When Big Data Doesn’t Provide Big Insights

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]

 

 

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Ad Tech’s Walking Dead Startups (DigiDay Interview)

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]

Digiday:Daily Interview (Repost)

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]

TRAFFIQ Talks Private Marketplaces and Other Platform Enhancements

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]

Beyond Bidding

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]

Fish Don’t Know He’s Wet

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]

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?