Digital Marketing Questions in Search of Answers

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.”

The Great Publisher Disruption

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]

Rise of the Machines

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]

PLATFORM WARS #4: Ecosystem Bubble?

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]

Choosing between Performance and Branding in Digital Display?

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]

PLATFORM WARS #3: Back to the Future

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]

What are we Selling?

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]