Advertising Agencies · Big Media · Demand Side Platform (DSP) · Digital Display · Online Media · Publishing · Real Time Bidding (RTB) · Remnant Monetization · TRAFFIQ

The Great Publisher Disruption

ADOTAS – Remember when you used to really depend on your local paper? For finding jobs, houses, getting the local weather forecast, selling that boat in your yard, and getting last night’s sports scores? I still do…but barely.

Most of what your local paper offers can be found in greater abundance (and at higher quality) elsewhere and, now that everyone is glued to their iPhone, rather than flipping newsprint on their commute, most of that content is only a click (or, more likely, a finger touch) away.

Jobs Section –> Monster.com
Real Estate Section –> MLS, Zillow
Business News –> WSJ.com
Weather Report –> Weather.com
Classified Sales –>Craigslist
Sports –> ESPN.com
Travel Section –>TripAdvisor.com
National News –> WSJ.com
Gossip –> PerezHilton.com

As the above demonstrates, the only area of superior content the local news website has left is local news, and even that has suffered as papers reduce reporting staff and rely more upon outside content providers to fill pages. Although local papers came to the online party rather late, they managed to quickly build reliable websites and leverage their most valuable content effectively.

Monetizing that content has fallen far short of revenue expectations for the most part. The AAAA’s recent report that ad agencies lose up to a third of their media cost servicing digital media buys (as opposed to only 2% with television) was eye opening, but probably nothing compared to what publishers feel.

Back when I was running sales for a Nielsen group, we were struggling with the fact that the same $100,000 once earned by selling a small schedule of print ads was now taking an enormous effort to create.

With print, you are simply selling space. The advertiser provided the content (a PDF) and you put it inside a magazine or newspaper, alongside compelling editorial. Publishers focused on producing the content they wanted and advertisers produced brand ads that appealed to a like audience.

Then, all of the sudden, advertisers started to lose interest in print advertising alone. Sure, maybe they still ran a small print schedule, but now they wanted some content to go along with it: maybe a “microsite” or a custom series of events, or perhaps an advertorial.

Then publishers found themselves allocating resources to writers, designers, and photographers—and acting like a small agency on behalf of their clients. Kind of cool, but the problem was that the advertiser had the same $100,000 to spend. They were all over you, and they wanted stuff like “ROI.” Publishers’ margins were compressed, resources (once dedicated mostly to producing their own content) were misallocated, and their employees were getting burnt out.

Let’s take this to 2007, and the emergence of social media. Now advertisers didn’t even need publishers to develop their content, because they could create their own blogs from scratch (Blogger) and start building online communities (Facebook). Enter Twitter and now every employee in the building has their own mini PR platform which could be leveraged for the company.

Talk about disruption. With thousands of really smart writers, photographers, and designers willing to work cheaply, from home — and with access to free, web-based tools equal or more powerful than any in-house software a publishing company could provide, now publishers were losing the only edge they had: the ability to produce content at scale.

The Googles of the world will always argue that they “need” content providers like The New York Times to continue to provide thought leadership, but web-based content marketplaces like Associated Content and others have only validated the concept that traditional publishers (no matter how big their websites are) are losing their power positions when it comes to content. (Except WSJ, which produces content so exceptional that people are willing to pay for it, but that’s for another article).

So, in this new reality, the publisher is left trying to protect his last tangible asset: his online advertising inventory. He can’t sell subscriptions, he can’t pay to have leadership in any other category besides local news, and now huge sites can geotarget ads to create larger audiences than he has. Spot quiz: who has more unique users in the Anchorage, Alaska DMA: Yahoo or the Anchorage Daily News? I don’t know either, but this is part of the problem.

When the starting point for most computers is search, local media misses the boat on what used to be their wheelhouse. Search for “Anchorage restaurants” on Google, and Fodors, Yahoo, and the local visitor’s bureau sites come up before ADN.com.

In response to this atmosphere of ever-increasing margin compression, competition, customer dilution, and constant need to understand and embrace new technologies, local publishers turned to the experts in online revenue monetization: networks, exchanges, and aggregators. Now (with networks and exchanges), as simple as placing a few ad tags throughout their pages, newspapers could monetize the 70% of inventory they couldn’t sell directly.

Establishing a daisy-chain of ad calls to backfill their unsold inventory was easy, and at least there was some visibility into revenue (amount of impressions available, divided by 1,000, times 65 cents). Despite the ease of use, the rates continue to be painfully cheap, and you never can really tell what the tolerance level of your audience is for an endless stream of teeth whitening, tanning, diet, or Acai berry offers will be.

Aggregators like Centro, LION New Media, Quadrant One, or Cox Cross Media offer a much better solution: real advertisers that need and respect real local inventory. These aggregators provide a great one-stop shop for advertisers and agencies that may not have the depth of knowledge (or personnel) to negotiate and service a multitude of small buys on dozens of local media sites.

As a result these aggregators earn the money they arbitrage by providing the expertise to buy local media at scale. Smarter companies like Centro are leveraging the in-house systems they have developed over the years to navigate this process and making it available to agencies directly (Transis).

However, when it comes to selling premium inventory, specialized sponsorships, or anything beyond standard inventory, the aggregators can’t really play in that space at scale; advertisers still need to partner with local media to make those deals happen.

Ultimately, I see local websites winning by being able to offer more than just inventory. For them, hustling uniques and impressions is a zero sum game. They will never compete against the networks and (with 65-cent CPMs on their remnant space) the networks and exchanges aren’t exactly their best allies.

What agencies need is for technology to help them scale the way they reach advertisers, in an open and transparent way—and systems that give them the ability to do more than place an ad tag on their pages and pray for a good campaign to hit the transom.

We feel the future for publishers is an open marketplace that enables good local media sites to package their premium inventory to advertisers who truly value the local audience: the regional ad agencies across the country who service the local hospitals, schools, banks, and businesses that need local content aimed at local customers.

Ultimately, publishers need systems that can give them placement level control over their inventory, total pricing and deal point control, and access to both agencies and direct advertisers in the same environment. There should be a place between getting a 75-cent Acai berry ad on your homepage and running a $50 CPM rich media expandable.

Publishers need to be able to negotiate both types of deals, and do them at scale, with total control. An open and transparent marketplace that enables publishers to market their entire inventory—not just remnant—is where the future is headed.

[first published in Adotas, 4/1/2010]

Advertising Agencies · Demand Side Platform (DSP) · Digital Display · Digital Media Ecosystem · Media Buying · Media Planning · Publishing · Real Time Bidding (RTB) · Remnant Monetization

Changing the Game

The Evolution of Real Time Bidding Means Better Inventory, and Higher Bids

For years, publishers have devalued their inventory by letting a daisy chain of remnant inventory networks and exchanges leverage their audience. Because every publisher was willing to place ads on every single page, sheer scale created the opportunity for 3rd parties to extract value by adding the splash of data that changed CPMs from pennies into dollars. As third party data shrinks, the opportunity for publishers to profit from partnering with technology and data companies also shrinks—but the near ubiquity of real time bidding also creates many new and exciting opportunities for publishers to package and sell their higher value inventory and audiences. Here are three tactics critical for succeeding in post-legislation era:

1)      Change the Bids: Although real time bidding has gone from obscure, future-facing media theory to being part of the ongoing media conversation, demand-side players still put RTB in the same bucket as remnant networks. When inventory is being traded in a true exchange that is agnostic with regard to pricing, it is assumed that some inventory will be priced high, and some low. Today, the preponderance of inventory available in both private and public exchanges is composed of the same low-value impressions most networks offer. This will change. Once supply side players start selling their high-value inventory inside exchanges, the game changes. Look for private, exchange-based marketplaces to crop up that connect prime demand side customers with the best inventory available on the planet. This is the future of RTB.

2)      Own the Data: Given the coming legislative tsunami, the common wisdom is that there will be severe shrinkage in the cookie pool, leading to a decline in targetable audience. Consumers will have to opt into targeting—or have much easier access to browser-based tools that enable them to opt out more easily. Either way, it seems apparent that cookie-addressable audiences will decline. For publishers, this may be the greatest thing that ever happened. At what point did publishers decide to let 3rd party technology companies know more about their audiences than they did? While that is somewhat of an exaggeration, I think the successful modern publisher must have a strategy for targeting their own inventory using first-party data.

3) Stop the Madness: Many publishers realize they have a inventory management problem. Like addicts, they know exactly what their problem is doing to their lives but, when confronted by the source of their addiction, easily crumble. For digital publishers, the crack pipe is called remnant inventory and monthly checks from network and exchange enablers keep the ads flowing.  Back in the old days of print publishing, we understood that ads didn’t have to appear on every single page. The expensive ones were in the front, and the cheap ones (classified) were all crammed in the back. Not a bad strategy. I wonder who decided that every single page on the internet had to have 3 standard IAB-sized ads on it. Maybe the time has come to end “value-added” impressions, and cut back the number of remnant ads available on your site. That day won’t come for a while, which is why companies like Rubicon and AdMeld, and PubMatic exist.

As the real time universe becomes more ubiquitous, more than just remnant inventory will be bought and sold on a bidded basis. For publishers, the challenge will not only be how to squeeze every penny out of the cheapest inventory with remnant optimizers, and managing the declining availability of targetable inventory (based on 3rd party data availability). The challenge will be balancing the decline in remnant revenue with the rise in bidded high value inventory. How much of your premium audience will you make available in real time to your existing and new advertisers in open exchanges? Getting that mix correct will make some publishers (and private publisher inventory pools) extremely profitable, and kill other publishers altogether.

[This article appeared on 4/18/11 in iMediaConnection]

Advertising Agencies · AppNexus · B2B Media · demand side platform · Demand Side Platform (DSP) · Digital Display · Digital Media Ecosystem · Marketing · Media Buying · Media Planning · Online Media · Publishing · Real Time Bidding (RTB) · TRAFFIQ · Uncategorized

Rise of the Machines

Where do People Fit into a World that Promises Endless Media Automation?

Ever since man tied a rope to an ox, there has been a relentless drive to automate work processes. Like primitive farming, digital media buying is a thankless, low-value task where results (and profits) do not often match the effort involved. Many companies are seeking to alleviate much of the process-heavy, detail-oriented tasks involved in finding, placing, serving, optimizing, tracking, and (most importantly) billing digital media campaigns with various degrees of success.

Let’s take the bleeding edge world of real-time audience buying. Trading desk managers are often working in multiple environments, on multiple screens. On a typical day, he may be logging into his AppNexus account, bidding on AdBrite for inventory, bidding for BlueKai stamps in that UI, looking for segmentation data in AdAdvisor, buying guaranteed audience on Legolas, trafficking ads in Atlas, and probably looking at some deep analytics data as well. If he is smart, he is probably managing that through a master platform, where he can look at performance of guaranteed display and even other media types. How efficient does that sound?

To me, it sounds like six logins too many. Putting aside the obvious fact that an abundance of technology doesn’t lead to efficiency (how’s “multitasking” working out for your 12 year old, by the way?), I wonder we aren’t asking too much of digital as a whole. How many ads have you clicked on lately? If the answer is zero, then you are in a large club. Broken down to its most basic level, we are working in a business that believes a 0.1% “success” rate is reason to celebrate. But the “click is a dead metric” some say. Really? Isn’t the whole point of a banner ad to drive someone to your website? When did that change?

All of this is simply to illustrate the larger point that the display advertising industry, for all of its supposed efficiencies, is really still in its very nascent stages. Navigating the commoditized world of banner advertising is still very much a human task, and the many machines we have created to wrestle the immense Internet into delivering an advertiser the perfect user are still primitive. For a short while longer, digital media is still the game of the agency media buyer…but not for long.

Let’s look at the areas in which smart media people add value to digital campaigns: site discovery, pricing, analytics and optimization, and billing.

Site Discovery

In the past, half the battle was knowing where to go. Which travel sites sold the most airline tickets? Which sites indexed most highly against men of a certain age, looking for their next automobile? What publisher did you call to get to IT professionals who made purchasing decisions on corporate laptops? Agencies had (and still have) plenty of institutional knowledge to help their clients partner with the right media to reach audiences efficiently and—even with the abundance of measurement tools out there—a lot of human guidance was needed. Now, given the ability to purchase that audience exactly using widely available data segments, the trick is simply knowing where to log in. I just found the latter IT professional segment in Bizo in less than 2 minutes. So the question becomes: how are you leveraging data and placement to achieve the desired result, and how efficiently are you doing it?

Pricing

It used to be that the big agencies could gain a huge pricing advantage through buying media in bulk. Holding company shops leveraged their power and muscled down publisher rate card by (sometimes) 80% or more with promised volume commitments, leaving smaller media agencies behind. Then, a funny thing happened: ad exchanges. All of the sudden, nearly all of the inventory in the world was available, and ready to be had in a second-price auction environment. Now, any Tom , Dick, and Harry with a network relationship could access relatively high quality impressions at prices that were guaranteed never to be too high (in a second-price auction, the winning bid is placed at the second highest price, meaning runaway “ceiling” bids are collapsed). Whoops. With their pricing advantage eliminated, large agencies did the next best thing: eliminated the middleman by building their own exchanges, which we have been calling “DSPs.” So, you don’t need human intervention to ensure pricing advantages.

Analytics and Optimization

What about figuring out what all the data means? After all, spreadsheets don’t optimize media campaigns. Don’t you need really smart, analytical media people to draw down click- and view-based data, sift through conversion metrics, and build attribution models? Maybe not. Not only are incredible algorithms taking that data and using machine learning to automatically optimize against clicks or conversions—but programmatic buying is slowly coming to all digital media as well.  In the future, smart technology will enable planners to create dynamic media mixes that span guaranteed and real-time, and apply pricing across multiple methodologies (CPM, CPC, CPA). Much of that work is being done manually right now, but not for long.

Billing

Sadly, much of the digital media business comes down to billing at the end of the day. Media companies struggle tremendously with reconciling numbers across multiple systems, and agency ad servers don’t seem to speak the same language as publisher ones. The bulk of a media company’s time seems to be spend just trying to get paid, and an incredible amount of good salary gets burnt in the details of reconciliation and reporting. This is slowly changing, but the advent of good API development is starting to make the machines talk to each other more clearly. The platforms that can “plug in” ad serving and data APIs most easily have a lot to gain, and the industry as a whole will benefit from interoperability.

So, are people doomed in digital media? Not at all. There are going to be a lot less digital media buyers and planners needed—but what agencies are really going to need are smart media people. Right now, you need 4 people to manage 10 machines. In the near future, you will need 1 smart person to manage 1 platform—and the other three people can focus on something else. Maybe like talking to their clients.

[This article originally appeared in ClickZ on 4/14/11]

Advertising Agencies · Big Media · demand side platform · Demand Side Platform (DSP) · Digital Display · Digital Media Ecosystem · Marketing · Media Buying · Media Planning · Online Media · Real Time Bidding (RTB) · Remnant Monetization · Sales Management · Sales Rants · Sales Tactics · TRAFFIQ · Uncategorized

Notes from DPS 2011

Going Beyond Content and Delivering Value in a Multi-Platform World

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]

Advertising Agencies · Demand Side Platform (DSP) · Digital Display · Digital Media Ecosystem · Media Buying · Media Planning · Online Media · Publishing · Real Time Bidding (RTB) · Uncategorized

The Agency of Procrustes

Is Your Media Shop the Right Fit for the Digital Age?

Nassim Taleb’s marvelous book of aphorisms is called The Bed of Procrustes, named after the myth of Procrustes, a cruel owner of a roadside estate between Athens and Eleusis in ancient Greece. According to Taleb,

He abducted travelers, provided them with a generous dinner, then invited them to spend the night in a rather special bed. He wanted the bed to fit the traveler to perfection. Those who were too tall had their legs chopped off with a sharp hatchet; those who were too short were stretched.

Taleb’s point is that we humans tend to “squeeze the world into crisp, commoditized ideas.” In short, we try and fit things we don’t understand into our particular worldview. But, what if the new things don’t fit?

As a digital media agency owner faced with keeping up with the times and (more importantly) earning margins from notoriously labor intensive digital campaigns, it is tempting to fall back on time-worn models. If you think about the tried and true “agency” model, it is exactly what the dictionary says it is: “a consensual fiduciary relationship in which one party acts on behalf of and under the control of another in dealing with third parties.” In other words, the client can do the work himself, but would rather stick to making widgets or selling plane tickets than have 300 different media and technology relationships to contend with.

The problem? That’s not enough anymore. What clients want—and an increasing number of them expect, is a different definition of “agency.” Maybe even a legal understanding of the term: the person or thing through which power is exerted or an end is achieved. Is your digital agency exerting true power on behalf of your clients, or are you just buying media? I believe that, in a world where technology enables most agencies to have ubiquitous access to media and software tools, the modern digital agency needs to go beyond traditional notions of “agency” and provide their clients with unique expertise.

The traditional agency “bed” is still rather misshapen for the world of emerging technology. Most shops still don’t have a cohesive social strategy (beyond Facebook); the technology to properly target audiences through exchanges; or the ability to leverage technology to wring performance from digital creative. Some do, and are leveraging relationships with social technology providers, DSPs, and creative optimization companies. The problem here is that many of those technology providers are going directly to your clients as well.  So, how do you defend against disintermediation and start building proprietary expertise to enable you to win and retain digital business in the future?

  • Data: Create it, analyze it, tie into your clients’ data, and make it actionable. I know an agency in upstate New York that only gets paid every time its client performs an oil change. The agency is tied into their client’s POS system, and gets a true end-to-end view of attribution. They know how they are getting people to the business, when, and how they are getting them to return. I know other agencies that, through tools like Datran’s Aperture, are getting a household-level view of who is converting on their online campaigns, and using online data to go offline to seek new customers and reengage them. If you are not leveraging the data you currently have—and seeking to partner with your client to create or get access to new streams of data, then you are not being an extension of power to your client.
  • Technology: How is your shop leveraging available technology to gain efficiency? Media platforms like Transis, Facilitate, and TRAFFIQ (disclosure: I work for TRAFFIQ) offer agencies the ability to let workflow technology handle the blocking and tackling of digital media (RFPs, AdOps, billing, etc) so agencies can work on things that have value (strategy, creative execution, data analysis).  What about real time bidding technology that uses machine learning to auto-optimize campaigns based on performance data? If you are not leveraging technologies like these, then you are already in danger of becoming extinct.
  • People: If you are in fact going to leverage data and technology to transform your agency business, then you are going to necessarily need different people. In the good old days, you could hire a 22-year old for $25,000 and bill them out at $40,000. Unfortunately, the 22 year old wants $35,000 these days, and by the time you train them to be a “digital media expert,” a larger shop will pay them $50,000 to take advantage of the free training you gave them, and start billing them out at $75,000. Also, that 22 year old media person who used to good at collating spreadsheets and ignoring publisher e-mails is not the person who is going to transform your business. Someone who can dive into data to determine media placements—or someone who is passionate about the social space and understands the new social technology ecosystem are the folks that are going to make a difference (and profit) for your agency now.

In the end, Procrustes faced poetic justice. One of his guests was the mighty Theseus, of Minotaur-slaying fame. Theseus invited Procrustes to lie in his own bed and, seeing it slightly too small for his frame, decapitated him to create the perfect fit. Your agency may not currently be the right fit for clients that need advanced digital agency help. The answer, however, is to make your bed fit your clients better, rather than shrink them down so they fit into your legacy paradigm.

[This article originally appeared in Adotas 3/16/11]

Advertising Agencies · Demand Side Platform (DSP) · Digital Display · Media Buying · Media Planning · Online Media · Private Equity · Publishing · Real Time Bidding (RTB) · Remnant Monetization · TRAFFIQ · Uncategorized

PLATFORM WARS #1: Endangered Ecosystem?

Is the Current “Digital Advertising Ecosystem” Endangered by Overpopulation?

I am looking at an “ecosystem map” by LUMA Partners banker Terence Kawaja.*It is an 11×8.5 Pantone-hued logo vomit of incomprehensible names:  Blue Kai, AdXpose, Yieldex, AppNexus, Dataxu, TRAFFIQ (full disclosure: I work for the latter one, pronounced “Traffic”). From left to right, the landscape depicts the players in the business of digital display advertising, from those that buy the ads (agencies and marketers) to those that sell them (online publishers) and everyone in between. Over the last few years, not only have the players on either side increased but, thanks (or no thanks) to technology, the broad middle ground between the two has exploded.

Now, the advertiser can access a buying platform , buy on an exchange which uses cookie data to target an audience found on multiple websites, whose audience composition are verified by a third party, who are then served an ad by an ad server, with a creative that may be dynamic, and finally reconciled and billed by yet another software provider. And this is just the run of the mill stuff. Even in an industry rife with middlemen, the noise in the marketplace for the average media buyer is epic. What is happening out there, and why is it so confusing?

To the optimist, all of this wonderful technology is helping marketers buy the audience they have always wanted to target. Instead of having to buy ESPN.com at double-digit CPMs, now the advertiser seeking “sneaker intenders” can plug into a million cookie-appended sites and hit users with a dynamically generated running shoe ad that hits the reader as he is accessing jogging content on a favorite long-tail blog, and deliver him a geotargeted ad that shows him coupon on his size Asics from the nearest shoe store. And all for an $8 CPM. So what’s the problem?

For the publisher, the problem is that it’s way too cheap. After years of publishing all of their content for free, and placing a dozen network and exchange ad tags on their sites to monetize remnant inventory, the world is overwhelmed with banner inventory. Publishers—who sell only 30% of their total banner inventory on a good day—are stuck monetizing the large majority of their banners at an industry average $0.75. Yet, the networks and exchanges who have co-opted the publisher’s very audience via cookie data, are making a cozy $5 CPM selling “audience segments” and “behavioral targeting.” Ouch. You wonder when the (decent) publishers of the world will finally wake up and firewall all of that content they’ve paid a fortune to create and distribute.

In addition to the fact that publishers have been caught flatfooted by the broader trend of buying audience vs. buying the place where it is found, they haven’t really learned to leverage the tremendous power they wield: Owning some very nice eyeballs on one of the most important screens in the market today. Are television ad sellers dependant on several dozen third-party intermediaries who skim 90% of their revenue? No. The money that they have lost due to channel explosion, they have found other ways to make up: namely, monetizing their content through different distribution (DVD sales and rental, DVR rental, overseas distribution, and cable licensing).

The introduction of the iPad was another painful reminder of how poorly publishers are doing when it comes to content monetization. Essentially, they have allowed the ultimate 3rd party (Apple) monetize all of their mobile content for them, and they are left begging at Steve Job’s table for scraps. Oh wait—the “ultimate 3rd party” is actually Google, and they have already let them control their site traffic and much of their content monetization through search. Oops.

So, what is my point, anyway?

The point is about control, and who is exercising it in this increasingly complicated landscape. Looking at the publisher’s dilemma, it is clear that they have (for the time being) surrendered control to a variety of 3rd parties with technology expertise in the hopes of staying relevant in a digital advertising economy. In addition, today’s advertising agencies are increasingly becoming irrelevant, as they are increasingly dependent on the dozens of technology companies that control the way ads are created, displayed, measured, and transacted upon. The agency value proposition of publishers (we have the audience) and agencies (we know how to reach them) has eroded, which essentially opened the door to this new horde of technology players.

Yet, I am pretty sure both sides have only started to fight to get some of that control back. On the agency side, we have seen agencies building their own DSPs, so they can control the inventory and targeting capabilities. On the publisher side, smart companies like Glam are building their own ad platform (GlamAdapt) promising to “a 3rd generation ad platform built for emotional digital branding,” whatever that means. Both sides are trying to take control of the value they create by building platforms, which is admirable. But, in doing so, aren’t they building closed systems that, over time, will create their own ecosystems and be unable to quickly adapt to changes in the market? In other words, are they building Windows, rather than leveraging Linux?

This battle for control is going to see many of the ecosystem players in the middle get absorbed by the larger players on either side of the equation, and an explosion of platforms designed to make sense of the large array of choices and ultimately organize the ecosystem as a whole. The real battle will be among those companies that are building open, scalable platforms that enable both agencies and publishers to choose among the various moving parts, based on their need. In tomorrow’s platform, an agency will register, plug in what ad server they use (Atlas), their primary 3rd party data provider (Comscore), their existing publisher relationships, the different data companies they use (BlueKai, etc), and their billing system (Advantage)—and have a single interface to manage their search and display. Publishers will log into the same system and be able to participate in a marketplace where they set their own rates, and are able to leverage in-system data providers to create discrete audience segments and match them with advertiser needs. Tomorrow’s ad platform will also include both guaranteed buying (great for brands) and RTB buying (great for performance).

In the end, for such a system to exist, all players must start by ceding more control back to the buyers and sellers at the end, and the parties in the middle of the ecosystem must develop the APIs and integration paths that make systems interoperable. As a series, “Platform Wars” will look at all the different players in the space, and the ongoing battle for control as digital media technology evolves, and winners and losers are chosen.

*from his excellent May 3rd presentation at IAB’s Networks and Exchanges keynote address,  with the delightful title of “Parsing the Mayhem,” back when he was at GCA Savvian.
[This article originally appeared in iMedia Connection on 7/14/2010]

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The Next Printing Press

Today’s Magazine Publishers have to be Sales, Content, and Technology Organizations to Survive

By Chris O’Hara

 

I am sitting at the airport bar in Dallas, trying to get back to 2010. After attending the Dallas Ad League’s Magazine Day event at the Fairmont Hotel, I feel as though I journeyed to 1995 and back again. Not that I have anything against attractive, skirt-suited southwestern sales directors and their handsome, eminently polite male counterparts. Nor do I have contempt for the magazine industry in general, as many “new media” bloggers seem to. I came from a magazine background, and love magazines. But the atmosphere was decidedly 1999: folding tables stuffed with magazines, sharply dressed sales reps talking about “custom opportunities” and “special sections,” and not a computer display in sight. The lunch itself promised a lively panel discussion that would inform the 200+ attendees what the “digital future” of magazines would be, but the forum was a panel discussion, bookended by two gigantic monitors featuring a single, non-interactive PowerPoint title slide for most of the two hours.

A large portion of the day’s panel discussion was dedicated to the new, $90 million “magazines” campaign, designed to make advertisers feel better about spending money in their products (the “interactive” portion of the event featured the “magazines” video where Jann Wenner (the former editor and publisher of Rolling Stone) and Catherine Black (President of Hearst) get all feisty about audience engagement). Did you know that, during the 12-year lifespan of Google, magazine readership increased by 10%? Or, that “ad recall” has increased by 13% over the last five years? Neither did I, which is why this campaign is so important. Despite the bloodletting of the past several years, magazines remain a highly relevant part of the media landscape. “Magazines have enduring values for readers and advertisers that have gotten a little neglected and misunderstood in the era of Internet instant buzz and chatter,” said Jann Wenner, chairman, Wenner Media. “Magazines are beloved and powerful in people’s lives for very good reasons that need to be remembered and reinforced. That’s what this campaign is about.” Although, I am not sure how one can “misunderstand” a magazine, Wenner’s point is well taken.

The panelists (David Carey of Condé Nast, Michael Clinton of Hearst, and Stephanie George of Time) all did an admirable job of toeing the line. That being said, anytime you see those three so buddy-buddy on stage, you better watch out. Obviously, this new industry love-fest has a lot more to do with survival than pure affection. If their consortium can produce more than a print advertising campaign (irony alert! The best concept these guys could come up with to save their industry was a print ad campaign!), they might actually be dangerous.

The takeaway? These companies were training their employees for the digital age (“some are really adapting, and some are struggling with making the transition,” according to George). They are doing oodles of “custom media” for their advertisers—and even acting like agencies for many of their clients (something that I am sure the WPPs and Omnicoms of the world are enjoying), according to Clinton. And all of them are “building apps.” Lots and lots of apps.

Sounds good.

I wondered, however, when these guys all decided they didn’t want anything to do with the platform itself. The “power of the press” was always based on the fact that the average Joe didn’t have much of a voice, because he couldn’t afford a multi-million dollar printing press. Sure, he could shout from the rooftops and rabble-rouse in the local coffee shop, but that was basically it. The major publishers controlled the loudspeaker, and they could decide to what purpose they would drive their message (start a war, make scads of cash, anoint a president, etc.). Sure, print’s voice got diluted with the emergence of radio and television, but print journalism (the real stuff) still drove the message and shaped the conversation. Anyway, there is really no need to dig up this old conversation; we all know how the internet gave everyone their own printing press (blog), television station (YouTube account), and the means to capture “stories” as a “citizen journalist” (mobile phone).

When did the publishers decide to give up their platform? Why aren’t they leveraging everything they have to standardize the content creation business, and building the next great platform? It’s because they were focused on being sales organizations, rather than content organizations, or even technology organizations. At a certain point, a long time ago, things got mighty comfortable in publishing land. The industry that created the ability to print a trillion newspapers every night and get them into America’s driveways by 5AM, got fat and happy on loads of advertising money, and they started building immense sales organizations, and dedicated all of their creativity and emotion to increasing readership, ad pages, and revenue.  In the meantime, the very platform that they were building this organization on top of was thinning out, and starting to teeter, as disruptive technologies ate away at the foundations.

The magazine business is still a very powerful beast, though. Some 300,000,000 magazines were sold last year, and they generated $19.45 billion in advertising revenue, according to the Publishers Information Bureau. As our panelists pointed out, the average newsstand consumer still just about trips over themselves to shell out $4 to read the latest about Lady Gaga and poor, bamboozled Sandra Bullock, so magazines aren’t exactly dead yet. They still control some very powerful content, and they are starting to get themselves in a position to undo some of the damage they inflicted upon themselves (it should be noted that all of the panelists issued very refreshing mea culpas when it came to the ginormous mistake of making all of their online content free, and depending on banner advertising revenue to fill the gap. Needless to say, that gap only grew wider over the last 15 years, creating the monstrous chasm that exists today). To fill it, these magazine publishers are looking at the iPad as the greatest thing since the PDF replaced film in their production departments.

Early iterations of online magazine publishing “solutions” tried to bring the advertiser value by taking that PDF and putting in online, where readers could see full-page ads, and enjoy the beautiful layouts that make print so special. Later iterations—featuring in-page video, ad “hotspots” with enhanced product information, and other interactive features—also failed, due to the nature of the engagement. When a reader goes to the web, he is often looking for “quick bites” of content, not necessarily the longer, more relaxed, engagements that he ordinarily sets aside for a magazine reading session. The iPad and other smart mobile devices promise a reader that wants an interactive experience, but is more engaged and willing to spend time with content. Maybe he is being held captive by a plane, train, car ride, or (dare I say it) boring business luncheon. The iPad user expects interactivity, and something more than just printed content, and he is willing to pay for it.

The last part of that sentence is really what today’s Ad League Luncheon was really all about. Magazines are the king of the opt-in relationship. People pay good money to get magazine subscriptions, and advertisers know that they are reaching people who are truly engaged with that content. That’s the only kind of validation that’s truly important, and it’s so much more reassuring to an advertiser than a Quantcast or ComScore data pull. People have limited time, and limited money. As an advertiser, I know that I will at least have a chance to “have a conversation” with the reader that has plunked down his hard-earned money to spend some quality time with the content my ad is alongside. That translates to the web, when I start being able to charge for subscriptions—and ultimately lifts CPMs (called WSJ.com lately)? And it translates to high CPMs for whatever advertising we will start to find on iPads and other mobile devices where consumers are willing to pay for applications.

For today’s print publishers to truly recapture the ongoing attention of the modern advertiser, and stay relevant in the post-print era of modern advertising, the prescription is obvious, although difficult:

Make it Exclusive: What sets the price for any product is its supply vs. its demand, whether it’s coffee, hotel rooms, or content. New York City Mayor and media tycoon Michael Bloomberg didn’t get rich because he had the best content. He got rich because he has access to proprietary content that no one else had. The successful content organization has to be able to have the research, stories, and data that no one else has—or present that content in a format that nobody else can match. Whether you are the National Enquirer buying off Perkins’ waitresses to get the Tiger Woods scoop, or you are a B2B publisher with a trade magazine that rounds up the day’s prices for pork bellies on the Chicago Mercantile Exchange, you have to lead with content that people can’t find anywhere else easily. The nature of the content always defines the value of the audience, and content companies always win when they can charge enough to break even on the content production, and make the advertising the gravy on top.

 

Make it Expensive: It’s funny how people will plunk down good money for a magazine subscription, but hesitate to pay even a few dollars a month for that same content online. A magazine is an object of beauty, with some heft, and (depending on the title), conveying a certain image. Like it or not, reading the New Yorker in an airport lounge says something about you—just as digging into an issue of ESPN Magazine, or the Economist. Magazines are consumer products, and sold like them, their covers designed to spur us to pay a good amount of money to grab them off the shelf. If I am an advertiser, shouldn’t I expect a reader to be willing to pay $30 a year for all the content you produce? Shouldn’t I demand evidence that your publication is more valuable than the thousands of other free content sources available in your vertical? I think some magazine publishers are finding out that their content isn’t quite as valuable or differentiated as they would like to think. Maybe, after underpaying writers, editors, designers, and developers for decades on end, the reason many hot content producers set off on their own is because they see the opportunity to get paid higher prices for their content (or at least, be able to own it outright). The modern magazine publisher has to get back to producing exclusive, expensive content that readers are willing to pay a premium for.

Make it Interactive: About 4 years ago, I was working for Nielsen and getting pitched by a highly progressive interactive company that was taking magazine reading to the next, interactive level. They had an online magazine that blended social media, video, in-page advertising, and a great package of analytics to tie it all together. You could literally look at a typical magazine fashion shoot, mouse over the various products within the photo, and get instant product information, pricing, and find out where to buy the object(s) of desire. Now, add in location-based marketing with mobile devices, and you have a whole new, highly relevant type of interactivity that today’s publisher can leverage. The fact that most magazine websites are still HTML-based and feature standard banner units speaks volumes. The problem wasn’t the concept or pricing of some of the great online magazine ideas. The problem was that AOL (and other online players) defined the platform before the best content producers could. The magazine industry came up with the 468×60 banner (Hotwired.com), but AT&T had to buy into it to create the standard. Now, it seems as though the advertisers have more say in the process of establishing advertising standards than the publishers. Chris Schembri, VP of Media Services from AT&T (the sole advertiser on the panel) made it clear that marketers were looking for leadership from their publishing partners around creating the digital content standards of tomorrow. Advertisers like Schembri need their publishing partners to create new standards that leverage technology to make their advertising more relevant to today’s audiences. Publishers cannot let their advertisers (or online portals, platforms, and ad networks) tell them what they can sell.

Own the Platform: The biggest challenge facing today’s magazine and newspaper publishers is getting back control over the interactive delivery platform itself. Look how the music industry lost control of their delivery system, and the billions of dollars in lost revenue that engendered. Once technology made it possible to remove a song from a CD and share it with hundreds of people for free, the music industry was sunk. Like publishers today, they found themselves looking to Apple to build a modern platform that would once again value their content. They are finding a rough peace with the 99 cents a song deal they got from Steve Jobs. If the iPads, Kindles, and Sony Readers of the world end up creating the standard for published content, the content owners will have once again been commoditized by technology players and lack control of their own destiny. Publishers need to think about designing the next printing press, rather than have Apple do it for them.

All of this hyperbole aside, I don’t think magazine publishers will ever go away. Over the years, printed magazines, newspapers, and books will be a great luxury. People who would rather read a solid copy of Moby Dick, or fold the Wall Street Journal on the train, or flip through Architectural Digest will be afforded the opportunity to do so—at a premium price. The future for these content manufacturers, however, will be around taking back ownership of the delivery mechanism and setting the standards of tomorrow when it comes to content creation, distribution, measurement, and (most importantly) ad formatting and delivery.

That’s a panel discussion I believe would be worth listing to.

[This article originally appeared as a two-part feature in Adotas from 7/13/2010 and 7/14/2010]

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Being There

Today’s Marketer Isn’t Choosing Between DSPs, RTB, and Guaranteed Buys. He Wants it All.

The brave new world of digital display advertising seemingly offers it all. Using the latest and greatest platforms, marketers can access technology that enables them to identify their product’s audience, and reach them at the very moment they are ready to make a purchasing decision. With hundreds of already identified cookies floating out on the web, packed full of personal information, I can find a “42 year-old male with a household income greater than $200,000, who is coming off a GM vehicle lease” and sell him financial services by offering up a dynamically generated banner ad at the very moment he is engaged in financial research. Welcome to the world of DSPs (Demand-Side Platforms), real time bidding (RTB), dynamic creative, and all the 3rd party data you can shake a stick at. Sounds great, doesn’t it? It’s certainly good for advertisers. Since the advent of “ROI” smart marketers have always looked to technology to find better audiences and serve them ads. That has been true since the first direct mail marketing list was produced, and is still true today. It is the reason Google AdWords gets the lion’s share of digital dough, and you can be sure the next huge wave of addressable advertising (location-targeted mobile ads, perhaps?) comes online in a significant way. For the direct marketer that needs to reach an audience of buyers at scale, this will never go away. Yet, I wonder how much this technology which promises to bring us closer to our true audience is truly achieving that goal. For the brand advertiser looking to build affinity with a certain user, is true context being ignored?

Let me explain what I mean by “true context.” Rather than just looking at what kind of text is on the webpage at the of the visit (context in the current, technical, sense), why aren’t we still concerned with user engagement, which includes not only the time a user spends on the content itself (measureable), but the quality of that content, and the user’s affinity for the brand that produces that content? The latter two metrics are hard to measure, but extremely valuable. There is a reason why the Wall Street Journal commands outsized CPMs, and it’s not only the fact that they have a great audience of high income businesspeople. It also has a lot to do with the fact that people simply love the Journal and, more importantly, they trust the Journal’s content implicitly. This is extremely hard to measure, and impossible to buy at scale in the non-guaranteed space.

Maybe Mindset data added to 24/7’s  inventory can help me buy into an audience where “assertive” people are “52% more likely to be an entrepreneur,” but where am I reaching these people, and what might be their mindset at the time I serve them an ad? Back in the days when people still read business magazines you knew that, by placing a 1/3-page vertical for enterprise software alongside the monthly IT procurement column, you were guaranteed that a good Systems Admin decision maker would be spending some quality time on a page that featured your messaging. More importantly, your prospect was reading highly relevant content while he was in a business frame of mind—with a trusted content source that he subscribed to. Many of the demand-side platforms purport to be able to leverage proprietary and third party data to bring you those users in a brand-safe environment, but the promises are currently just that.

Having to choose between guaranteed and continuously-served display inventory is a straw man argument set up by the providers in the space, advocating for their own platforms. In reality, there is room for all types of buying for the modern banner advertiser, and the three main buckets that agencies seem to place buys in are:

–          Deep and Direct: No exchange or network can offer the power and pure branding play that comes with buying a custom sponsorship on a premium web property. Agencies that have quality brands always make room for affinity publishers that are a good match for brands. Advertisers will always find real value in deep engagements with publishers, through homepage takeovers, sweepstakes, sponsored content, “advertorials,” and everything in between. These ad engagements require the one thing technology cannot provide: creativity. It is hard to see a day when brand advertisers will ever give up the practice of buying deep and direct. In this segment, the mutual fund marketer may work with a publisher to build a co-branded “retirement calculator” and offer educational videos related to investment strategy.

–          Premium Mid-Tail: Not many marketers have committed to exploring the middle range of content sites on the web, but this segment is worth exploring. If you are looking to reach investors online, it’s damn easy to call WSJ.com and call it a day, but the smart marketer can do better. Instead of paying sky-high CPMs on “name” sites, why not engage with brand-safe mid-tail sites like RagingBull, SeekingAlpha, or InvestorPlace that deliver the same audience in a highly engaged environment? It’s essentially the difference between a department store and a boutique. The merchandise (audience) may be similar, but your chances of delivering a more impactful brand experience are always better in a less crowded (less uniques) environment. And the pricing and availability is much easier to work with.  In this scenario, the mutual fund advertiser may select the top 10 mid-tier financial sites and use standard Flash banners to engage with the right demographic audience that’s engaged in investment content.

–         Long Tail: Of course there is always the need to go wide and cheap. It always surprises me that there is so much written about Superbowl ad costs. At an average $30 CPM, this is expensive, but how else are you going to reach 90 million people at the same time? Plus, compared to some newspaper rates, the Superbowl looks cheap. Today’s web marketer is much luckier. With the variety of networks and exchanges out there, you can go extremely wide for a lot less money. Decent reach plays start at $.50 CPMs, and reach with all the bells and whistles (behavioral, geotargeted, contextual, re-targeted) rarely exceeds $10. This type of advertising has been around forever, and will never go away. Technology will continue to drive down the cost of identifying and reaching audience segments, and this is something positive for the industry. In this scenario, a marketer leverages the power of real-time ad serving and third party data, to deliver a targeted, dynamic ad to an “investment intender” based on his cookie profile and the page context.

Guess what? None of the three scenarios are going away—and most agency marketers are interested in taking advantage of all three types of banner buying. That being said, both the “deep and direct” and the “mid-tail” plays offer the modern advertiser a way to engage with readers in a way that respects both their frame of mind when reading—and the quality of the content itself. While the automated ad platforms hint at the ability to reach users in the right place, there is no way to ensure that the user will be found in both trusted content where he is truly engaged.

I think the platforms of the future will provide open architecture that enables the smart marketer to take advantage of all three display buying tactics (and eventually be able to plug into mobile ad platforms, where the future lies). Publishers with focused content that engages their readership in a trusted environment will always be able to command premium rates. Large publishers will always be challenged by mid-tail players with more niche audiences (whether regional, or by specialty). That’s great for the business, as it means more choice for the reader, and more outlets for advertisers seeking greater granularity in content and, therefore, audience. Finally, the emerging class of reach players that can combine data and tools to make audience targeting better and more affordable (on a ROI basis) will always be a great option for the savvy advertiser.  By the time the platform wars are over, using a “DSP” (or whatever they will eventually be called) to reach audiences tactically at scale will be as easy as logging on to your Gmail account.

Agencies and direct advertisers should insist that all three buying tactics be part of the future of digital display, and make sure that the platforms they are adopting are the ones that leave as many options on the table as possible.

[This article appeared in Adotas, 5/28/10]