. The bottom line is that the machines are going to be making the allocation calls in the future, and we are going from real time bidding, to real-time media decisioning. That’s a big change.

Immediacy

Another interesting aspect (and perhaps the most important) of RTB is immediacy. Real time bidding systems are collapsing the time window between having a great marketing message, and your ability to distribute it quickly. Twitter’s sponsored posts are one great example, Facebook’s self-serve ad interface gives instant satisfaction, and companies like DashBid are helping advertisers put their ads directly into the “hottest” video content, using bidding systems. Now that content is being curated by end users even more than by publishers, marketers need the ability to access audiences quickly, as they follow the latest meme, news trend, or fashion. Systems that offer the ability to go from idea to execution quickly, and are easily adaptable will win in this new RTB-driven ecosystem.

[This post originally appeared in eConsultancy on 6/30/11]

Death of the Digital Media Agency?

July 12, 2011 Leave a comment

Here are the three major trends making media agencies less relevant every day.

On the surface, it would seem that running a modern digital media agency would be fun. Being on the cutting edge of media and technology, being in the “social media conversation,” helping clients understand and deploy groundbreaking new technologies…that is the stuff that has turned scores of English majors into media professionals. Unfortunately, the reality of digital media is somewhat more mundane. At the end of the (long, thankless) day, the digital agency is more valued for reconciling ad serving numbers, collating performance reports, and swapping ad tags than delivering groundbreaking new marketing ideas. The true standalone independent digital agencies (MediaSmith and MediaTwo being great examples) happen to manage both, for most traditional agencies that have added a digital practice struggle to make the technology—and, more importantly, margins—work.

If it wasn’t enough having to make a living on the slim margins digital media offers, the industry’s tendency to constantly and rapidly shift means there are major, fundamental challenges that require the digital operator to adjust their approach to the market. Here are the three latest ones, and how they are impacting digital media shops:

Platform Technology

For digital marketers, it’s all about the tools. Ad campaigns need to be researched, negotiated, served, tracked, analyzed, optimized, billed and reconciled. Just five years ago, each of those tasks would require a separate, and often expensive, software tool. There were relatively few agencies willing to build and maintain the expertise to deliver digital media effectively, and fewer that had the scale to do it at a profit. Companies like Operative were born out of the complicated nature of tools like DFA and Atlas, which were so frustrating to use that agencies were willing to pay others to manage it for them.

The sea change in the industry has been about SaaS model “platform” technology that is giving anyone willing to login the tools to effectively manage many different aspects of digital media, from guaranteed display advertising, to real-time bidded display, to search and even social. This not only levels the playing field for smaller agencies, who now have nearly the same level of access as more deeply pocketed rivals, but once obscure DSP type technology is blowing the lid of the supply side’s hold on inventory, giving the local corner agency the ability to arbitrage media like a pro. Not only that, but many of the platform technologies available are venture funded startups out for any revenue they can get, and more than eager to sacrifice some margin to win sales by offering service behind the product. Most trading desks are pushing the buttons for agencies, and many platform technologies do the same. Ask yourself if your technology partner is looking to help you—or eventually displace you completely.

The challenge for digital media practices these days is not how many digital tools they have access to, but how they are utilizing them to extract the best advertising performance, whether it is for branding or performance or even the nauseatingly titled, “branded response.”   There are only so many tools an agency can realistically use, and fewer that they can use effectively. Getting the mix correct, and choosing your partners wisely is the difference between being a digital media tools provider, and your client’s digital media expert.

Shift back to Premium

Back at the Digital Publishing Summit, I heard Greg Rogers of Pictela say this: “Nielsen says people visit 2.9 sites a day, and one of them is Facebook.” I don’t care how many industry conferences you go to this year; you will not hear anything more significant than that statement. Why does it matter? It matters because everything this industry is trying to do with audience targeting depends entirely on reaching consumers across a wide variety of sites. The Holy Grail of advertising we have been chasing (well, venture capital has been chasing) is based on the notion that you can find me with a targeted ad, wherever I am on the web, and not have to pay some huge publisher gatekeeper a premium to get to me. If those people are all on Facebook, that’s kind of a big problem.

It also means that all of the standardization we have done with ad units and ad operations procedures that have been designed to make deploying 3 ad sizes all over the web was a terrible mistake. If a consumer is visiting 2 sites a day that aren’t Facebook, and nobody is clicking on an ad (well, 0.03% of people are clicking on an ad, but it turns out they have no money anyway), then what? It means that marketers have to engage consumers with ads that do things on the page, such as expand, or play video, or tell a story. The exact types of things you cannot do with a standard 300×250, 728×90, and 160×600 commoditized ad unit.

Sorry, but we made a big mistake. Flooding the web with cheap banner ads doesn’t work for performance (unless the media cost is so low that ROI is almost  guaranteed), and it doesn’t work for branding either, thanks to “banner blindness” and a the general reluctance of consumers to drop everything they are doing online, only to be transported to someone’s really big ad (their website). Coincidentally, nobody really wants to “like” your client’s brand, or be their “friend” either. That’s the modern version of the .03% click rate: the sub segment of consumers that will “like” a washing machine company are the same people that have been punching the monkey for the last ten years.

The future of digital display advertising is about using highly premium ad units to engage consumers on the page, and provide them with a rich branded experience. That is why concepts like Project Devil are coming back to the forefront. Your agency has to be an expert at understanding how to deliver customized ad experiences at scale, but also leverage the existing, commoditized tools for display to achieve reach. That means that creative agencies, who increasingly have access to platform technology advertising tools, can put themselves in the driver’s seat by making  the creative—and deploying it too.

Social Media

Now every Tom, Dick, and Harry has access to platform technology, and creative is once again coming back into the forefront. What’s the next challenge for the digital media agency? The coming threat from social media.  If you thought the increasing dependence on social media for marketers would be a boon to the digital media agency, you may want to think again. Much of the social media focus for big brands is within their PR firms, who are challenged to build and maintain a brand’s “social media presence” on Facebook, Twitter, and LinkedIn. I recently met with a few PR firms who were charged with attracting “friends,” getting tweets, and “likes.”

They are going to do that with media money—and some of them want to keep that money in house, rather than partnering with media agencies to do it for them. A few years ago, this would have been unthinkable, as the cost of hiring a media team would erode much of the margins. Now, with ubiquitous access to platform technology, PR agencies are looking at building small in-house media teams to leverage social budgets, and make deploying social marketing campaigns a core expertise.

The successful digital media agency’s greatest expertise has always been adaptability. The best ones are already building the tools and expertise to help marketers navigate through these times, and partnering with technology companies that can evolve alongside them.

[This post was originally published in eConsultancy on 7/12/11]

Epic FAIL

July 20, 2011 Leave a comment

This is why agencies buy direct.

Much has been written about the notorious “logo vomit” map of famed internet banker Terence Kawaja. I reference his handy charts on my blog, and often his “Display LUMAscape” as a reference point for thinking about the digital display business, and what will happen to it. Many have tried to navigate through the various categories and dissect what may be “happening” in the space, which is a favorite pastime of company executives trying to raise money for many of the identified advertising technology outfits referenced within. Nobody ever really tries to explain the whole thing, though. It’s just too complicated, I guess. Allow me to try:

 “A few years ago, people started to figure out that you could use technology to target advertising to people on the Web. Ever since then, 250 companies have placed themselves in the middle of the transaction between the advertiser and the inventory, confusing everyone. Now, most of them are running out of money and will sell cheap, get acquired, or go out of business.”

Perhaps that oversimplifies things slightly, but the reality is that there are many companies in the space that are primed for one of those three scenarios. Unfortunately, most of them will sell for less than their investment, or go out of business. Here are the three big reasons we have gotten here:

It was a Bad Idea

The whole point of most of the companies on the Kawaja map is to help advertisers use data to find exactly the right audience at the right time, serve them the right ad, and maybe find something out about them that helps drive branding or sales. In the past, most advertisers used to do that contextually (putting ads for shoes in Vogue, for example) and it seemed to work pretty well. When that Internet thing came along, publishers could get something nearing their print CPMs for “site sponsorships” and premium banner advertising alongside good content. Sooner or later, however, publishers decided to put banners ads on all of their pages, creating the advertising largest inventory glut known to man. That created a big problem.

All of that banner space needed to be monetized somehow, and publishers were quickly discovering that it was hard to make money on the trillions of monthly advertising impressions they had created. But nobody wanted to buy $10 CPM banner ads on message board pages, and the “contact us” page. So, in order to “solve” this problem, exchanges popped up and allowed publishers to “monetize” this space by having various parties bid on the inventory. Things got even better when data companies came in, and were able to layer some demographic data atop those impressions, making audience buying possible for the first time. The venture money flowed, as smart young technologists created fast-moving software companies to help marketers exploit this trend as they sought a way to help reduce industry average CPMs from $20 to $2.

Mission accomplished! In the last 10 years, average CPMs have been drastically reduced, 100% of a publishers inventory is being “monetized” (often by 10 or more companies), and you can target an ad down to one’s shoe size.  So, what’s the problem? Hasn’t turning advertising from an art into a science worked?

The answer is: Yes, but not for all of the companies on that map. People visit three sites a day, and one of them is Facebook. If you want audience targeting, why not just find exactly what you want from a social network? They are the ones with the real audience data. They are also the ones with the audience scale, having about 5 times as many “profiles” as the next largest data company. The problem with all the companies trying to sell you audience targeting and ad technology is that it only works when you have audience scale (they don’t) and deep audience data (they don’t have that either).

Facebook, Google, and LinkedIn (and the next company that people are willing to share their private information with) are going to win the audience targeting game. When you are talking about audience buying at scale, social media IS digital media.

It’s Still about Art

If you believe that the average web user visits only two sites a day besides Facebook, then you better find them on those sites—and give them a really amazing experience with your banner ad. That thing should play video, games, talk to you, and almost pay you to look at it. Since only three out of every 10,000 people will click on it, you had better make sure the creative really tells a terrific story and gets your brand message across too.

That means standard sized banners that work with exchange-based buying are pretty much irrelevant, since they have a hard time doing any of the above. It also means that context has to accompany placement. It is not enough to reach a “35 year old woman in-market for shoes.” You have to reach her when she is on her favorite fashion site, or otherwise psychologically engaged in shoe consideration. The ad should be in a brand-safe environment that engenders trust—and compliments the creative in question. That sounds suspiciously like premium display advertising…the stuff that was being sold 10 years ago!

In a certain sense, we have almost come back full-circle to guaranteed, premium advertising. And that means an emphasis on the creative itself. If you look at the map, it’s clear that creative isn’t a part of the picture…but it might be the most important thing driving the future of the digital display advertising business.

It’s Confusing

Even if agencies and advertisers wanted to take advantage of a few of the of companies cluttering the “landscape,” they would need to log into and learn multiple systems. As a marketer looking to reach women, am I really going to log into Blue Kai and bid on demographic “stamps” from Nielsen, log into AppNexus and apply those to a real-time exchange buy, constantly log into my DART account to check ad pacing and performance, periodically log into my Aperture account to download audience data, and then log into my Advantage account every month to bill my clients? Maybe—but that’s exactly the reason why digital media agencies are making 3% margins lately. Most of these technologies are really great on their own, but string together too many of them and you start to get lost in the data, and are unable to react to it.

For digital marketing to be effective, a set of standards need to be created that enables systems to work together and share information. Basic B-school dogma teaches you that effectiveness starts to break down when a manager has more than 5 direct reports. If you believe that, then it’s not hard to imagine the effectiveness of a 22-year old media planner managing 5 logins on behalf of his agency.  It’s not just confusing, but impossible.

We have built an industry ripe for aggregation, and the Googles, Adobes, and IBMs of the world will not disappoint us! So, what companies will succeed in this ecosystem?

– Social Scalers: If you agree that all reach advertising targeting audiences will eventually be on social networks, then you should look to work with companies that are making social advertising scale effectively. Doing Facebook advertising is incredibly easy—but doing it right is hard. Doing it properly requires extreme multivariate creative optimization and, more importantly, knowing what to do with the mounds of truly actionable audience data that Facebook and other social networks will hand you. Companies like XA.net that are doing this are EPIC WIN.

 – Creative enablers: Since the conversation is coming back to the creative, how can technology help make great creative even better—and help advertisers understand how that creative is being engaged with?  The click is a dead metric to most seasoned advertisers, who are spending more time with branding measurement tools (Vizu) and creative ad analytics startups (Moat) that are well positioned to “science-ify” the truly important part of advertising: the creative itself. Companies doing that well are also going to be EPIC WIN.

 – Standard Bearers: With all of the logins out there, it is inevitable that one company is going to try and create the technology stack for next generation media buying that puts all the pieces together seamlessly. There are a number of companies trying to do this right now (full disclosure: I work for one of them), and I believe there will be a lot of advertisers and agencies relieved to log into a single platform, and be able to access all of their vendor relationships in one dashboard.  This will take some time, but the companies that enable standardization across technology providers will also WIN big.

[This post originally appeared 7/20/11 on eConsultancy blog]

TRAFFIQ Talks Private Marketplaces and Other Platform Enhancements

July 27, 2011 Leave a comment

ADOTAS – Demand-side digital media management platform TRAFFIQ expands its offerings so much that it’s hard to keep up. Fortunately, we were able to hit Senior Vice President of Sales and Marketing  (and regular Adotas contributor) Chris O’Hara with questions regarding the platform’s latest upgrades (including customized and private publisher portfolios and enhanced financial management tools) as well as the many partnerships the company has formed since the beginning of the year.

ADOTAS: Terence Kawaja’s infamous display ecosystem landscape places TRAFFIQ in “media management systems” with companies like Centro — closer to the supply side than DSPs. Do you think this is a fair placement and why?

 

O’HARA: I don’t think we should put too much emphasis on placement in the landscape chart. Many companies belong in one or more buckets—and some of the logos should appear much larger than others, based on overall impact within the landscape itself. TRAFFIQ, for example, could appear in many of the categories (DSP and Ad Serving being two of them), but I believe there is a revenue threshold to be met before LUMA will place you in multiple buckets.

That being said, I think TRAFFIQ is in the right category. Eventually, the notion is that TRAFFIQ would appear as an overlay to multiple sections of the map, providing dashboard level access to an advertiser’s entire vendor toolset.

How does a media management system differ from a DSP? Confused agency people want to know.

Mostly, it’s nomenclature. I think the term “demand-side platform” is a great term for a technology tool that helps advertisers manage their media. The reality is that now “DSP” means “technology tool for real time managing exchange buying.” Agencies have every right to be confused, as companies within the landscape are changing from network to “platform” and from data provider to “DMP.”

The difference is simply that a “management system” should provide tools that cover inventory discovery, vendor negotiation, offer management, contracts, ad serving, analytics, and billing; DSPs handle a sliver of the overall media buy. For example, TRAFFIQ customers will be able to manage several DSPs within our platform at once.

It seems like the new Private Marketplaces tool allows advertisers to customize publisher and exchange lists — fair assessment, or is there more, so much more?

Right now, TRAFFIQ private marketplaces enables advertisers to buy outside of our curated list of 3,000 guaranteed inventory sources, which is especially important in terms of giving agencies the control they need over media. Publishers increasingly want the convenience and efficiency of exchange buying…without exposing their quality inventory to the world.

Demand side customers like the reach and price efficiency they can achieve with exchange-buying—but still struggle with brand safety and transparency. Our next-generation system will offer both sides a lot more control over who they work with, and that is sorely needed in our business right now.

Can this tool also offer hookups into the increasingly popular private exchanges, such as The Weather Channel’s Category 5 and Quadrant One?

Yes, as long as the demand-side partner has a business relationship in place with the inventory supplier, TRAFFIQ will be able to enable the connection.

Why are agencies going gaga over your new finance management tools?

If agency CFOs could actually go “gaga,” they may be doing so over our new tool for the simple reason that most digital platforms don’t take the vagaries of agency pricing into account. At TRAFFIQ, we have to manage several different pricing scenarios at once.

What is the agency’s margin, and how do they want that margin reflected in the pricing (baked into the media cost, or shown transparently)? How about data and technology fees? Those can be added to the gross media cost, or shown separately as well. Also, handling net and gross costs with publishers has always been challenging.

Smart systems should recognize these fundamental business needs, and expose the correct pricing to everyone within the system, eliminating confusion and duplicative work.

Can you explain how the multiple user permissions work? Why is this important for your agency clients and how can they best be deployed?

For the demand side, multiple user permissions means giving access to a subset of clients for an individual account team. On the supply side, it means having the ability to put the right publisher rep with the right demand side customer.

For example, an individual agency account team may buy from Fred at ESPN for one client, and Joe at ESPN for another. It is also necessary for agencies to be able to manage which of their end-clients gets to view certain reports. Multiple user permissions adds the layer of flexibility that enables TRAFFIQ users to expose the right data to the right set of customers.

What kind of agencies are you working with these days and what kind do you hope to add to your client base? Are you working with brands directly as well?

For the past several years, our focus has been getting total product adoption from the small to mid-sized agency market. Some are the types of shops that have a thriving traditional media practice, but not necessarily the right tools to tackle digital media. Still others are strong in digital, but are struggling with multiple tools, and having a hard time putting all of the pieces together efficiently.

We partnered with some of the great agency groups like TAAN, Magnet Global, AMIN and Worldwide Partners to reach these shops, and have been quite successful. We have also done some work with the holding companies, but mostly on a campaign-by-campaign basis, rather than getting the large shops to adopt our solution fully.

The product features we are working on now will actually enable big agencies to adopt TRAFFIQ by enabling API connections to their existing systems (ad serving, billing, etc). You can’t walk into an agency and ask them to drop all of their vendor relationships at once… You have to be able to work seamlessly with what they have.

What sets apart your attribution services from your media management peers as well as other attribution providers? What kind of extra insight do you provide?

Right now, a lot of our customers are working with our embedded Aperture audience measurement reports. Unlike other platforms, we make it fairly easy to take those demographic campaign  learnings and take action against them. So, it’s not just click- or view-based data; it’s using third-party data to understand who is seeing your campaign, clicking on it, and ultimately converting against it.

We are the only platform that can help marketers react to that data through guaranteed buying—and RTB. In the near future, we will be able to show how our efforts in initial media budget allocation and optimization are driving performance. We also see a great opportunity to get some key attribution metrics out of search and display, once out customers are doing both types of media in the platform at scale.

How does TRAFFIQ integrate first-party and third-party data into audience buying efforts?

Right now we have over 15 data segmentation partners. Some of them work directly with our Trading Desk (we apply those segments to exchange buys), and some of our partners provide both targeting and media execution. We see our role as a platform as provisioning our advertising clients with the right best-of-breed partners, no matter what the targeting need.

That means Proximic and Peer39 for semantic; AlmondNet (now Datonic) for search keyword retargeting; Media6Degrees and 33Across for social targeting; Nielsen, Lotame and eXelate for demo targeting, etc. We also have the ability to match any first-party data with available audience within our real-time bidding system, and find that audience as well.

Do you foresee more mobile partnerships in TRAFFIQ’s future or is Phulant your one and only?

TRAFFIQ is an open platform, and that means we must be willing to integrate partners based on our clients’ needs. We see Phluant as a key TRAFFIQ partner for mobile ad serving, and have plans to work closely with them to define and grow our mobile capabilities. We want to see more standardization around mobile workflow, and that means making it easier for marketers to allocate budgets across different media types (social, search, mobile, video, and display) in one system.

Phluant has developed amazing technology to help marketers take rich media for display  and bring it to mobile devices. That’s a great starting point… and something that can be leveraged across multiple mobile inventory vendors.

Regarding your partnership with Bizo, what kind of opportunities lie in the realm of targeted B2B display?

Bizo is doing an amazing job of bringing the power of B2B to display advertising. Until recently, B2B marketers stayed away from display advertising (or struggled to get online reach with smaller, niche business publishers). Now, they can take the success that they are used to having with targeted direct mail in B2B, and apply that in real time display.

We believe that there are some real opportunities to make both B2B and local display digital advertising more manageable, scalable, and accountable.

Besides its “interesting” name, what about Oggifinogi (recently acquired by Collective Media) attracted TRAFFIQ to make it your video and rich media network partner?

Our customers use Pointroll, Mediamind, Spongecell, and all kinds of third-party rich media vendors, but we needed a reliable “go-to” partner that could help our registered demand-side client base tackle rich media and video more easily. We saw that “Oggi” had a strong commitment to both technology and customer service, and we felt that we could work with their team well. I think Collective media validated what a great partner choice we made there!

TRAFFIQ appears to have spread itself out pretty well across digital marketing channels, so what area is next on the agenda? Social?

The first big channel we are going to tackle after display is search. In a few months, TRAFFIQ will feature bid management tools for search engine marketing right in the platform—along with access to the Facebook self-service ad inventory. This means that, for the first time, guaranteed display, real-time display, search, and social can be managed within the same “media management system.”

It’s going to be exciting, but the real challenge will be making it seamless for marketers—and getting some great insights out of all the data that such an integrated platform will produce. That’s what we’ll be working on over the next several months.

[This interview appeared on 7/2711 in Adotas]

Digiday:Daily Interview (Repost)

August 16, 2011 Leave a comment

The right exit?

During the past year, the number of tech companies has exploded. There are some 245 logos on the (in)famous Luma Partners slide. Some of those have been acquired, but many have not and, in the eyes of several observers, are more features of products than standalone companies. In an economic downturn, with its focus on wringing efficiency, how many will be able to argue for a small slice of ad buys?

“People are all talking about the Luma slide,” said Tom Deierlein, managing director of Tagman, an ad technologies firm. “And they all want to pat themselves on the back and say, ‘Yeah, we made the Luma slide!’ If you go back to the original presentation of the slide, the point is that the industry is too cluttered. Too many people have their hands out, and there are not enough dollars to support all of the companies, and all of the tollbooths being put up. There is not enough money to support the ad ecosystem.”

Deierlein’s sentiments are echoed by analysts within and outside of the ad technology industry. The ad technology herd will “absolutely” be thinned, according to Erin Hunter, evp of media at Comscore. The proliferation of ad technology companies, some offering little or no transparency on their operations, won’t continue in an economy where brands want results, not simply assurances, according to Hunter.

“Brands want to know that there is a human on the other side of that impression,” said Hunter. She believes that advertisers will soon start to demand a system of “checks and balances” that will make ad technologies back up their product stack with verifiable results. Those firms not able to illustrate their value with transparency will eventually implode. At the end of the day, with the dizzying array of ad technologies, from DSPs to DMPs to SSPs to AMPs, there is still the question of what value each player is bringing to the table.

“When everyone has access to the same tools, there tends to be little differentiation and, consequently, value in an industry,” said Chris O’Hara, svp of marketing for Traffiq, an ad technologies firm. “Ad tech provides a highly robust example of this. Take DSPs and agency trading desks, for example. Everyone buys the same exact inventory from Google, Right Media, Microsoft, OpenX, PubMatic, Admeld and Rubicon, for example, and uses data that spring from the same sources such as IXI, Experian, Acxiom, etc. It’s extremely simple to get access to technology that enables you to leverage those things. So, what makes the companies that do real-time bidding valuable? They don’t own the inventory or the data. Many of them use the same machine-learning algorithms licensed by IPonWeb to drive optimization, and most deploy a roomful of smart account managers to help their clients manage and optimize their campaigns. As an investor, what value do you ascribe to those companies?”

And then there’s the simple fact of M&A: that there aren’t enough chairs to go around. There’s clearly the need for consolidation — Google’s vp of display advertising Neal Mohan regularly stresses this — but it’s hard to find a home for all those logos on the Luma chart.“Is there an explosion in the number of ad tech companies? Yes. Is that going to continue? No,” said venture capitalist Mark Suster in a recent Digiday interview. “In a bull market the number of startups in a category multiplies by as much as ten, and then when the markets collapse then they consolidate or shut down, and that is normal.”

The problem isn’t simply a general me-too mentality among startups, according to Deierlein. It’s that many companies bring nothing new to the table, often because they aren’t expected to. Companies are forgetting the history of the technology markets, Deierlein believes, and so many companies are simply plunging headlong into a complicated market without assessing whether or not their business model is an improvement on what is commonly offered in the “already cluttered ecosystem.”

“The clutter has come from the amount of money to be made in the ad technologies industry,” said Josh Kraft, marketing director for data analytics firm InfiniteGraph. “Eventually we will see companies being pruned, in a sense. Companies will have to back up their claims with actual client references. It requires a significant capabilities with data to compete, survive and thrive now.”

[This post appeared in DigiDay:Daily on 8/16/2011]

The RFP is Dead: New Concepts in Audience Discovery

August 19, 2011 Leave a comment

The Programmatic Approach to Media Allocation is Coming Soon to a Platform near You.

Since its inception, advertising has always been about putting the right message in front of the right audience. Back when televisions were really expensive, and people used to gather around them in bars to watch baseball, beer companies started to do a lot of television advertising. While it’s still pretty easy for marketers to find the right beer demographic on sports programming in broadcast, the new world of multiple screens makes finding that audience at scale tougher every day.

The guy who was likely in the pub watching the game back in the 1940s and 1950s is now watching the game at home, but maybe on his iPad. Or perhaps he’s sneaking it in at work on his computer via Slingbox, or following along on his Android phone on the MLB Mobile app. The point is, there’s no easy way to find him, it’s almost impossible to find him at cheaply at scale, and we may have the wrong way of discovering him online.

The traditional method of finding your audience in the digital space is to put together a campaign request for proposal (RFP) that details the nature of your ad campaign, the audience you are looking for, where you want to find them, and the most you expect to pay to reach them. An agency’s trusted inventory suppliers receive and evaluate the RFP, and put together (hopefully) creative strategies that deliver a way to find that audience, and put the agency’s message in front of the user at the right time, in the right place. This approach makes complete sense. Except when it doesn’t.

Here are some ways in which the traditional, single RFP fails:

Multiple Pricing Methodologies: One of the problems in the traditional RFP process is that the agency is often limited to suggesting a single price range they are willing to pay for the media. For example, a typical RFP for a branding campaign looking for contextually relevant, above-the-fold inventory may suggest a price range to publishers of between $8-$12 CPM. This is fine if the proposal is only going to premium publishers with guaranteed inventory. But what if the advertiser is also interested in finding his audience on a cost-per-click basis? Knowing the historical performance of similar past campaigns, he might suggest a range of $1.50 -$3.50 per click. While the agency is comfortable buying using both methodologies (and certainly prefers the latter), the publisher is left wondering how to respond in a way that gives him the best overall price, and best revenue predictability. After evaluating the campaign, he may well decide that he will fare better on the CPC model, but in the absence of the granular past performance data of the demand side client, he will probably opt for the revenue visibility afforded by a CPM campaign.

Markets tend to work most best when both sides of the transaction have access to similar information. That leads to pricing efficiency, which in turn creates long-term sustainable performance results. Unfortunately, the traditional RFP process tends to strongly favor the demand side customer rather than the inventory purveyor. Add in the possibilities of buying on cost-per-lead (CPL) and cost-per-action (CPA), and you have a situation in which the demand side customer has the benefit of greater data visibility, and the supply side opportunity becomes purely speculative, leading to even more pronounced market inequities. These dynamics have largely occurred due to the seemingly unlimited supply of banner inventory (a supply side problem that will be debated in another article), but the fact remains that today’s standard agency RFP process falls far short of accounting for the multiple ways in which digital media can be bought and sold today.

Multiple Buying Methodologies: Along with a new multitude of pricing choices available to both sides, the emergence of real-time-bidding (RTB) makes the traditional RFP process even less relevant in for today’s progressive digital marketer. Say a marketer wants to reach “Upper income men in Connecticut that are in-market for a BMW 5-Series sedan.” That’s a pretty specific target, and I’ll bet that if a marketer could actually identify and find the several dozen guys in Darien, Stamford, and Greenwich that are looking for that specific make and model of car within the time period of the campaign, they might be willing to bid upwards of $500 CPM to reach him. Unfortunately, if you were to restrict the RFP variable to that exact target, you would end up serving a few hundred impressions, and probably fail to even spend $500 altogether. Naturally, the marketer is willing to bid a lot less find all men and women in Connecticut that are in market for a BMW; or just men in Connecticut in market for a car in general; or even just men in Connecticut, whether they need a car or not. Naturally, bids for each segment will vary widely, and can span from single to triple digits. Without a CPM-based pricing cap, it is not uncommon to see bids above $1,000 for certain impressions, although very few of them are won.

Well executed RTB campaigns have multiple segments that bid at different levels, and impressions are won at widely differing prices. While the marketer expects some visibility around what the effective CPM may be for such a campaign, RTB systems work best when agnostic to media cost, and should depend purely on the advertiser’s CPC or CPA goals. While a marketer can be very specific about his ultimate CPA, CPC, or CPL pricing cap, the traditional RFP does not address his tolerance for certain types of risk, his willingness to deploy a large percentage of media budget for data costs, and his willingness to forgo placement and context in exchange for reaching his ultimate demographic targets. This is just one of the reasons that agencies are having difficulty transitioning to the new world of demand side platforms in general.

New Discovery Mechanisms: Finding your audience by creating a well-crafted RFP and working with inventory suppliers to cobble together an effective buying program is still a great way to reach your ultimate goal, mostly because publishers know their audiences really well and have been able to offer new and creative ways to engage them on webpages (and, now, multiple screens). But what if the publisher isn’t really in control of his audience? What if the content an advertiser wants to be associated with migrates and changes constantly, based on user behavior and activity? I am talking, of course, about user generated content. Companies like Buzz Logic measure the “conversational density” around a topic and find where people are talking about, say, “organic food.” You can’t find that audience with a traditional RFP. The prevalence (or downright dominance) of social media outlets has created an explosion of UGC that is creating content almost faster than marketers can discover it. And that those new content areas are highly desirable to advertisers looking to engage consumers in contextually relevant activities. Those audiences are found via technology. How about finding people through the products they own (OwnerIQ) or even based on their occupation (Bizo)?

RTB and data make finding very granular audiences an intriguing option for marketers, but the traditional RFP process makes it hard to describe a marketers willingness to mix traditional, contextual audience buying (finding fantasy football fans on ESPN, for example) from some of the new audience discovery options (finding college students online based on their ownership of mini refrigerators, for example). Both are possible, and probably great to deploy over the course of a single campaign, but the traditional RFP process doesn’t really address this well.

Allocation: In my mind, the most important aspect missing from the traditional RFP process is that it doesn’t bring the demand and supply sides together effectively to suggest proper budget allocation for a campaign. If you have a $100,000 budget, and suggest $10,000 per publisher, every publisher is going to suggest $10,000 in media—regardless of whether or not they have it available. Moreover, you are going to alienate some publishers that may have larger minimums. The real problem is that the traditional RFP process doesn’t easily allow budget allocation across multiple media types (guaranteed display, real-time bidded display, mobile, video, search, and social) or take into account historical performance data. Essentially, the RFP makes a crude guess at budget allocation, with the marketer using his gut and some past performance data (“well, the $40,000 I spent with Pandora last time performed pretty well, so I’ll do that again”). Although the amount of choices today’s digital marketer has have expanded greatly, his form of communicating specific campaign needs is still an essay-length Word document or form-based technology with limited fields that do not capture the breadth of choices available.

So, what is the answer? New platform technologies are helping marketers expand the way they describe their campaign needs-and their willingness to deploy differing pricing and buying methodologies to reach their intended audience. Real time bidding systems are also giving end users hundreds of different levers to control the types of bids they are willing to make, based on the granularity of the audience, and performance of the inventory they purchased. In coming months, technology will not only expand a digital marketer’s ability to better describe his goals, but also use past performance data to suggest more effective media allocations in the beginning—and during—a campaign. Based on granular campaign attributes, knowledge of price points where certain real-time bids are won, and historical campaign performance, systems will be able to tell the marketer: “Allocate this percentage to SEM, this percentage to guaranteed display, and this much to real-time display” while suggesting the most effective bids to place. This three-dimensional discovery technique is where we are headed. While we are getting ready for its arrival, marketers should start thinking outside the traditional RFP box, and begin configuring new ways to ask inventory partners to find their desired audiences.

[This post originally appeared in eConsultancy on 8/19/11]

Ad Tech’s Walking Dead Startups (DigiDay Interview)

August 25, 2011 Leave a comment

Chris O’Hara is svp of marketing and sales for Traffiq, a digital media optimization company. He has referred to the clutch of ad tech companies with sizable bank accounts from VC investment, not profits, as the walking dead. O’Hara believes that it’s only a matter of time before a massive fire sale begins in the industry.

Explain the idea of a walking-dead company?

Walking dead companies are venture-funded companies that are sort of stumbling along revenue wise, making enough money to stay afloat or surviving on their financing by having a relatively low burn rate. They’re not going to have a super successful exit anytime in the future. They may be very exciting, innovative companies, but they have a hard time getting VCs pumped up. Venture funds tend to place a lot of bets and hope that they get big wins from a small percentage of them. Like any investment vehicle, a VC’s portfolio has its mix of winners and losers, although the typical VC portfolio tends to be less diversified in terms of its industry focus. When I heard Jon Soberg of Blumberg Capital — it is a backer of Legolas, HootSuite, and DoubleVerify, among others — use the phrase “the walking dead,” it felt extremely appropriate. A lot of companies in the digital display landscape are running out of capital after 3 or 4 years and several rounds of financing—and most of them will exit at low or zero multiple of valuation. Then again, smart investors like Grotech Ventures find a Living Social to invest in every now and again, and that is the kind of deal that can propel the value of an entire portfolio.

 

Are VCs beginning to cool in regards to investing in ad tech and social, in light of the economy?

On the contrary. I think the valuations of LinkedIn, Facebook, and Living Social have the VC community excited, maybe even overexcited, to be honest. The recent Buddy Media announcement is just one example, raising $54 million to plump its valuation to $500 million, and there are sure to more such valuations coming soon. I think what VCs aren’t too excited amount is the amount of companies within the display landscape that are going to flame out, or exit at fire sale prices. Unfortunately, according to Luma Partners banker Terence Kawaja, over half of the 35 deals in the last year didn’t produce a return on capital, and he expects that number to increase over time.

 

What are VCs doing right, or wrong, in ad tech?

If their funds make a decent return on investment, then they aren’t doing anything wrong! It may seem like that to company insiders working for some of the less fortunate companies, but VCs are not in business to keep ad-tech executives in panel discussions at cocktail-soaked industry conferences. They are in business to build companies to sell them, or put them into a public offering. I think certain well-heeled VCs may be making the venture capital business a lot harder by over-inflating the valuations of some of the larger companies in our business, but I think that’s due to the flight of money from increasingly unstable capital markets to other investment vehicles. There is a lot of cash on the sidelines right now, and venture funds are starting to look like a surprisingly safe haven. While that should scare the average investor, it makes for a very fun, frothy environment for ad technology!

 

So how should an investor, in this market, value a Demand Side Platform (DSP) company?

I would give them a 1x-3x valuation, similar to a successful digital media agency — and only if they were showing strong profitability and something unique about their process which was repeatable. The problem with the current landscape is that the excitement has been driven in large part by many of the companies that I have just described — companies with more hype than real technology with a unique IP.

 

What should ad tech Investors look out for?

I think investors have to watch out for a rapidly collapsing landscape, due to the social factor. You have an entire ecosystem built around audience targeting using 3rd party data. The problem? The companies with better and deeper first-party data have a lot more audience — like 750 million profiles for Facebook alone — than all of the companies in our landscape put together. And Facebook, LinkedIn, and Google have just started to define their display advertising strategy. If audience targeting is as easy as it seems to be now, via Facebook, then what is the real value of many of those little logos in the Kawaja map?

 

[This interview was originally published in Digiday on 8/25/11]

Great American Beer

February 1, 2012 Leave a comment

My introduction to beer started on a warm summer day in 1982 on a weathered green bench on the Avenue B side of Tompkins Square Park in New York City. The beer was Rolling Rock, a six­-­pack purchased with astonishing ease at the bodega on 12th Street, and swathed in small brown paper bags—the standard form of concealment for underage drinkers and veterans alike. I twisted off the cap, doffed my beer in my friend Frank’s direction, and promptly drained off half of the bottle. We looked at each other and laughed. Of course this was illegal—they would never let anybody our age have this much fun. After finishing the six­-­pack, we walked back up Avenue B to the basketball courts on 14th Street, reveling in the newfound power of Beer. When we got to the court, I was astonished when I couldn’t dunk the ball. The truth was that neither of us was sober enough to even make a lay­up.

It’s funny how that memory takes precedence over so many other “firsts” that happen when you’re young. The first kiss. First home run. First concert. Though I didn’t know it at the time, that first real drink of beer was my first step on a very long road to adulthood. The irony that my first giant step of individualism consisted of doing something my father did—and learned from his father before him—didn’t matter. There is a kind of magic in that first beer. There may be ­thousands—if not tens of thousands—of beers to remember over a lifetime, but that first beer sticks with you for a long ­time.

For me, it was a Rolling Rock—at the time, an inexpensive and mysterious selection from the bottom of the bodega’s cooler. For you, it may have been Budweiser, or Pabst Blue Ribbon, or maybe even an ice­-­cold can of Schaefer purloined from your dad’s garage fridge. This book is about celebrating the classic beers we encountered in our youth. Not gourmet “sipping” beers like a Belgian Witbier or a German doppelbock, but the classic all­-­American brews that our fathers and grandfathers drank, like Schaefer, Schlitz, Hamm’s, and Rheingold. In so few words, “the beers to have when you’re having more than ­one.”

What is it about these stalwart brands that capture our imagination in the way that today’s microbrews and other specialty beers do not? In some ways, it is about embracing a time in America when things were much ­simpler.

Though many of the hallmarks of early twentieth­-­century America (racism, war, lack of women’s rights, etc.) were so inexorably wrong, there was still much to celebrate in the “good old days.” It’s hard to believe, but there was actually a time when one income could support a family, when American automobiles were top-notch, and when you could get your first—and last—job with a good company and retire comfortably on your pension. Back then, you ate a steak without fear of cholesterol, went on vacation without a Blackberry, and sent your kids off to school without fear of abduction. Back then, you ordered a “cup of Joe” rather than a “tall half­-­caf mochaccino latte,” and you drank beer. Not lager, stout, or IPA. Just plain old beer.

Great American Beer celebrates the purity and simplicity of classic American brands and the way they continue to resonate today. This book is intended to be the ultimate guide to beer from the era when Milwaukee was the brewing capital of the world and the big names were Schaefer, Schlitz, Rheingold, and Pabst Blue Ribbon. The antithesis of the recent microbrewery revolution in America, this was a time when the major beer powerhouses took control of the brewing industry and, in the grand spirit of American industry, relentlessly quashed the small, independent producers that relied upon local support. This story is about the Americanization of beer, where homogenized brands—grown through a mixture of political clout, industrialization, and marketing might—became the best loved, and most heavily consumed beer brands in the ­world.

Great American Beer is also about the power of beer in our popular culture and how ­marketing turned beer—basically a commodity product with very little differentiation at the time—into powerful brands that had their own unique personalities and images. Even if an ounce of Miller Lite has never passed between your lips, I guarantee you know it’s the beer that “tastes great” and is “less filling.” As a true American beer lover, you also may be aware that Hamm’s hails from “the land of sky­-­blue waters” (wherever they may be) and be able to hum the Rheingold theme (“it’s my beer, it’s the dry beer . . .”).

Although the marketing battle for beer drinkers’ loyalty (and money) has probably been festering since the first brewery opened up in Manhattan (then New Amsterdam) in 1612, the heart of the battle did not begin until the late 1940s, when a curious confluence of events placed beer in the heart of American popular culture. Televisions were enormously expensive at the time—not everybody had them, but they could be found readily in the local tavern where, thanks to the dearth of quality shows, sports programming dominated the airwaves. Add the fact that “the boys” were mostly back from World War II and to be found in large quantities in the taverns, and you have the undeniably perfect setting for a beer commercial: a roomful of men watching baseball in front of a ­bar.

The 1947 Subway Series between the Brooklyn Dodgers and New York Yankees was mostly seen in standing­-­room­-­only taverns. With regional beer sports sponsorships already firmly established, it was only natural for beer companies to saturate the airwaves with characters ranging from Carling’s “Black Label Mabel” to the venerable Hamm’s Bear, who enjoyed a sixteen­-­year run as the beer’s primary spokesanimal. Through the magnifying prism of television, our love affair with American beer deepened and became more complex as brands took on a fuller life, with an entire range of logos, jingles, characters, and slogans intertwined in our consciousness.

Of course, our love affair with American beer isn’t just about advertising. It is also about where we are from. Before the advent of mass marketing and refrigerated trucking, you simply drank the beers supplied from your local breweries. Yet, even though larger breweries have been able to effectively ship and sell beer across the country since the turn of the twentieth century, affection for one’s local brew continues to this day. When soliciting suggestions for what great American brands to include in this book, both friends and colleagues fiercely advocated for their local brews—often citing largely experience­-­based, anecdotal evidence of their superiority, rather than arguing on the merits of craftsmanship or flavor. Naturally, those from upstate New York insisted that Genesee Cream Ale be placed highest in the pantheon of Great American Beer, while friends from Wisconsin were no less forceful in their advocacy of Leinenkugel, insisting that “once the amber goodness of a Leine’s penetrates your lips for the first time, you will see clearly that no other beer ­compares.” For some New Yorkers, the fact that Pabst (made in Milwaukee) was sold in Shea Stadium back when the Jets still played there was reason enough to support it as the ultimate American ­brew.

Unfortunately, the passage of time, the rise of the megabrewers, and the globalization of the economy have made many beloved regional American beer brands things of the past. In their place have risen thousands of smaller specialty microbreweries, brew pubs, and enough imported beer choice and variety to enable someone to have a different beer every day for the next quarter century without fear of repetition. This is a wonderful thing for all beer drinkers, although I suspect that I will always more vividly remember pulling the ring tab on my first PBR than having my first Samuel Adams Winter Wheat Ale. However, the current resurgence of storied brands such as Rheingold and Schaefer—as trendy, upscale beers—reveals that the power of these American icons has not faded over ­time.

Whether it is a memory of your father sipping beer in his armchair, a television beer commercial, or a fondness for a local sports team’s brew of choice, there is something about these classic American beers that resonates within us. I hope this book evokes these memories and helps you appreciate every can you drink a little bit ­more.

The Birth of Great American ­Beers

Beer has been an integral part of the American landscape since the first Virginia colonists brewed their own corn ale in 1587—and for centuries before, as the Native Americans were known to brew a drink from maize, according to Christopher Columbus. A long­-­standing legend holds that the Mayflower only touched down on Plymouth Rock because the ship’s crew ran out of beer and needed to disembark to obtain the materials to brew ­more.

Beer was brewed in America continuously since Europeans first set foot on the continent, and the settlers came armed with thousands of years of collective brewing knowledge. The first American beers were ales and stouts—rich, hearty, and robust beers made with top fermenting yeasts at warmer temperatures, then aged for a short time. These were typically heavy British­-­style brown ales, bitters, and barley­-­wine, stouts, and wheat ­beers.

But prior to the mid­-­1800s, the industry was modest. In 1810, for example, total American beer production stood at a meager 180,000 barrels. It wasn’t until the Germans arrived in force throughout the last half of the nineteenth century (over 4 million of them), that the true golden age of American brewing got started and the typical “American­-­style” beer took hold: smooth and elegant lagers and ­pilsners.

These new beers were the result of a type of yeast brought from Bavaria: yeast that was active at the bottom of the beer fermenter and worked at much cooler temperatures. When aged in cool caves or cellars, the beer took on a decidedly different character—much cleaner and smoother—than the typical ales of the day. Prior to the mid­-­1800s, this live Bavarian yeast could not survive the long ocean voyage between the United States and Europe. However, maritime development meant new, fast, multi­-­sailed clipper ships, which brought enough live yeast—and lively Bavarian brewers with it—to ensure that this style of lager made a swift foothold in the ­States.

German brewers, supported by a built­-­in worker and customer base of their fellow expatriates, rapidly took the American beer industry by storm. The combination of their readily drinkable beer, a rapidly expanding European immigrant community with the taste for German lager, and industrious German master brewers transformed the American industry from a com­paratively sleepy 750,000 barrels a year in 1850 to an astounding 6,600,000 barrels in 1870—and an estimated 40,000,000 barrels at the turn of the ­century. That trend was helped along by the fact that the rising immigrant population of America were factory workers prone to drinking before, during, and after their shifts—contributing to a per­-­capita beer consumption that rose from 6.4 gallons in 1865 to 16 gallons in 1900, and peaked at a (literally) ­staggering 20.6 gallons in 1910 (according to the U.S. Brewers Association’s Brewers Almanac).

The German Beer Barons pursued brewing with such a passion that they forever changed the cities their breweries were founded in—and, after a while, all of American culture. With single-minded purpose, they transformed a small cottage brewing industry into the industrial powerhouse it is today: a volume business whose product serves the masses. Despite the acuity of their craft and their initial intention to please their fellow German immigrants, the lager beer they ­produced was aimed at the broadest possible market—everyone. The ­product that began in the Bavarian countryside won over both the European immigrant population and well­-­established Americans alike and eventually became what we now call American ­Beer.

In the cities and towns where they planted roots, the Barons created more than beer. They employed thousands of workers and brought an industriousness that changed the other industries around them. The taverns and saloons they supplied, and often owned, stood as social nexuses in the local communities. The places where they settled (Milwaukee, New York, parts of Pennsylvania) became great beer towns and their ghosts linger on. Being a Beer Baron in the days before Prohibition was like being the President of the United States, Al Capone, and George Steinbrenner all rolled into one. Some of the greatest early stories from New York and Milwaukee give a feeling for the type of men the Barons were, and how they shaped the cities around ­them.

Milwaukee: Beer City, ­USA

To the aspiring Beer Baron’s eye, Milwaukee was a virtual dreamscape for the intrepid brewer: a welcoming harbor, plenty of ice and cool caves for storage (there was no refrigeration back then), and plenty of thirsty European immigrants. Although Milwaukee was a perfect spot for brewing, it didn’t seem to offer any truly unique advantages that couldn’t be found elsewhere on the Great Lakes. Yes, it had access to a wealth of wooden barrels, thanks to its proximity to the North Woods. It also had a large immigrant community, but so did Chicago. Its water was pristine, but no more so than other nearby industrial ­centers.

Oddly, Milwaukee’s main advantage was what it lacked: enough people to drink all the beer it produced. Milwaukee’s brewers quickly ran out of local drinkers, so they learned the crucial art of packaging, shipping, and marketing early. Their first target was Chicago, the city that drank enough Schlitz to “Make Milwaukee ­Famous.”

The other main advantage Milwaukee had was a variety of intrepid, adventurous German brewers who seemed to be armed with risk capital, business acumen, and a magic formula for lager beer. Two of those brewers were Charles and Jacob Best, from Mettenheim, Germany. Starting in 1844, the Best family, owners of a vinegar factory, turned the industrial harbor city of Milwaukee into what would become known as Beer City, USA. In 1844, Jacob Best opened a small brewery on Chestnut Street Hill, which eventually became the Pabst Brewing Company. A few years later, his brother Charles opened a small operation nearby, humbly calling it the Plank Road Brewery. It is now known as the Miller Brewing Company. Sibling rivalry is a wonderful ­thing.

Other great brewers in the Milwaukee tradition were Captain Frederick Pabst (who married into the Best family), Frederick Miller (who bought the Plank Road Brewery), and Joseph Schlitz. These men, and hundreds of others like them (albeit not as successful), fashioned Milwaukee into a beer paradise. The city was covered with pubs and beer gardens, where free hot lunches, entertainment, and plenty of political votes could be had for the price of a nickel beer. With the great Beer Barons at the hub of the ever­-­growing German community, Milwaukee wallowed in beer and the industry it wrought, creating both larger­-­than­-­life characters and beer bellies—humorously known as “Milwaukee Goiter.” Truly, Milwaukee was Beer City, ­USA.

New York: Ehret and the ­Colonel

The early days of New York brewing can be summed up by two great figures: George “The Crazy Dutchman” Ehret and “Colonel” Jacob Ruppert. In 1857, the twenty­-­two­-­year­-­old George Ehret immigrated to New York City, promptly found employment at a local ­brewery, and began his rapid climb to the top of American brewing. Fueled by enormous patience, persistence, and frugality, Ehret stashed away his salary (and the knowledge he acquired) from his supervisor position at A. Hupfel Brewery for eight years, until he had enough to start his own ­operation.

Ehret selected a rural site for his brewery, opposite a dangerous passage in the East River called Hell Gate. Hell Gate Brewery was established with one core principle in mind: to duplicate, as closely as possible, the famous Munich lagers of the day. Finding the local water supply unreliable, Ehret drilled a 700­-­foot artesian well to draw water for his brewery. The resulting “Franziskaner” beer proved to be an instant hit among New Yorkers. By 1867, the brewery was firmly established and had a wide distribution among New York’s numerous bars and taverns. Despite a near crippling setback when his brewery burned to the ground in 1870, Ehret managed to quickly rebuild and nearly doubled his sales every year until the end of the century. Ehret never believed in bottling, so his market was only ever local. However, it is estimated that, by 1900, Ehret was ranked fourth in the nation in terms of overall production—even though his sales were limited to New York ­City.

At roughly the same time of Ehret’s ascendancy, another young Bavarian, the ten­-­year­-­old Jacob Ruppert, was working for his father’s Turtle Bay Brewery and hatching plans for his own operation. When he turned twenty, he asked his father for permission to strike out on his own and, ironically, picked the same desolate spot for his fledgling operation as Ehret did: New York’s then­-­forested Upper East Side, known as Hell ­Gate.

Starting his operation out of a modest fifty­-­foot­-­square brick building, Ruppert sold 5,000 barrels of beer in his first year. A combination of quality beer and relentless salesmanship saw sales of Ruppert’s Extra Pale Ale and Knickerbocker Beer rise to 500,000 barrels a year by the mid 1890s, when his son, Young Jake, became general manager of the brewery. A deft politician and salesman, Young Jake was given the honorary title of Colonel by then­-­Governor Hill. The “Colonel” soon gained a reputation among New York’s elite crowd, and his success in New York society mirrored the rapid rise in his beer sales. The Colonel went on to buy the New York Yankees in 1914, built Yankee Stadium (known then, sarcastically, as the “House That Beer Built”), and personally selected the famous Yankee pinstripes for their uniforms. The team (including the later acquisition of one Babe Ruth from Boston) proved to be a sage investment, as Yankee Stadium sold more Ruppert beer than any other location in the ­country.

In 1935, a triumph greater than the purchase of Babe Ruth sealed Ruppert’s destiny as the greatest New York brewer. That was the year George Ehret’s heirs sold his brewery to ­Ruppert.

Across the Country . . .

While Milwaukee dominated the “Golden Age” of brewing, and New York (being New York) was always close to the media spotlight, other parts of the country were also part of the beer revolution. Pennsylvania has been synonymous with beer since its founder, William Penn, built the Pioneer Brew House as his home in Bucks County in 1683. The state also currently holds the distinction of having America’s oldest brewery, Yuengling, based in Pottsville and nestled among the Appalachian foothills in Schuylkill County. Philadelphia’s Ortlieb is equally distinguished in beer history: the brewery actually stands on the site of where the first lager beer was brewed in America by Bavarian brewmaster John Wagner on Saint John Street, near Poplar, in ­1840.

In St. Louis, Adolphus Busch was busying himself with the creation of an international empire built on hops and malt. In Texas, Busch’s Lone Star Brewery was fighting for the spotlight with neighboring Pearl Brewing in San Antonio. In Colorado, Adolph Coors was trying to develop the “taste of the Rockies,” and further west, Maier and Olympia breweries were wetting the palates of Californians and Washingtonians. German lager beer spread like the flu across America, creating an industry that, with Prohibition, arguably had the biggest impact on domestic American society in the twentieth century. Here is the story of how American beer grew ­up.

The Rise of the Great American Beers of the Twentieth Century: Death of the Local ­Brewery

The story of the birth of the great American beers is truly the story of the first microbrewery revolution. The Bavarian master brewers, armed with brewers yeast and secret family recipes, created small­-­batch beers for limited populations, distributed through a few outlets. With no refrigeration and no easy access to ice, the brewing season was limited, and beer could only travel a short distance before it turned stale. Before the great American beers of the twentieth century could truly emerge, they had to adapt and survive two of the most radical changes in the industry: the emergence of refrigeration and mass bottling, which changed the business environment from regional to national; and Prohibition, a law intended to destroy their business ­entirely.

The brewers that would eventually survive and create the great American beer brands that still exist today were perhaps better industrialists, politicians, and marketers than craftsmen. Beer was a business—and a serious one at that. With approximately 3,000 breweries in operation in 1867, brewers and industrialists had already developed a large infrastructure of suppliers, distribution outlets, and equipment manufacturers. When the Siebel Institute of Technology, the first accredited brewing school, opened in 1867 and The American Brewer, the industry’s first trade publication, debuted a year later, the business of beer was truly ­institutionalized.

With the second generation of Bavarian brewing masters coming into their own, well­-­financed and backed by a growing industry support system and knowledge base, brewing became a high­-­stakes game where quantity and distribution reach trumped craft expertise. By 1873, when a record 4,131 breweries were operating, Busch—the one Beer Baron who was trained as a salesman rather than a brewer—seized the future of beer by bottling and shipping it on a scale not seen before. The game changed ­forever.

It would only take a few years before Louis Pasteur’s Studies on Beer showed the industry how to control living yeast organisms and keep beer relatively fresh over long periods of time. Pasteur basically solved the beer problem by killing the living organisms inside beer with heat—simply bottling the beer and immersing the bottles in water hot enough to kill the yeast organisms. Unfortunately, the heating had the effect of “overcooking” the beer, and did not tend to improve flavor. Despite this, brewers now had the ability to package and ship their products across the country, ensuring that the beer tasted the same from origin to destination. Although draft beer, by its very nature, was fresher tasting, it could not compete on a business level. By 1880 the number of brewers had declined to just over 2,800, as the larger brands expanded across the country with packaged beer, slowly pushing mom and pop regional brewers out of business. By 1910, a thousand more regional breweries had succumbed to the trend, and the estimated number of breweries had shrunk to ­1,500.

As the marketplace continued its merciless elimination of smaller operations, another disturbing trend was taking hold: Prohibition. Although national Prohibition did not happen until the 1919 Volstead Act took effect, “temperance” movements had been well underfoot for nearly a century. Nickel pints of lager flowing freely through America’s vast saloon infrastructure came with their own consequences: lots of public drunkenness, crime, and prostitution. As early as 1829, the American Temperance Society’s 100,000­-­strong member base was pushing for the abolition of what they saw as a morally bankrupt saloon culture. By 1833, with the German beer invasion just starting to take hold, membership in America’s various temperance societies had surpassed one million members. Initiatives on the state and local levels weren’t always successful, but Maine’s enactment of its 1846 prohibition law was a dark cloud on the horizon for brewers ­everywhere.

Various temperance experiments waxed and waned in the 1850s, seeing Vermont, Rhode Island, Michigan, Connecticut, New York, New Hampshire, Indiana, Delaware, and Iowa all enact laws with various prohibition measures (many later repealed), but the beer industry got an early taste of what was to come. Luckily for brewers and beer drinkers alike, the newly created Internal Revenue Service’s enactment of a dollar per barrel beer tax—primarily for funding Civil War operations—gave state and local governments a convenient excuse to look the other ­way.

Syndication

Although formal Prohibition was still years away, there was another, more powerful, trend taking hold in the brewing industry that would forever doom the small brewer: syndication. With beer, like any other manufacturing industry, the game is about scale. Larger brewers sought expansion through the acquisition of less cash­-­rich enterprises. Why spend thousands to build new manufacturing facilities and market new brands, when smaller breweries could be acquired and folded into an already successful business model? Such was the fate of many smaller brewers in the late ­1800s.

With muscular brewing syndicates controlling large areas of distribution and enjoying large economies of scale in manufacturing, the price wars started. Fierce competition between these new regional super brewers kept prices low, which created more syndication. By 1916, almost every brewery region in the United States had consolidated; regional super brewers included Pittsburgh (with twenty­-­one breweries forming the Pittsburgh Brewing company and fifteen folded into the Independent Brewing Company), Boston (a syndicate of ten brewers), Baltimore (sixteen), and San Francisco ­(six).

Prohibition

Bill Number 6810, introduced by Representative Andrew Volstead, established the apparatus for enforcing Prohibition. Although it was subsequently vetoed by President Wilson, the veto was overturned, and the Volstead Act authorized the enforcement of the Eighteenth Amendment. Prohibition officially began less than a year later, in 1920, and was the force that would shape American beer for the next century. One of the first major effects of the law was found in local drinking ­establishments.

In the early days, it seemed as though any brewer with a half­-­decent product could sell as many cases of beer as he could manufacture. Most brewers pushed their beer through networks of saloons, a marvelous distribution strategy—but one that proved for many brewers to be a fatal weakness. Prohibition, pushed through largely by the advocacy of the Anti­-­Saloon League, aggressively targeted taverns and beer gardens, which were known for their licentiousness. According to Peter McWilliams, author of Ain’t Nobody’s Business If You Do: The Absurdity of Consensual Crimes in a Free Country,

Saloons were seen as hotbeds of corruption, contagion, and vice. These male­-­only (except for “dance­-­hall girls”) establishments were, to the pious, positive hell holes. Drinking, gambling, prostitution, tobacco smoking, tobacco chewing (and its natural by­-­product, spitting), dancing, card playing, and criminal activity of all kinds were all traced to the saloon. Saloons were irresistible temptations to the otherwise righteous and virtuous men of the community. Invited there for a social drink by the “recruiters of Satan,” the young men of the community found themselves hopelessly caught in a spider’s web of immorality, lust, and depravity. Alcohol (a.k.a. the devil) was the spider at its very center. The Anti­-­Saloon League was formed, “an army of the Lord to wipe away the curse of ­drink.”

The small “independently­-­operated” taverns could be closed on the local level and posed less of a legal burden on enforcement than going after the well­-­funded brewers themselves. While Prohibition managed to slash incidences of liver cirrhosis by 63 percent, it also had slashed the number of breweries by half by the time it ended in 1933. Only the strong, well­-­funded breweries that had amassed large fortunes ­survived.

Breweries with an excess of capital and some imagination survived the long drought. Some produced “near­-­beers,” low­-­alcohol “cereal” beverages, sodas, chocolate, or malt syrup during the Prohibition years. Near­-­beer was about as close to real beer as most people could get, and brands like Pablo (Pabst), Vivo (Miller), and Bevo (Anheuser­-­Busch) received a mildly enthusiastic response in the marketplace. Using their well­-­established political clout garnered from years of donations, some of the majors (most notably Pabst and Anheuser­-­Busch) managed to obtain special federal licenses granting them the ability to produce malt syrup—the base material for home brewing—ostensibly for “medicinal purposes.” This highly cynical legislative loophole not only helped fuel alcohol consumption—which was growing, not declining—in the States, but also enabled the major breweries to retain their brewmasters and key brewing personnel, giving them a decided advantage in the post­-­Prohibition ­years.

In the meantime, thousands of brewers were closing their doors. In 1930, with winds of change on the horizon, the industry teamed up to create the American Brewers Association to lobby for the brewers that would eventually survive. But with America’s taste for near­-­beer at an all­-­time low by 1932 (consumption was down 75 percent in volume over the last decade), it would take the repeal of Prohibition to rescue a dying ­industry.

The Cullen Act of 1933, which allowed states without specific prohibition laws to sell 3.2 percent beer (the beginning of the end of Prohibition, which was eventually abolished with the Twenty­-­First Amendment) was also a financial bonanza for the government, which realized a highly regressive tax of five dollars per barrel. Despite this onerous fact, the Act was greeted with tremendous enthusiasm by the vast majority of citizens. The “Noble Experiment” of Prohibition had proven to be a complete failure: not only did it not stop people from drinking (it actually increased it to levels not yet surpassed today), but gave birth to widespread government corruption and organized crime as we know ­it.

Post­-­Prohibition: Rise of the Great American ­Beers

Not only did Prohibition knock out under­-­funded brewers, it also actually helped the major players gain skills they would have otherwise not naturally accumulated, leading to the hyper­-­consolidation of the business in post­-­temperance days. For example, although soda beverages were being bottled for years, the beer industry lagged far behind in terms of their ability to bottle and distribute product. Beer was traditionally kegged and shipped to taverns, a less expensive and thus more profitable enterprise. When Prohibition forced brewers to turn to the production of “malt beverages,” they began to closely emulate the models of soda producers’ bottling and distribution operations. The lessons of this experience weren’t lost after Prohibition ended. The statistics tell the story: while 85 percent of pre­-­Prohibition beer was kegged, nearly 85 percent of near­-­beer, beer, and soda sold after Prohibition was ­bottled.

Prohibition also taught brewers the canned goods industry. Suddenly forced to produce what were essentially foodstuffs (syrups and the like), the industry had to adapt to the methods of producing and packaging food products. Blatz adapted quickly and in 1925 was already earning $1.3 million on canned syrup products. By 1935, the American Can Company would forever change the beer landscape by introducing the beer ­can.

With bottling came packaging—another new art to be learned by the brewer. With a long history of well­-­established and loyal distribution channels, brewers never really had any need to differentiate their products. Beer was typically shipped in identical wooden kegs, and taverns pushed the products they were contractually obliged to carry. One of the caveats to the Twenty­-­First Amendment, however, made it illegal for brewers to own their own saloon networks. This forced the industry to rely upon a network of distributors, who sold directly to retailers. Now, with sales totally outside of their direct control, a brewery needed to shape its identity to earn retailer loyalty. Thus, packaging in the brewing industry was ­born.

A key advantage for the large breweries was that their large distribution networks depended on motorized trucking—a relatively new form of shipping, even in 1920. Without a proper supplier for the specific vehicles needed, companies like Anheuser­-­Busch began to actually manufacture their own trucks—enabling them to customize their shipping operations to exactly meet the needs of their vendors. Needless to say, it was only the largest and most well­-­capitalized companies who had the wherewithal to accomplish the building of their own delivery ­fleet.

There were only a few “shipping” beer companies prior to Prohibition (Blatz, Pabst, and Anheuser­-­Busch), and it is no surprise that these were the companies to be reckoned with after the drought ended. When the industry reawakened, breweries opened up to a radically altered landscape—one in which the major brewers had a serious competitive advantage. Although hundreds of local breweries reopened, they did so in an alien landscape where the rules of the game had been altered by a dozen years of both repression and innovation; the majority of small brewers ultimately died. In five short years, the ­number of active breweries declined by 10 ­percent.

As the U.S. population surged, beer consumption increased; in 1935 it was at levels approaching that of 1910—roughly 60 million barrels. However, with 30 million more ­people in the U.S. market, per­-­capita beer consumption was down significantly. For the major brewers of the day it didn’t matter; they grew the fastest and controlled the lion’s share of the business. In 1938, the leading manufacturers were Anheuser­-­Busch (2.1 million barrels); Pabst (1.64 million); Schlitz (1.62 million); New York’s Ruppert (1.4) and ­Ballantine (1.1) breweries; Schaefer (1); Hamm’s (.750); Pennsyl­vania’s Duquesne Brewing (.625); Falstaff (.622); and Liebman, the maker of Rheingold ­(.625).

This basic lineup would remain unchanged for a little while—and even prosper through World War II, as the war proved to be a panacea for most manufacturers. The long hangover of the Prohibition and Depression was thrown off and, even in the midst of world war, beer consumption grew at the staggering rate of 50 percent between 1940 and 1945. The war years were truly glory days for big ­brewing.

After the war, the industry entered a state of consolidation not seen since the late 1880s. Between the end of World War II and 1970, the number of breweries in America shrank from 468 to 154, an amazing tale of consolidation, acquisition, and attrition. In fact, it took only twenty­-­five years (a short breath in an industry with four centuries under its belt) for the top five brewers to go from having 19 percent market share to owning over 64 percent of the American market (a number that is over 85 percent today). A large amount of that growth and consolidation can be directly attributed to the creation of the beer can by the American Can Company in ­1935.

The invention of the beer can was the final blow to small, regional brewers. This marvelous device, coupled with the mass availability of household refrigeration, enabled ­consumers to enjoy ice­-­cold and fresh beer straight from their kitchens. This modern convenience caused a sea change in an industry that, until as late as 1935, had relied on draught beer for 70 percent of its sales volume. By the end of the war, canned and bottled beer accounted for more than 64 percent of sales. By 1970, canned and bottled beer was more than 85 percent of total beer sales by volume, according to the U.S. Brewing ­Association.

Americans loved canned beer, and the industry continually strived to meet their needs. In 1935, Schlitz introduced the famous “cone­-­top” can—the beer can with the characteristics of a bottle. In 1954, Schlitz introduced the sixteen­-­ounce can, which continues to be an industry staple at convenience stores this very day. Coors, always an industry innovator, brought the aluminum can to market in 1959 and, in 1962, Pittsburgh Brewing marketed the first “tab top” can, making packaged beers easier to open. Only three years later, the “ring pull” can came on the market, and the novelty never really wore off; by 1969, canned beer was outselling bottled beer for the first time in ­history.

By 1970, the Great American Beers were firmly established in the national consciousness (and refrigerator). With help from television advertising, an ever­-­expanding national highway and rail system, and—most importantly—sports advertising, brands like Budweiser, Miller, Coors, Pabst Blue Ribbon, Schaefer, Stroh’s, Blatz, Schlitz, and Rheingold were household names. So, too, were the regional beers that were lucky enough to be enveloped under the major company’s brand portfolios or just good enough to survive on their own: Rolling Rock, Rainier, Leinenkugel, and ­Ballantine.

The Greatest American ­Beers

The following list represents only a subjective opinion of what comprises the fifty greatest American beer brands of the twentieth century and is, by its very nature, exclusionary. Why fifty, anyway? Well, fifty is a nice, round, American number, and when people ask for a list of something you are usually looking for the “top ten” or “top one hundred.” The size of this particular book and other publishing constraints made this list come out to fifty. There are some very good—indeed, historic and classic—beers not included in this list (my original “short list” topped out at about 120).

I have tried to identify the fifty brands that were either highly recognizable, made an impact on the beer industry, had a strong regional following, or were just plain, tasty American beers (or all of the above). That being said, the criteria for the list are pretty specific: the brand has to be American, in existence prior to 1975, and brewed on a fairly large scale. That means there are no microbrewery beers or specialty “craft” beers included in this list. If you are after that sort of information, then you are looking for a book by Michael Jackson (no, not the Gloved One), the preeminent authority on beer, and the author of the excellent books Ultimate Beer and Great Beer Guide (and many, many ­more).

The list of fifty is in two sections: “Pioneers of Beer,” focusing on the key mega brands that started mass brewing, and “The Great American Beers,” comprised of classic regional brands that, for the most part, are still around today. In almost every case, each brand has a long and storied history and a deep association with the city or town in which it is (or was) brewed, and weathered both the Great Depression and Prohibition to enter the era of ­modern ­brewing.

Also included is a bit of the history, to give a feeling for the rich background and accomplishments of some of these brands. I think some of the stories will be surprising to those of us who may ordinarily be inclined to give these brands no more than a cursory glance in the beer cooler as we pick out our six-packs of Stella Artois and Samuel ­Adams.

[Read more in the upcoming eBook version of Great American Beer from Random House, available soon]

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