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?

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]