Dynamic Real Time Segmentation

What-is-Real-Time-MarketingThe term “real time” is bandied about in the ad technology space almost as heavily as the word “programmatic.”

Years later, the meaning of programmatic is finally starting to be realized, but we are still a few years away from delivering truly real-time experiences. Let me explain.

Real-Time Programmatic

The real-time delivery of targeted ads basically comes down to user matching. Here is a common use case: A consumer visits an auto site, browses a particular type of minivan, leaves the site and automatically sees an ad on the very next site he or she visits. That’s about as “real-time” as it gets.

How did that happen? The site updated the user segment to include “minivan intender,” processed the segment immediately and sent that data into a demand-side platform (DSP) where the marketer’s ID was matched with the DSP’s ID and delivered with instructions to bid on that user. That is a dramatic oversimplification of the process but clearly many things must happen very quickly – within milliseconds – and perfectly for this scenario to occur.

Rocket Fuel, Turn and other big combo platforms have an advantage here because they don’t need to match users across an integrated data-management platform (DMP) and DSP. As long as marketers put their tags on their pages and stay within the confines of a single execution system, this type of retargeting gets close to real time.

However, as soon as the marketer wants to target that user through another DSP or in another channel, user matching comes back into play. That means pushing the “minivan intender” ID into a separate system, but the “real-time” nature of marketing starts to break down. That’s a big problem because today’s users move quickly between channels and devices and are not constrained by the desktop-dominated world of 10 years ago.

User matching has its own set of challenges, from a marketer’s ability to match users across their devices to how platforms like DMPs match their unique IDs to those of execution platforms like DSPs. Assuming the marketer has mapped the user to all of his or her device IDs, which is a daunting challenge, the marketer’s DMP has to match that user as quickly as possible to the execution platform where the ads are going to be targeted and run.

Let’s think about how that works for a second. Let’s say the marketer has DMP architecture in the header of the website, which enables a mom to be placed in the “minivan” segment as soon as the page loads. After processing the segment, it must be immediately sent to the DSP. Now the DSP has to add that user (or bunch of users) to their “minivan moms” segment. If you picture the internet ID space as a big spreadsheet, what is happening is that all the new minivan moms are added to the DSP’s big existing table of minivan moms so they are part of the new targeting list.

Some DSPs, such as The Trade Desk, TubeMogul and Google’s DBM, do this within hours or minutes. Others manage this updating process nightly by opening up a “window” where they accept new data and process it in “batches.” Doesn’t sound very “real-time” at all, does it?

While many DMPs can push segments in real time, the practical issue remains the ability of all the addressable channels a marketer wants to target to “catch” that data and make it available. The good news is that the speed at which execution channels are starting to process data is increasing every day as older ad stacks are re-engineered with real-time back-end infrastructure. The bad news is that until that happens, things like global delivery management and message sequencing across channels will remain overly dependent upon how marketers choose to provision their “stacks.”

The Future Is Dynamic

Despite the challenges in the real-life execution of real-time marketing, there are things happening that will put the simple notion of retargeting to shame. Everything we just discussed depends on a user being part of a segment. I probably exist as a “suburban middle-aged male sports lover with three kids” in a variety of different systems. Sometimes I’m an auto intender and sometimes I’m a unicorn lover, depending on who is using the family desktop, but my identity largely remains static. I’m going to be middle aged for a long time, and I’m always going to be a dad.

But marketers care about a lot more than that. The beer company wants to understand why sometimes I buy an ice-cold case of light beer (I’m about to watch a football game, and I might drink three or four of them with friends) and when I buy a six-pack of their craft-style ale (I’m going to have one or two at the family dinner table).

The soda company is competing for my “share of thirst” with everything from coffee to the water fountain. They want to know what my entry points are for a particular brand they sell. Is it their sports drink because I’m heading to the basketball court on a hot day, or is it a diet cola because I’m at the baseball game? The coffee chain wants to know whether I want a large hot coffee (before work) or an iced latte macchiato (my afternoon break).

This brings up the idea of dynamic segmentation: Although I am always part of a static segment, the world changes around me in real time. The weather changes, my location changes, the time changes and the people around me change constantly. What if all of that dynamic data could be constantly processed in the background and appended to static segments at the moment of truth?

In a perfect world, where the machines all talked to each other in real time and spoke the same language, this might be called real-time dynamic segmentation.

This is the future of “programmatic,” whatever that means.

[This originally appeared in AdExchanger on 8/31/2016]

Punching the Monkey

BannerAdI recently tried to explain what I do for a living to my 14-year-old son. I found myself telling him about ad tech.

“Basically, we make technology that helps marketers buy different kinds of banner ads,” I told him.

“You mean the kind of annoying pop-up ads that everyone hates?” he asked.

His look of profound disappointment said it all. I explained that the kind of work we do wasn’t just about populating the Internet with the “Lose five pounds with one stupid trick” type of banner. But even though we are getting a lot right, my explanations eventually started sounding pretty weak.

I have been working in this business since 1995. Aside from doing some ad implementation testing, I have probably clicked on about a dozen banner ads in as many years. Today’s robust, real-time ad tech “stack” has been purpose-built to optimize the delivery of the kind of banner ads most people already hate: standardized IAB units, retargeted ads, auto-play video pre-roll units and even the dreaded pop-up and pop-under.

Publishers without robust direct sales options depend on networks and exchanges to monetize the endless streams of traffic they create, and they happily collect their $1.10 eCPM (cost per mille) payments. Advertisers looking for cheap reach and performance plumb the depths of such inventory to find the rare conversion, and hope they are getting what they pay for rather than a shady “last view” attributed banner.

Today, the highest and best use of the standardized banner has enabled marketers to leverage their first-party data to bombard site visitors with retargeted ads – an effective tactic, since they are essentially paying to accelerate a conversion that has a great chance of happening on its own.

As an industry, it seems pretty clear that we will look back on this era in digital ad technology and see how primitive it was. Have we built a trillion-dollar real-time ad serving machine for punch-the-monkey ads, or have we really innovated and created disruption?

RTB Is Dead, Long Live RTB

The recent acquisition of [X+1] by Rocket Fuel is a great sign for our industry. It basically validates the idea that, for programmatic RTB to be effective, real data science must inform targeting. [X+1] is one of the best at cross-channel targeting, and they have already started to figure out the cross-channel attribution puzzle. An everlasting always-on stream of RTB banners for branding and retargeting might prove to be a hugely important part of unlocking a broader multi-channel strategy – if the data can dictate it. If data management platform technology can be leveraged to truly optimize addressable marketing, then RTB will survive and thrive. With consumers always on the move, and every form of media starting to be addressable, real-time programmatic will be something marketers have permanently switched on, and we’ll see the true value of the pipes we have created.

Programmatic Direct

How about inventory that is relatively standard, but a bit nicer than that found within the exchange environment? Transacting on this tier of inventory works quite nicely with all kinds of one-to-one connections within RTB, and buyers and sellers are quickly leveraging the pipes to make private marketplace deals.

If I am a quality financial publisher, why wouldn’t I sell within RTB for $8 CPMs, rather than pay a $200,000 salesperson to sell at $12 CPMs? The math just makes sense. Delivering higher tiers of inventory at scale to private buyers is a great use of RTB, but not a panacea for overall inefficiency in media procurement. But, we have seen those RTB pipes service entire new classes of inventory, and start to appeal to brand marketers.

Workflow Automation

The problem with getting really good inventory has always been the difficulty understanding rates and availability. That’s why the RFP exists today, and isn’t going away anytime soon. Publishers will always want full control over the really good stuff. Because they know their inventory better than any algorithm, there will always be a need for human control and creativity. Big, custom sponsorships and custom-curated native executions will only increase over time, as more television and print budgets shift into addressable digital. You just can’t automate those deals. Marketers and agencies will demand programmatic efficiency to compress an expensive, 42-step process for securing guaranteed inventory. This is one area that programmatic RTB has not been built to handle (these deals are neither “real time” nor “bidded”), but we are seeing real innovation from a number of companies trying to bring programmatic efficiency to guaranteed deals.

It’s hard to explain everything that we are getting right to a 14-year-old who spends more time on mobile apps than in an Internet browser. His assessment, in surfing the desktop Internet, is probably right – it looks like a lot of weight loss ads and sneaker retargeting. But, it’s still early days nearly 20 years after the first banner ad was served.

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 RFP is Dead: New Concepts in Audience Discovery

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Epic FAIL

This is why agencies buy direct.

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

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

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

It was a Bad Idea

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

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

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

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

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

It’s Still about Art

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

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

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

It’s Confusing

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

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

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

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

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

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

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

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]