Watch Chapter 2.
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]
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:
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.
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.
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.
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]
Deer Valley, UT – If there is one thing I learned after spending several days at Digital Publishing Summit 2011, is that the people in this industry really love what they do. It’s not easy walking past world class spring skiing in what is arguably the United States’ best ski area, and enter a dim conference room to listen to a speech on “Auto-nomous Data Management,” but every session played to an SRO crowd of media and technology executives. The crowd was a veritable who’s-who of the “Digital Display Advertising Landscape” (LUMA) map, so I suppose you could argue that these guys got where they are today by skipping lots of fun, and building advertising and media technology instead.
Among the highly informative (albeit sometimes sales-y) content at the conference, there were some gems to be had. So, here is DPS 2011, organized by quote:
“Value is shifting from those that produce the content, to those that deliver the experience of consuming it.” – Saul Berman, IBM
Saul Berman’s keynote address touched upon the disruption happening in our space, but even the overhyped keyword “disruption” doesn’t touch upon the true chaos happening as publishers learn how to navigate the through all the new social media, exchange-based sales, and various technology partnering opportunities out there. Do you make Facebook Connect your friend (as Kristine Shine from PopSugar Media does), to drive new unique visits, and build your audience? According to Shine, for her organization, the call was to “go all in” with Facebook. For others, like Todd Sawicki, CRO of Cheezburger, Facebook can kill publications by migrating all of their native traffic (like message board comments) to their environment, without returning the favor.
So, for publishers, the challenge is not just continuing to produce quality content, but to make it for a multi platform world, where consumers are just as likely to value the way they are consuming it. That means having a multi-platform approach—and a multi-revenue approach as well. Why does a full song from iTunes cost $0.99, but a 10-second sliver of that song, sold as a ringtone, cost $3.00? In that case, it is the application of content in a clever way that adds value, a nice use case for anyone monetizing content in an experiential way.
“Media will be sold like pork bellies” – Frank Addante, Rubicon Project
There was quite a bit of discussion around pricing at the conference, and the founder and CEO of the Rubicon Project was not wrong in insisting that, without significant changes, media would indeed be as commoditized as the humble pork belly. Unfortunately, this trend has already happened. Addante was right to highlight the unfortunate fact that the same article in the NY Times commands a $20CPM in print as opposed to $2CPM online. That value gap, Addante argues, can be closed by “realizing the true value of digital experiences.” Rubicon would like to see one big gigantic “open market” that enables the industry to expand the digital advertising pie from $40b to $400b with full participation, but the details were cloudy. If that market concept involves having publishers suddenly not to sell their entire remnant inventory into an exchange, then maybe we can avoid the pork bellies fate. Addante may be on to something, however. What the industry needs is one trusted third party aggregate high quality inventory, and create value around it, but that battle is in its very nascent stages.
That being said, a good bit of the conversation was around pricing. Both Saul Berman and Tim Cadogan of OpenX deployed the airline pricing scenario, to argue for dynamic pricing models. For Cadogan, three levels of inventory equate to three levels of seating: Exclusive (first class), Premium Guaranteed (business class), and Non-Guaranteed (coach). Just as airlines frequently change the configuration of their seating to account for their routes, seasonality, and passenger mix, so must the industry dynamically price inventory, based on its placement and value. The OpenX Enterprise server hopes to achieve that by putting guaranteed and real time exchange inventory into the same platform, and use smart decisioning technology to maximize yields. A very smart idea.
For Berman, it was not only about “having 5 different passengers, paying five different prices,” but also about exploring entirely new revenue models, like Apple did in “switching the razor blade model” with the iPhone (expensive “razor,” cheap “blades”). Publishers must go beyond monetizing their content through advertising, and start looking at generating revenue from the larger “marketing” bucket. Right now, that is called “selling apps.”
“Premium brands need to be associated with premium content” — Eric Klotz, Pubmatic
Truer words have never been spoken. Klotz explored some recent survey data which asked publishers and advertisers how the way they are buying media is shifting. The results were fairly predictable: more and more budget is finding it’s way into real-time bidding environments, as brand and direct marketers seek new ways to target their desired audiences. That’s nothing new. What is changing rapidly, however, is that all marketers are demanding more placement control, increased transparency, and brand safety. Brands want the same direct connections with publishers they have enjoyed with guaranteed buying, with the ease and cost efficiency of exchange-based buying. The takeaway? If you are a publisher, and not looking at building private exchange connections with your demand side partners, you are in trouble.
That sentiment was hinted at in a panel called “Selling in a Cluttered Market.” For Jonas Abney of Hachette Filipacchi, “general content gets beaten by specific content every time.” Marketers are looking for laser-focused, topical content that captures user intent, rather than more generalized content. Moreoever, today’s advertising sale is more educational than ever. For panelists like AdMeld CEO Michael Barrett and PubMatic’s Andrew Rutledge, a sales force cannot simply have media experience–they have to know the ecosystem, and be prepared to add value by educating clients. For Whitepages VP of Sales Craig Paris, it is simple math: Agencies get 100+ unique sales calls a month, from an increasing amount of new technology and media companies. Unless you differentiate yourself, you are not going to win business. “Thirty percent of your day should be spent reading the industry trades so you can have credibility, and provide insights to your customers.”
“Nielsen says people visit 2.9 sites a day, and one of them is Facebook” — Greg Rogers, Pictela
Last minute speaker Greg Rogers of Pictela provided some insights on how premium advertising units (specifically the new IAB 300×1050 “Project Devil” unit from AOL) can drive user engagement. If the above quote is true, it means that brands have to find a way to engage the user more deeply on the the sites they visit every day, and that way is through interactive units. Rogers has data that points to “dramatic” CPM increases from premium RM units, and makes a case for replacing three 300×250 units with the single 300×1050 “devil” slot. Patch and Huffpo have seen great results, and advertisers are getting good engagement, and plenty of reporting. Highly premium, brand-safe, engaging advertising…sounds like something from the past called “premium guaranteed.” I bet PopSugar’s Shine would agree. She has built a virtual in-house agency to build premium campaigns for her customers, and demands “150% control over every ad unit on the page.”
“Cookie Targeting Doesn’t Scale” — Michael Hannon, Aperture
Sort of a dark horse moment for me was Michael Hannon’s first slide, which threw down the gauntlet on cookie targeting. All the energy in the space for the last several years has been about targeting using 3rd party data . But what if it doesn’t work? This is the 900 lb. elephant in the Ecosystem. Not only have many marketers had difficulties achieving significant scale when overlaying data on top of exchange buys, but the legislative tsunami of “Do Not Track” threatens to reduce that scale even further. Hannon makes an elegant argument for real audience measurement, and doing so in a cookie-less way.
That leads me to a great conversation led by Alan Chapell, a lawyer specializing in just these types of issues. In a room full of ad publishing and ad technology executives that depend on using data to identify target audiences, there was a great deal of confusion regarding how our industry is getting on top of what may be a very severe problem. More direction from the IAB in the form of specific self-regulatory principles and mandates is needed, and needed fast. For Chapell, inaction may cause the “privacy disaster, which enables Google, AT&T, and Facebook to own all the data,” leaving the rest of the industry on the side.
[This article originally appeared in Adotas on 4/4/11]