Category Archives: Media Agencies

Jan 25 2013
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Ad Ecosystem, Ad Technology, Media Agencies, Online Media, Publishers

What the heck does “programmatic” mean?

By Eric Picard (originally published on iMediaConnection.com 1/10/13)

This article is about programmatic media buying and selling, which I would define as any method of buying or selling media that enables a buyer to complete a media buy and have it go live, all without human intervention from a seller.

Programmatic is a superset of exchange, RTB, auction, and other types of automated media buying and selling that have mainly been proven out for remnant ad inventory clearing mechanisms up until today. So while an auction might or might not be involved in programmatic buying and selling, the roots and infrastructure behind the new programmatic world is based on the same infrastructure that the ad exchanges, DSPs, SSPs, and ad servers have been plumbing and re-plumbing over the last five years.

Let’s talk first about so-called “programmatic premium” inventory, as this is what I’m seeing as the most confusing thing in the market today. Many people still think of programmatic media as remnant inventory sold using real-time bidding. But that’s far from the whole truth today. All display media could (mechanically) be bought and sold programmatically today — whether via RTB or not, whether it’s guaranteed or not, and whether it’s “premium” or not. Eventually all advertising across all media will be bought and sold programmatically. Sometimes it will be bought with a guarantee, sometimes it won’t.

What we’re talking about is how the campaigns get flighted and how ad inventory is allocated against a specific advertiser’s campaign. In premium display advertising, this is done today by humans using tools, mostly on the publisher side of the market. In the programmatic world, all buys — even the up-front buys — will be executed programmatically. So when I say that all ads will be bought and sold programmatically, I mean that literally. If Coke spends $50 million with Disney at an upfront event, that $50 million will still be executed programmatically throughout the life of that buy. The insertion order and RFP process goes away (as we know it) and is replaced by a much more efficient set of processes.

In this new world, sales teams don’t go away. They become more focused on the value that they can add most effectively. That’s in the relationship and evangelism of their properties and the unique content and brand-safe environment that they bring to the table. Sales teams will also engage in broader, more valuable negotiations with buyers — doing more business development and no “order taking.”

In a programmatic world, prices and a whole slew of terms can be negotiated in advance. Essentially what’s happening is that the order-taking process, the RFP, and the inventory avail “look up” that have been intensely manual for the past 20 years are being automated. And APIs between systems have opened up that allow all these various tools to communicate directly and to drive through the existing roadblocks.

Here are five things everyone in our industry should know about programmatic media buying and selling.

It’s inevitable

Programmatic buying and selling is coming, is coming big, and will change the way people buy and sell nearly all media — across all media types — over the next five to 10 years. This will be the case in online display over the next two to three years.

It’s comprehensive

Programmatic is not just RTB, is not just “bidding,” and is not one channel of sales. It’s comprehensive, it’s everything that will be bought and sold, and it’s all forms of media across all sales channels. That’s why I’m hedging by saying five to 10 years, as it will take more than five years to do all these things across all media. But certainly fewer than 10. And a lot is transitioning over the next two years, especially online.

Prices will still vary

In non-programmatic buying and selling (old-fashioned traditional relationship sales), different customers are charged different prices all the time for exactly the same product. That doesn’t go away. Different advertisers get different prices for all sorts of reasons. In the worst case, the buyers might be worse negotiators. But it could be that the advertisers spend more than $1 million monthly with that publisher and therefore get a huge discount on CPM. There are all sorts of reasons that this happens. The same exact thing will happen programmatically. Various advertisers will have hard-coded discounts that are negotiated by humans in advance. Price will drop as thresholds on overall spend are hit. Prestigious brands will get preferences that crappy or unknown brands don’t get. This can all be accommodated right now — this very minute — in almost every major system out there. It’s here. Now.

Complexities will remain

All the various “ad platforms” of the past and the new true ad platforms of today have opened up APIs and can communicate with each other programmatically. This is the way the infrastructure is powering programmatic buying and selling. I can’t stress to all of you how fundamental this change is. It’s not about bidding, auctions, futures, hedges, etc. — although those things will certainly exist and proliferate. It’s about automating the buying and selling process, removing friction from the market, and providing immense increases in value across the board. People talk about how complex the LUMAscape map of ad tech vendors is, but what they miss is that there’s plenty of room for lots of players when they can all easily connect and interact. I do believe we’ll see consolidation — mainly because there’s too little differentiation in the space (lots of copycat companies trying to compete with each other). But I do believe that the ecosystem can afford to be complex.

TV comparisons do not apply

People keep using the television upfronts as the analog to online premium inventory, and the television scatter market as the analog of remnant inventory. That’s not the right metaphor; they’re not equivalent. And even TV will move to programmatic buying and selling in the next decade. But let me lay this old saw to rest once and for all:

  • In television, the up-front is a discount mechanism. Buyers commit to certain spend in order to get a discount. Publishers use the upfront as a hedge in order to mitigate later-term risk by the seller that they will not sell out their inventories.
  • The scatter market is still the equivalent of guaranteed inventory online (although it’s more “reserved” than guaranteed). It’s just sold closer to the date of the inventory going live. I’d argue that with the exception of the random “upfronts” run by some publishers online today, all online premium ad sales is the equivalent of the television scatter market.
  • Remnant is a wholly other thing in television — and isn’t part of the scatter market. TV limits remnant significantly (in healthy economies to about 10 percent of total inventory). We’ve mucked that all up online by selling every impression at any price, which has lowered overall yield and flooded the market with cheap inventory — most of which is worthless.
Nov 30 2012
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Ad Ecosystem, Ad Technology, Media Agencies, Online Media, Publishers, Rich Media

Time for a New Mobile Ad Format

By Eric Picard (Originally published on AdExchanger.com 11/19/12)

I’ve been designing, prototyping and deploying new ad formats in digital advertising for more than 15 years. I started one of the first rich media advertising companies, where we pioneered many of the ad formats that today are standard offerings – starting in late 1997.  And I ran a team at Microsoft that focused on building new ad unit prototypes for emerging media for several years, which created hundreds of prototypes that were shown to dozens of brands and creative agencies for feedback, and we ran many studies.

I tell you all this not to toot my own horn, but to explain that when I suggest that I’m going to propose a new ad format for the mobile industry, I’m not doing so idly.  I’ve been doing this professionally for my entire career, and the problem of putting new ad formats on devices is one that I’ve thought an awful lot about.  In fact, the format I’m going to suggest is very similar to one I proposed for another new device that was an innovative music and media player.  But I’ll hold off on the specifics for a bit.

The biggest problem with mobile advertising today is the ad formats being deployed. The screen is very small, and even a very small ad unit that isn’t well integrated into the screen experience of an app or mobile website causes a dissonance that is simply unacceptable to most users.  And app developers see this clearly – using the presence of ads not really to drive ad revenue, but rather to annoy the crap out of consumers in order to push them to pay for the premium version of an app.  This is a very backwards approach to advertising experience, but one that has been used repeatedly over the course of digital evolution.

Ad experience design is a very tricky problem – because ad experiences need to walk the razor’s edge between grabbing the audience’s attention while not pushing them over into frustration.  For this reason, in many ways, ad experience design is far harder than standard user experience design for applications.  Unfortunately the vast majority of startups and even large companies that deploy apps and mobile sites simply slap tiny mobile banners onto their applications, and wait for the dollars to roll in. That isn’t likely to happen for most companies, because the ad experience is horrible.

So I decided that instead of simply complaining about the ad experience of mobile, I’d propose to the industry through this article a new ad format that I believe will fix the core problems with mobile ads. I hope somebody picks it up and runs with it, because I firmly believe (after many years of thinking about these problems) that it’s the right solution for mobile. And I believe the same principles behind the format I’m suggesting would work well for tablets.

Let me start by saying something perhaps a little controversial – it’s impossible for companies to differentiate from each other by using proprietary ad formats.  Note that all rich media companies offer essentially the same ad formats.  And this is one reason I’m not bullish on the current so-called “native ad format” movement.  Unless you’ve got the reach of Google, Twitter or Facebook, rolling your own ad format is stupid.  Advertising’s core principle is about reach – advertisers try to reach as broad an audience as possible that matches their target customer persona. Creative teams can’t cost effectively create unique ad formats for every publisher. This means that once a proprietary format starts getting scale, other companies copy that format and they begin to perpetuate. But we’ve only seen this happen with “native” formats when the company that created the format had large scale.  So all paid search ads pivot off Google’s format, because the same creative needs to be uniform across search engines. And when formats that were pioneered by one rich media company got traction, every other rich media company adopted those formats too.  Ad formats don’t work as product differentiators.

So what will work?

First:  The format must be integrated into the design of the application (app or web).

App and M-Web developers must build their user experience *around* the ad vehicle. So the ad vehicle can’t be crappy – it needs to fit neatly into a standard App experience. It needs to provide utility to the advertiser (enable attention to be captured, and ideally to drive activity) and it needs to nestle carefully into the utility of the application it sits in.

Second: The screen is small, so the ad needs to use the whole screen.

Interstitial advertising has been around since the early days of the web – Unicast promoted the format broadly with its Superstitial format, which then was copied by all the other companies.  But most of us who use mobile apps will probably agree that a straightforward interstitial experience is incredibly disruptive and annoying.  So putting up a full screen ad that a user has to stare at before accessing their content is simply unacceptable. What’s the answer?

Way back in 2006 I wrote an article that discussed the (then) current trend toward trying to drop short 5 second videos at the end of pods of content on television to combat fast forwarding on DVRs.  We did some research back at the time at Microsoft that showed that consumers got annoyed with advertising content about 5 seconds into the roll of a video.  We surmised at the time that for non-video content, a few seconds of static “sponsorship text” would be a good way to introduce pre-roll videos – that placing a short sponsorship message in front of the ads would soften the transition – especially if it was limited to a couple of seconds.  We’ve seen this deployed to great effect at Hulu.

I believe the answer is simple: Create a multi-part ad format that has different stages and experiences.

First it’s a full screen ad unit with basic sponsorship text: This app is proudly sponsored by “insert advertiser name here.”  Maybe the company logo can go on this screen as well. At the bottom of the full screen sponsorship, in small text, a message states: To see more, swipe the ad.

Then the full screen unit should shrink down to a “leave-behind” banner that needs to be persistent, needs to be small, and needs to be “swipeable”.  The leave-behind needs to take up the entire bottom of the screen – from left-to-right side.  The creative content in this banner may not take up the entire screen width, but can be centered in the ad unit ‘space’ and ideally the background color of the ad should be matched by the background on the two edges of the ad unit (this is technically easy to do in apps) such that it doesn’t ‘hover’ in the middle of the screen. It’s also important that the same is done with the first and second interstitials – they should cover the whole screen, and be centered in the screen – not locked “off center” to the upper left-hand corner.

The banner should have no more than three to five message transitions (animation points) that can tell an enticing message to the user to facilitate them swiping the ad.  That should be followed by a short “swipe here” animation that is instructional for users to see that they need to swipe the ad to open a bigger ad experience.

Upon swiping the ad unit, a full-screen ad should expand out of the banner unit that is fully interactive and immersive. This can be a “mini-game” experience, a video, an interactive unit that enables commerce or opting into something (a Facebook Like, tweeting a message to your friends, etc).  It should not open a mobile web browsing experience that bounces the user out of the App experience, because once a user is trained that doing anything in the ad is going to bounce them away from their game, they’ll never interact with another ad.

For Apps that have natural transition points (e.g. Moving from level-to-level in a game, or similar), the ad unit can expand out for no more than 5 seconds, and if the user chooses to interact with it – can stay up until the user closes it.

The ad transitions are extremely important to get right.  The initial interstitial unit should smoothly slide down off the screen leaving the banner unit there. The expansion of the banner to take over the whole screen also should be extremely smooth and feel “well crafted” to the audience. Also the initial interstitial should only be shown once per session to avoid annoying the audience. This won’t preclude multiple ads or advertisers per session – but will create scarcity and value to the session sponsor.

The other critical issue here is transition timing.  The initial ad experience needs to be no more than 3 seconds.  The animation frames of the leave-behind banner need to last no more than 7 to 10 seconds. Any automated expansion of the ad unit should leave the expanded page up for no more than 5 seconds.

I believe that if this ad unit were deployed uniformly across apps and mobile web experiences, the industry would see CPMs increase significantly, and the mobile advertising space could enjoy an interesting renaissance. I’m sure there are other answers to this problem – other formats for instance – that would work equally well, or even better.  But if the industry doesn’t lock to a standard format quickly – I fear that the space will continue to languish and won’t see the growth it deserves.

As I said above, ad formats don’t work as product differentiators.  But the largest players do have the ability to use their reach as a driver of format adoption – which is good for the industry. Apple, Google and Microsoft should work together here to drive adoption of a great uniform ad unit that can work across mobile devices.

Follow Eric Picard (@ericpicard) on Twitter.

Nov 08 2012
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Ad Ecosystem, Ad Serving, Ad Technology, Economics, Media Agencies, Online Media, Publishers

How ad platforms work (and why you should care)

(By Eric Picard, Originally Published in iMediaConnection, 11/8/12)

Ad platforms are now open, meaning that startups and other technology companies can plug into them and take advantage of their feature sets. The ad technology space is now API driven, just like the rest of the web technology space. The significance of this change hasn’t hit a lot of people yet, but it will. The way this change will affect almost all the companies in ad technology will have an impact on everything: buying, selling, optimization, analytics, and investing.

Companies in our space used to have to build out the entire ad technology “stack” in order to build a business. That meant ad delivery (what most people think of as “ad serving”), event counting (impressions, clicks, conversions, and rich media actions), business intelligence, reporting, analytics, billing, etc. After building out all those capabilities, in a way that can scale significantly, each company would build its “differentiator” features. Many companies in the ad technology space have been created based on certain features of an ad platform. But because the ad platforms in our space were “closed,” each company had to build its own ad platform every time. This wasted a lot of time and money and — unbeknownst to investors — created a huge amount of risk.

Almost every startup in the ad platform space has existed at the whim of Google — specifically because of DoubleClick, the most ubiquitous ad platform in the market. When Google acquired DoubleClick, its platform was mostly closed (didn’t have extensive open APIs), and its engineering team subsequently went through a long cycle of re-architecture that essentially halted new feature development for several years. The market demanded new features — such as ad verification, brand safety, viewable impressions, real-time bidding, real-time selling, and others — that didn’t exist in DoubleClick’s platform or any others with traction in the space.

This led to the creation of many new companies in each space where new features were demanded. In some cases, Google bought leaders in those spaces. In others, Google has now started to roll out features that replicate the entirety of some companies’ product offerings. The Google stack is powerful and broad, and the many companies that have built point solutions based on specific features that were once lacking in Google’s platform suddenly are finding themselves competing with a giant who has a very advanced next-generation platform underlying it. Google has either completed or is in the process of integrating all of its acquisitions on top of this platform, and it has done a great job of opening up APIs that allow other companies to plug into the Google stack.

I’ve repeatedly said over the years that at the end of the natural process this industry is going through, we’ll end up with two to three major platforms (possibly four) driving the entire ecosystem, with a healthy ecosystem of other companies sitting on top of them. Right now, our ecosystem isn’t quite healthy — it’s complex and has vast numbers of redundancies. Many of those companies aren’t doing great and are likely to consolidate into the platform ecosystem in the next few years.

So how does the “stack” of the ad platform function? Which companies are likely to exist standalone on top of the stack? Which will get consumed by the stack? And which companies are going to find themselves in trouble?

Let’s take a look.

How ad platforms work (and why should you care)

Pretty much every system is going to have a stack that contains buckets of services and modules that contain something like what you see above. In an ideal platform, each individual service should be available to the external partner and should be consumable by itself. The idea here is that the platform should be decomposable such that the third party can use the whole stack or just the pieces it needs.

Whether we’re discussing the ubiquitous Google stack or those of competitors like AppNexus, the fact that these platforms are open means that, instead of building a replica of a stack like the one above, an ad-tech startup can now just build a new box that isn’t covered by the stack (or stacks) that it plugs into. Thus, those companies can significantly differentiate.

This does beg the question of whether a company can carve out a new business that won’t just be added as a feature set by the core ad platform (instantly creating a large well-funded competitor). To understand this, entrepreneurs and investors should review the offering carefully: How hard would it be to build the features in question? Is the question of growing the business one of technical invention requiring patents and significant intellectual property, or is it one of sales and marketing? Is the offering really a standalone business, or is it just a feature of an ad platform that one would expect to be there? And finally, will the core platforms be the acquirer of this startup or can a real differentiated business be created?

The next few years will be interesting. You can expect these two movements to occur simultaneously: Existing companies will consolidate into the platforms, and new companies will be created that take advantage of the new world — but in ways that require less capital and can fully focus on differentiation and the creation of real businesses of significance.

Oct 25 2012
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Ad Ecosystem, Ad Technology, Economics, Media Agencies, Online Media, Predictions, Publishers, Startups

How Do Companies Make Any Money in Digital?

(By Eric Picard, Originally Published in AdExchanger 10/25/12)

In 2007 I wrote a paper that analyzed the lack of investment from 2001 to 2006 in the basic infrastructure of ad technology.  The dot-com bubble burst had a chilling effect on investment in the ad tech space, and as an industry we focused for about six years on short term gains and short term arbitrage opportunities.

This period saw the rise of ad networks and was all about extracting any value possible out of existing infrastructure, systems, and inventory.  So all the “remnant” inventory in the space, the stuff the publisher’s in-house sales force couldn’t sell, got liquidated at cheap prices.  And those companies with the willingness to take risk and the smarts to invest in technology to increase the value of remnant got off the ground and succeeded in higher efficiency buying and selling, and lived off the margins they created.

But we lost an entire cycle of innovation that could have driven publisher revenue higher on premium inventory – which is required for digital to matter for media companies. There’s been lots of discussion about the drop from dollars to dimes (and more recently to pennies) for traditional media publishers. And while the Wall Street Journal and New York Times might be able to keep a pay-wall intact for digital subscriptions, very few other publications have managed it.

In 2006 the ad tech ecosystem needed a massive influx of investment in order for digital to flourish from a publisher perspective.  These were my observations and predictions at the time:

  • Fragmentation was driving power from the seller to the buyer. Like so:
  • A lack of automation meant cost of sales for publishers, and cost of media buying management for agencies, were vastly higher in digital (greater than 10x what those things cost for traditional on both the buy and sell side).
  • Prices were stagnated in the digital space because of an over-focus on direct response advertisers, and the inability of the space to attract offline brand dollars.
  • Market inefficiency had created a huge arbitrage opportunity for third parties to scrape away a large percentage of revenue from publishers. Where there is revenue, investment will follow.
  • There was a need for targeting and optimization that existing players were not investing in, because the infrastructure that would empower it to take off didn’t exist yet.
  • Significant investment would soon come from venture capital sources that would kick start new innovation in the space, starting with infrastructure and moving to optimization and data, to drive brand dollars online.

Six years later, this is where we are. I did predict pretty successfully what would happen, but what I didn’t predict was how long it would take – nor that the last item having to do with brand dollars would require six  years. This is mainly because I expected that new technology companies would step up to bat across the entirety of what I was describing.  Given that the most upside is on brand dollars, I expected entrepreneurs and investors to focus efforts there.  But that hasn’t been the case.

So what’s the most important thing that has happened in the last six years?

The entire infrastructure of the ad industry has been re-architected, and redeployed.  The critical change is that the infrastructure is now open across the entire “stack” of technologies, and pretty much every major platform is open and extensible. This means that new companies can innovate on specific problems without having to build out their own copy of the stack.  They can build the pieces they care about, the pieces that add specific value and utility for specific purposes – e.g. New Monetization Models for Publishers and Brand Advertisers, New Ad Formats, New Ad Inventory Types, New Impression Standards, New Innovation across Mobile, Video and Social, and so on.

So who will make money in this space, how will they make it, and how much will they make?

I’ve spent a huge portion of my career analyzing the flow of dollars through the ecosystem. Recently I updated an older slide that shows (it’s fairly complex) how dollars verses impressions flow.

The important thing to take away from this slide is that inventory owners are where the dollars pool, whether the inventory owner is a publisher or an inventory aggregator of some kind.  Agencies have traditionally been a pass-through for revenue, pulling off anywhere from 2 to 12% on the media side (the trend has been lower, not higher), and on average 8 to 10% on the creative side depending on scale of the project.  Media agencies are not missing the point here, and have begun to experiment with media aggregation models, which is really what the trading desks are – an adaptation of the ad network model to the new technology stack and from a media agency point of view.

The piece of this conversation that’s relevant to ad tech companies is that so far in the history of this industry, ad technology companies don’t take a large percentage of spend.  In traditional media, the grand-daddy is Donovan Data Systems (now part of Media Ocean), and historically they have taken less than 1% of media spend for offline media systems. In the online space, we’ve seen a greater percentage of spend accrue to ad tech – ad serving systems for instance take anywhere from 2 to 5% of media spend.

So how do ad tech companies make money today and going forward? It’s a key question for pure transactional systems or other pure technology like ad servers, yield management systems, analytics companies, billing platforms, workflow systems, targeting systems, data management platforms, content distribution networks, and content management systems.

There’s only so much money that publishers and advertisers will allow to be skimmed off by companies supplying technology to the ecosystem. In traditional media, publishers have kept their vendors weak – driving them way down in price and percentage of spend they can pull off. This is clearly the case in the television space, where ad management systems are a tiny fraction of spend – much less than 1%.

In the online space, this has been less the case, where a technology vendor can drive significantly more value than in the offline space. But still it’s unlikely that any more than 10% of total media spend will be accepted by the marketplace, for pure technology licensing.

This means that for pure-play ad tech companies with a straightforward technology license model – whether it’s a fixed fee, volume-based pricing, or a  percentage of spend – the only way to get big is to touch a large piece of the overall spend. That means scaled business models that reach a large percentage of ad impressions.  It also means that ultimately there will only be a few winners in the space.

But that’s not bad news. It’s just reality.  And it’s not the only game in town. Many technology companies have both a pure-technology model, and some kind of marketplace model where they participate in the ecosystem as an inventory owner. And it’s here that lots of revenue can be brought into a technology company’s wheelhouse. But its important to be very clear about the difference between top-line media spend verses ‘real’ revenue. Most hybrid companies – think Google for AdSense, or other ad networks – report media spend for their marketplaces as revenue, rather than the revenue they keep. This is an acceptable accounting practice, but isn’t a very good way to value or understand the value of the companies in question. So ‘real revenue’ is always the important number for investors to keep in mind when evaluating companies in this space.

Many ad technology companies will unlock unique value that they will be the first to understand. These technology companies can capitalize on this knowledge by hybridizing into an inventory owner role as well as pure technology – and these are the companies that will break loose bigger opportunities. Google is a great example of a company that runs across the ecosystem – as are Yahoo, Microsoft and AOL.  But some of the next generation companies also play these hybrid roles, and the newest generation will create even greater opportunities.

Oct 05 2012
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Ad Ecosystem, Ad Technology, Economics, Media Agencies, Online Media, Predictions, Publishers, Startups

5 Important Memes for the Digital Advertising Industry

Aug 14 2012
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Economics, Media Agencies, Online Media, Publishers

How publishers sell ad inventory

By Eric Picard (Originally published on iMediaConnection, August 09, 2012)

Ad inventory is typically broken down into four buckets: sponsorships, premium guaranteed, audience targeted, and remnant. Each of these buckets can be sold through a variety of sales channels.

Revenue distribution across this “layer-cake” inventory model flows downward — with the vast majority of inventory coming from premium and a significantly lower amount of revenue coming from the remainder:

The process of an advertising sale begins with the media buyer, who sends a request for proposal (RFP) document to numerous publishers. These RFPs typically are written in prose and define the overall goals of the advertiser in question, and of the specific campaign being executed. A typical RFP has between 50 and 100 elements that are laid before the publisher as acceptable or desirable outcomes, and these elements (attributes or attributes of the buy) are generally descriptors of the audience, of the media the advertiser is looking to run on, of the acceptable (and unacceptable) content to be associated with, etc.

Advertising inventory is the base unit sold by a publisher to an advertiser. It is measured in “impressions,” which are defined as an opportunity to show an advertisement to a person. Impressions at their most basic are blank vessels made up of opportunity. Inventory is generally defined in advance by the seller based on a variety of factors, and it is these predefined impressions that are contractually agreed up on between buyer and seller.

Nearly all impressions sold are made up initially of one or two media attributes based on content association (e.g., MSN>Entertainment or MSN>Entertainment>Celebrities; Yahoo>Autos, or Yahoo>Autos>News). Or they’re sold just based on category — in some cases blind, meaning without the knowledge of which publisher the impression ran on. Further refinement of the inventory is based on other attributes such as above the fold, rich media units, or a variety of quality scores. Additional media attributes included in the definition of a piece of sold inventory include various types of targeting and other types of intelligence and filtering such as inventory quality scores and contextual targeting.

Beyond media attributes, there are numerous audience-based targeting attributes available for the buyer to request, or for the seller to offer. These include such attributes as geographic, demographic, psychographic, behavioral, etc.

It is the combination of these various attributes that define the inventory that is sold. Inventory is sold in a number of ways, including on a guaranteed basis (a buyer contracts with a seller for a fixed volume of inventory between specific dates) and on a non-guaranteed basis (if inventory is available that matches, it will be sold, but the seller doesn’t make any guarantees on volume).

In order to predict how much inventory will be available, publisher ad platforms need to look at historical data with seasonality and apply some very sophisticated algorithms to make a guess as to how much inventory will be available during specific date ranges. These “avails,” as they are called, become the basis for how all guaranteed ad sales are done.

But ad inventory has many very complex and difficult-to-predict issues that are endemic to the problem — the problem of predicting how many impressions will exist in a specific month is sort of like imagining how many cars will cross the Golden Gate Bridge in a given week. Predicting this based on historical data isn’t too hard. And predicting the color of the various cars that might cross the bridge is probably feasible with some degree of accuracy. Maybe even predicting the general destinations of the cars crossing the bridge is possible. But trying to predict how many red Toyotas driven by women with an infant in the car who have red hair and who make more than $125,000 annually is probably not a solvable problem.

This is akin to the requests given on a daily basis regarding ad targeting. This type of prediction is extremely technically challenging; nobody has been able to accurately predict how much ad inventory will be available in advance for more than three to four targeting attributes in advance. Therefore, publishers rarely will sell inventory that contains more than three to four attributes because this causes an immense amount of work during the live ad campaign for the publisher’s ad operations team. (They must monitor ad delivery carefully and adjust numerous settings in order to ensure delivery of the campaign.)

Inventory is sold within a contract called an insertion order (I/O), and each sold element is typically called a “line item” on the I/O. Line items correspond to a variety of attributes within the publisher’s inventory management systems. A simple example would be MSN>Entertainment. But a more complex example would be MSN>Entertainment>Women>18-34.

Beyond a typical guaranteed media buy, there are several other mechanisms for selling ads. Some ads are re-sold by a third party such as an ad network (examples include Collective Media, ValueClick, Advertising.com, etc.). Some ads are sold through an automated channel such as a supply-side platform, or SSP (examples include Rubicon, Admeld, PubMatic, etc.). There are also ad exchanges that can sit in the middle of all the transactions, and as the industry has matured, the difference between an exchange and an SSP has become less clear. These exchanges and SSPs then create a marketplace that allows ad networks and various demand-side platforms (DSPs) to compete for the inventory in real time. We’ll refer to this as real-time bidding (RTB) even though in some cases this term doesn’t apply exactly.

The management systems for buying RTB inventory are generally called demand-side platforms (DSPs). In RTB media buys, it is extremely rare to have more than three to four targeting attributes (just like in guaranteed media buys), not because of prediction but because inventory that exists for each campaign or line item that contains more than three to four attributes delivers with extremely low volume. In fact, the amount of inventory available on a per-impression basis as you layer on more targeting attributes generally drops significantly with each new attribute.  This means that a typical line item for an RTB campaign would look very much like the one for a guaranteed buy: Entertainment>Women>18-34.

For a DSP to spend an entire media buy at more than four targeting attributes, the buyer would have to manually create hundreds or thousands of ad campaigns that each would then be manually optimized and managed. It isn’t actually feasible to do this at scale manually.

In summary
In a perfect world, advertisers would be able to find all available ad inventory that matches their goals, with as many attributes as exist on all impressions. The problem is that existing inventory management and ad serving systems are not designed to deal well with more than two to three concurrent targeting attributes, whether for guaranteed media buys or RTB.

So why do advertisers and publishers prefer to sell ads on a guaranteed basis?

Inventory guarantees serve several purposes. The most critical is predictability; media buyers have agreed with the advertiser on a set advertising budget to be spent on a monthly basis throughout the year. They are contractually obligated to spend that budget, and it is one of their primary key performance indicators. Publishers like to have revenue predictability as well, which is solved by selling a guarantee on volumes for a fixed budget.

For all the innovation in the ad-tech space over the last decade, it’s fairly impressive that very few of the core problems of a publisher have been solved. At the end of the day, 60-80 percent of the revenue that publishers bring in comes from their premium inventory, sold on a guaranteed basis — which represents generally less than half of all their available inventory. Nearly all the ad technology innovation in the last decade has focused on what to do with that other half in order to raise the median price of that revenue from nearly zero to a bit more than zero.

It seems to me that there is an opportunity to focus on something else. (And you might imagine that I’m doing just that.)

Aug 14 2012
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Ad Ecosystem, Ad Technology, Media Agencies, Publishers, Startups

How real-time bidding works

By Eric Picard (First published on July 19, 2012 on iMediaConnection.com)

The real-time bidding ecosystem is still fairly new, and for many in our industry, there are a lot of misconceptions about how all the different parts of the ecosystem fit together. I’ve had a lot of requests from folks in the industry to explain how RTB works, and how the different players in our space fit together.

The biggest concept to get your head around with real-time bidding is the concept of programmatic buying and selling. The idea here is to streamline the buying and selling process by removing humans from the transaction. Now this is a very important thing to understand: By “the transaction,” I don’t mean that buyers and sellers no longer interact, or that there’s no role for sales in the equation. I simply mean that the act of booking the buy — let’s call it “order taking” — is completely automated. Ultimately this is a good thing for sales teams, as it lets them focus on building the relationship and selling the buyer on the value of their publisher brands. It lets the seller step away from the order-taking process.

Programmatic buying and selling is absolutely the future of this industry; it’s just a question of how long that transition will take. The lower cost of sales for publishers and more efficient buying for media agencies absolutely will make up for any hit to average CPM. And many (myself included) believe that we’ll actually see higher CPMs as a result of all this streamlining. Today most of the inventory that’s available is remnant, and it’s not the high-quality premium inventory currently handled by sales teams. Ultimately, all inventory will transact programmatically. But, like I said, sales will still play a very important role.

At the center of the RTB ecosystem are the ad exchanges. These platforms allow all the various players in the ecosystem to share supply and demand and create liquidity in the market. Examples of ad exchanges include Right Media, the DoubleClick exchange, AppNexus, and many others. On top of these pure-play ad exchanges are many ad networks and supply-side platforms that have essentially built ad exchanges on top of their existing products. The lines get very blurry between the “pure play” ad networks and the other aggregators of inventory that make that inventory available programmatically.

Similar to how stock or commodities exchanges allow inventory to be transacted upon at high volumes with maximum liquidity, the advertising exchanges play that central role. But it’s very important to understand that, just like in the financial services world, the big revenue opportunity is not with the exchange; it’s with brokers representing buyers or sellers. It’s these brokerages that represent the bulk of the value and that pull away the highest percentage of the transaction costs.

The equivalents of brokers in the RTB space are the ad networks, the supply-side platforms (SSPs), and the demand-side platforms (DSPs.) All of these ecosystem players have important roles and provide value. However, it should be noted that the lines are beginning to blur throughout the ecosystem. I predict that in the next few years, many DSPs will roll out SSP services, and many SSPs will become full-fledged ad exchanges. (But more on this in another article.)

So let’s follow the ecosystem participants from start to finish:

The impression starts with the consumer and runs through a web browser. (I didn’t put device in here, but note that even on mobile and tablets, there’s a browser involved.) The impression moves over to the publisher, through some SSP (or ad network) to the ad exchange, and then through to the DSP that is managed by an agency trading desk team on behalf of an advertiser.

There’s nothing very sophisticated about what I’ve drawn here — but note that this is the simplest way I could draw the RTB ecosystem. Here’s another view:

Note that even this is a simplified view, and that many of the various partners can service numerous blocks in the ecosystem. At the end of the day, the RTB ecosystem is made up of dozens of players (possibly hundreds), and they’re all scrambling to figure out their business models. This new ecosystem is definitely the future, but how all the pieces will ultimately fit together is still being determined.

The important thing to note in the RTB space is that from the moment consumers visit a web page, the entire transaction of selling and delivering the advertisements to them takes only a few hundred milliseconds. And this is where the revolution plays out; the competition over those impressions plays out in real time. The best ad for monetizing that user is theoretically shown, and the highest yield for the publisher is achieved. Thus, it should make the ad ecosystem function much better.

But there are many changes that have to take place, and I believe we’ll see it happen. First is that publishers need to push more and more of their premium inventory into the RTB environments. Publishers can make use of almost any ad exchange or SSP to create a private exchange where they can define advertiser-specific or agency-specific terms that are negotiated in advance, and the transaction simply makes use of the RTB infrastructure. Terms with specific advertisers can be reached in pre-decided negotiations, and the transaction takes place through the RTB infrastructure.

In a nuts-and-bolts summary article like this, I’ve glossed over a lot of the nuance and details, and I’m sure we’ll hear from a few parties about what I’ve missed or how I’ve not quite explained this correctly. But I welcome the dialogue. In the RTB space, I think there’s a lot of focus on the details, and not a lot of high-level framing going on — which alienates some of the industry folks who are looking to participate but haven’t dived in yet.

Mar 03 2012
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Ad Ecosystem, Media Agencies, Predictions, Publishers, Targeting

Why Facebook will ‘own’ brand advertising

(Originally published in iMediaConnection, February 2012) by Eric Picard

I’ve been watching and reading the Facebook IPO announcement frenzy with curiosity. The most curious meme floating around is the one that pooh-pooh’s its strike price, market cap, and valuation because its ad business “clearly isn’t going to be able to sustain growth the way Google’s did” — to which I call BS.

Here’s why Facebook will ultimately be the powerhouse in brand advertising online (and eventually offline as well):

Facebook is a platform

To really do this one justice, I’d need to write a whole article about the power of platforms and explain why platform effects are almost impossible to defeat once they’ve started. Platform effects are similar to network effects, so let’s start there in case you’re one of the 20 people left on the planet who haven’t learned about them. Network effects are basically when multiple users have adopted a platform or network, causing the platform or network to be more valuable. Telephones are the primal example here — the more people who have a phone, the more valuable the phone platform or network is to its users, therefore more people get telephones. Facebook has cracked that nut — it’s a vast social network, and network effects have rendered it as difficult to avoid getting a Facebook account as they have rendered not having a telephone or email address to be almost impossible.

Platform effects are similar, but even stickier: They come from opening a platform to third party developers. Once you have developers creating software that relies on the use of a platform, the platform becomes more useful and therefore becomes more adopted by end-users. This has been proven repeatedly — from Windows beating the Mac originally because so many software developers and hardware manufacturers supported the Windows PC platform. Apple has of course had the last laugh there, with the iPod/iPhone/iPad apps marketplace taking a page right out of Microsoft’s playbook and kicking them in the teeth.

Facebook is a platform that “consumer facing applications” like Zynga and other game companies have made good use of. But also it’s a massive data and business to business platform, which has been less broadly publicized, but which is beginning to gain adoption. And that part of its platform, tied to the data from the consumer side of its platform, is why advertising will ultimately bow to Facebook (barring some horrible misstep on their part.)

Facebook takes user data in return for free access to the Facebook platform

Facebook requires all users to opt into its platform — and despite all the various privacy debates and discussions about Facebook, it is actually pretty good about being transparent and providing value to users in return for sharing all sorts of data.

Facebook is right now (my opinion — open to debate) the most authoritative source of data on consumers, their interests, and brand affiliations. It’s going to grow and become more comprehensive, meaning that it will become the main source of all data used by brand advertisers to reach targeted users.

To my mind this is already destined to happen — and locked up due to the fact that Facebook is a platform. It builds content that no media company would be able to build (social content.) So in that way it really doesn’t compete with online publishers. Online publishers wisely have adopted Facebook as a distribution platform as well as an authentication platform for allowing consumers to accesstheir content.

It’s only a matter of time before publishers become so intertwined with Facebook’s platform that all their content becomes effectively part of the Facebook platform. But not in a way that publishers should be worried about Facebook disintermediating them. If Facebook is smart, it will work this out now and find a way to give publishers what they want in return for this: Let the publishers own their own targeting data, and work out a way to help them make more money without losing that data ownership.

Facebook will own brand advertising, and will not need to own direct response

Most of the wonks in the ad space are pooh-poohing Facebook because of a near-sighted over focus on direct response advertising. They believe in this false premise because of a single proof point, which is Google paid search advertising. The idea is that, “Since Facebook owns ad inventory that is further ‘up’ the purchase funnel than Google’s, Facebook will never justify a high enough CPM to compete for supremacy in the online space. Since Google is the owner of advertising online, and it did this by creating a vast pool of inventory that is sold at extremely high CPMs (because it is so close to the purchase on the purchase funnel) and because most of the online ad industry has been focused on DR for its entire existence, DR is where online must go.”

The wonks are wrong on this topic. Google undisputedly “owns” paid search advertising. But the entire paid search market is made up of something close to 250 billion monthly ad impressions. Google gets a very high premium on those ads — around $75 CPM. But Facebook has many more ways to play in the ad space than Google, and a lot more inventory to play with. Estimates put display ad volume well above 5 trillion monthly impressions, and Facebook has a huge percentage of these.  Since Facebook can cater to brands, it can be an efficient platform for selling ads to brands that target authoritatively to very granular audiences. Nobody has cracked that nut yet — the targeted reach at granularity and scale “nut” (disclaimer — this is specifically the problem I’ve been working on for the last year.)

So Facebook could own brand advertising online, could own a role as the authoritative data provider for brand advertising, could own the way that the big brand content platform of TV makes its way into a more modern and effective ad model, and could very well be the winner of the online advertising (nay the entire advertising) space for brands.

Facebook will dominate local advertising

Facebook has already grown a massive advertising business, and my bet is that when the details of its ad revenue are fully disclosed, a big chunk of that business will prove to be locally based. It is the only real play to be had for local businesses online right now; the only place to get local audience reach at any kind of scale. Local is a massive advertising market — one that nobody has been able to crack online, and Facebook will be the gateway between traditional media and online media for local advertising. Zuckerberg must already secretly have 200 people working on this problem as I type.

I’m very bullish on Facebook, but then, this is all just my opinion: I don’t have any idea how much of this Facebook really understands itself. All it really needs is some decent ad formats, and it’s got everything pretty well sewn up.

Mar 03 2012
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Ad Ecosystem, Ad Technology, Economics, Media Agencies, Publishers, Startups

3 ways that display advertising must change — or else

(Originally published in iMediaConnection, October 2011) by Eric Picard

Despite all the excitement in our industry about programmatic buying and selling of inventory (via ad exchanges, DSPs, SSPs, and a variety of direct-to-publisher vehicles like private exchanges and private marketplaces), the vast majority of dollars today are still spent the “old fashioned” way.

Since display ads began being sold in the mid-1990s, very little has changed in the way that the vast majority of ad dollars are spent. Most ad dollars are spent via a guaranteed media buy — either a sponsorship (the brand is placed on a specific location for all impressions served to it) or a volume guarantee (ad space of a specific volume is reserved against either a specific location on a page, or a specific group of pages, but will rotate out dynamically on a per-page view).

Sponsorships are great for buyers and sellers because they’re easy to manage. The buyer gets a fixed location, takes over every impression delivered to that ad location, and the seller doesn’t need to worry much about over- or under-delivery. (Sometimes they will sign up for a volume guarantee here, but many times they don’t.) And generally while sponsorships tend to yield low CPMs for the publisher, the ad buys are frequently for solid brands and the size of a sponsorship tends to be large on a dollar figure, if not large on CPM basis (e.g., it may be a multi-million dollar buy, but the CPM is probably low).

The oft-misunderstood publisher benefit of sponsorships, despite the low CPM, is that the cost of sales tends to be much lower. A sponsorship buy can be executed quickly and doesn’t require a lot of labor after the fact. I’ll discuss more about the issue of cost of sales when I touch on efficiency. But don’t underestimate the importance here.

Guaranteed volume-based buys are in many ways the cause of vast problems in our industry, despite being generally more lucrative and higher yielding on a CPM basis than sponsorships. First, they tend to be very sales and operations intensive, which means the cost of sales is often extremely high (frequently above 30-40 percent, and sometimes significantly higher for some of the most complex campaigns). There are several reasons why guaranteed volume-based buys are complex and costly.

First is that when inventory is sold in advance, there is some degree of prediction involved to determine how much inventory of any specific type or location will exist in the future. This inventory prediction problem is still one of the biggest issues we face as an industry. The ability to predict how many users will visit a specific section or page of a site is quite difficult on its own. Given the guaranteed nature of these buys, the prediction methods need to be extremely accurate, and getting accurate predictions is hard, even just based on seasonality and one or two locations. Once additional parameters, like various types of targeting, frequency capping, and various competitive exclusions are applied, the calculations are near impossible to calculate accurately.

This difficulty with predicting specific inventory in advance is the root of the second problem — optimizing buys on the publisher side during the life of the campaign. This rears its head in general, but much more so when the buy is targeted. Most buyers have no idea of the complexity of delivering these buys and how much work happens behind the scenes at most publishers to pull it off. Frequently there are daily (sometimes multiple daily) optimizations done behind the scenes to make sure a targeted campaign delivers against its goals. This can involve making changes to prioritization in the ad delivery systems, spreading the buy to larger pools of inventory, and bumping lower-paying campaigns out of the same inventory pool (at least temporarily) in order to ensure delivery.

Most publishers are not aware of the vast amount of labor done by ad agencies on their buys across publishers in order to ensure that advertiser goals are met. This can range from just ensuring that volumes that were agreed to are met, to ensuring that click or conversion rates driven by the buy are meeting a performance goal (for the direct-response advertisers). In either case, the amount of work done by agencies to optimize these buys, frequently across dozens of publishers, is huge.

Buying and selling inventory must get more efficient
This brings us to our first big problem that must be solved. Media buying and selling needs to get more efficient. If you compare efficiency (i.e., costs) of buying and selling traditional media versus online media, there’s a very clear difference. I’ve been told by numerous sources that the efficiency is between 10-15 times less efficient for big spenders for buying online versus offline media. And certainly there is a similar lack of efficiency for selling of online media.

One way that both buying and selling can become more efficient is through basic automation. Much of the back and forth of a media buy between buyer and seller is manual. There are not simple standard efficient means of automating the media buying process. There are numerous tools on the market that try to do this in the guaranteed space, but adoption has remained small so far. Between TRAFFIQ (full disclosure: I run product and engineering at TRAFFIQ), Centro, FatTail, isocket, Donovan Data Systems, DoubleClick, and others, there is plenty of choice to automate buying and selling of guaranteed between systems focused on the buy or the sell side of the problem.

And despite the promise of programmatic buying and selling removing much of the inefficiency from the space, most publishers are so worried about putting premium inventory into exchanges that we are still relegating exchanges to massive repositories of remnant inventory. Publishers must start using the private exchange and marketplace functionality that’s available to represent premium inventory.

This doesn’t mean that salespeople go away, and it doesn’t mean that publishers lose control of their inventory. It just means that much of the inefficient order-taking and campaign optimization that is done on both sides of the media buy can be removed from the system and automated. Sales become a more evangelical process, less work goes on behind the scenes, and salespeople stop spending so much time “order-taking.” Today publishers can set dynamic floor prices against exchange cleared inventory, buyers can automate their bids, and at the end of the day, the whole marketplace can get more efficient.

Publishers often say they don’t want this to happen because they fear a drop in the CPM of their guaranteed buys. The reality is that the cost of sales is so extreme on guaranteed media buys — especially targeted or frequency-capped ones — that publishers could easily skim 20-30 percent off their floor price if the cost of sales was significantly reduced.

One major reason that we’re having such trouble in the display industry is the predominance of performance or DR spend in our space. This overemphasis on DR for display has huge consequences to our space — from depressed CPMs to a focus on metrics and methodologies that require a lot of work. This leads us to our second major change that must take place.

Online display must become a brand friendly medium
Let’s face it. As a brand advertiser, you’re much better off putting your message on television or in magazines than on almost any digital vehicle. Our ads are too small to give the brand a proper emotionally reactive vehicle to reach audiences. Even the “brand friendly” 300×250 ad unit is tiny on today’s modern high-resolution screens. Luckily the IAB is responding to this problem with action, and there are many new larger standard ad sizes being promoted across the industry. But publishers have got to adopt them, and buyers have got to demand them as part of their RFPs. We should be moving much faster here — especially when you consider how many new tablet form-factor devices are moving into the hands of consumers.

But beyond the simple size of the ad, the design of most web pages leaves a lot to be desired from the perspective of a brand advertiser. There are too many ad units, not enough “white space,” too much noise on the page, and not enough back-and-forth value to the site’s own visitors or to the brands from the “advertising experience,” meaning the way ads are integrated with content. In a perfect world, the audience and the brand should be at the very least “neutral” in tension, and ideally the ads should be adding value to the viewing experience.

But there hasn’t been a huge outcry from the brands to fix this because they don’t see online as a medium that caters to them or is brand friendly. The flat CPM pricing is fine, but the lack of available GRP or TRP measurement in order to provide some cross-media evaluative metrics is a major roadblock.

Another reason that the biggest brands haven’t come online, beyond both the efficiency and brand friendliness issues, is that the ad units are shared with numerous less brand-centric advertisers, many of which run creatives that no brand advertiser would ever want running alongside their own creatives. This massive over focus we have on direct response or performance advertisers has somewhat tainted online display, and the willingness of publishers to liquidate every single available impression at fire-sale prices has led to overall much lower CPMs than media that have focused on brands as their primary customers. This issue leads to our third and final major change that must happen in online display.

Online display must increase overall CPMs of inventory
If we can transform display into a high-quality space for brand advertising, we should be able to demand higher CPMs. This sounds nice and wonderful to most publishers, but many of the people reading this article will somewhat cynically push back at this point and talk about the “reality” we face in online display today.

So let me dispel a few myths by explaining the economics of our space in terms many of you have probably never heard.

Every emerging media that I have researched or lived through has focused initially on DR advertisers as their primary target in the very beginning. There is an economic theory that drives this: budget elasticity. The idea is that a DR advertiser is theoretically managing spend based on pure ROI. That is, they only buy ads that drive profitable sales of product or services (i.e., the budget is “elastic”). This, in theory, means they will spend as much as they can as long as the media buy creates more revenue than ad spend. And because the media experience is new in an emerging media, and the advertising is novel, response rates to those new ads in new media types tend to start out much higher, and then they will eventually plateau.

The problem with this theory is that it only works out well for publishers catering to DR buyers when the conversion rate on their inventory is high enough to drive high CPMs. The type of inventory that drives high conversion rates is typically extremely well-targeted inventory, typified in our space by paid search advertising, where the users tend to be searching for the very thing that the advertiser is selling. There are some forms of display advertising that also drive high conversion rates. They are frequently driven by retargeting of search queries, very lucrative behavioral segments that show a user’s propensity to buy is higher than average, or similar principles.

Like all other emerging media, when display advertising first started out, the focus was on getting DR advertisers in the door. And like all other emerging media, the response rates on ads were relatively high in the early days. But unlike all emerging media before online display, we wrote software that managed media buys online right at the beginning of this industry. And all of the DR “knobs and dials” were locked down in code, which made it much harder to evolve out of DR into brand advertising. If response rates had grown or remained high, this wouldn’t have mattered. But like most “top of purchase funnel” ad experiences, the response rates are too low to justify high CPMs by the DR advertisers.

When a media type does not drive a very high conversion rate, DR advertisers are only willing to spend a very low CPM. There’s a magic point at which the price of the inventory is low enough that the DR formula for positive ROI starts to make sense even for low performing inventory. This inventory is generally cheaper than 50 cents and frequently cheaper than 5 cents. And there’s a ton of it available in our space. This overemphasis on DR has numerous unintended or unrealized consequences.

Many large publishers sell their guaranteed inventory at well above $3 on average, and many publishers average between $5 and $9 for what is sold by hand. But this typically represents well under half of their inventory, and for many publishers it’s more like 30-40 percent of their total inventory. Once you dip below the conversion threshold of a DR buyer on most ad inventory, you’re driving very hard toward the basement on your prices. And if more than half of your inventory is sold off for less than 20 percent of your total revenue, then something is very wrong with the way we’re managing our space.

Publishers would be much better off stripping half the ads off of their site, redesigning the site to accommodate larger brand-friendly ad units, selling a lot more sponsorships with their human sales force, and selling the remainder of those ads mostly through a very automated sales channel, such as a private exchange, or at the very least automating their sales with one of the available tools.

Even selling10-20 percent more ad inventory through premium channels would significantly increase yield for most publishers than all of the remnant sales that take place today. Simply repurposing the sales and operations teams away from the remnant inventory problem and focusing them on selling premium could solve this.

To conclude, if we can make buying and selling inventory across the online display space more efficient, more brand friendly, and significantly increase our CPMs, then we’re going to have a rapidly growing and expanding space — one that would rival venerable offline media like print and television in size and scale. And that would become the perfect vehicle for those media to travel through as they become “tablet-ized” and “streamed.” But with such a huge overemphasis on DR, massive inefficiencies in buying, and low CPMs, we have a ways to go.

Mar 03 2012
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Ad Technology, Media Agencies

3 ways to increase ad engagement, conversions, and ROI

(Originally published in iMediaConnection, June 2011

We’ve been at this online advertising thing for about 15 years now — give or take a few years. And we’ve seen time and again all sorts of tricks, tools, approaches, and technologies that can be used to increase ROI from the advertiser’s perspective and yield from a publisher’s perspective. I’ve written tons of articles saying what we should do as an industry to improve advertising from a policy, approach, and technology perspective. But today, I have a nice little article about how to improve your results as an advertiser.

In 1997, I started one of the first rich media advertising companies. Many of the ads we built — back in the days of 56K modems, before broadband, and when creative file size limits were tiny — would win awards today and still be recognized as groundbreaking. As an industry, we’ve gone backward, not forward.

Disrupt your own creative approach
My overall recommendation is to “productize” your advertising. You can do this by creating standardized ad units with preconfigured types of interactivity and with one defining trait from a creative perspective that immediately connects with the user. This last element is important — and is the trickiest to pull off — but once you nail it for one set of campaigns, you’ll be done with that work.

Example: For an advertiser selling cleaning products, surround the border of each ad with a froth that animates little popping bubbles.

Whatever that unifying theme is, break it down into the simplest graphical treatment that doesn’t overwhelm the rest of the ad, but that is both noticeable and engaging. Work with your rich media vendors to find out what is possible across the publishers you want to work with — and make it real.

Since our display advertising space is small, and the units make up a tiny non-disruptive portion of the screen, you need to force the issue about space. That might mean you need to create very compelling creative that somehow creates interaction between multiple units on the page, breaks outside the boundary of the border of the creative unit, or just uses simple and arresting copy or images to capture the user’s attention.

I realize this is a bit of Advertising 101. But we spend too much time in this industry running ads that don’t differentiate from each other, don’t capture the user’s attention, and are just plain old boring ads in standard IAB-sized units.

Every rich media vendor out there offers a variety of simple solutions to the ad mechanism, whether the mechanism is a 300×250 banner that breaks outside the boundaries of the creative, or whether it enables an over-the-page experience in which the ad expands and is not rectangular.

Create multiple engagement opportunities within the ad
Even within standard ad units that run on a significant number of sites, many opportunities for engagement exist. Whether we are talking about a 300×250 ad unit, a 300×600 half-page unit, a 728×90 leaderboard, or 160×600 wide skyscraper, all of these formats are large enough to create deeper opportunities to create content — not just an ad.

Ads that just offer a click-through to a landing page are very straightforward and miss out on massive opportunities. My recommendation is to always offer at least two — if not three — specific and clear opportunities for engagement with the user. One should be the primary execution; the others should be highlighted but not overwhelm the primary.

Example: For a cleaning product, the primary creative should be an engaging brand message with eye-catching graphics and a simple story. The second opportunity should be more direct-response driven (e.g., print out a coupon or request a free sample by mail). If a third opportunity makes sense, it should pull in a different direction (e.g., sign up for a cleaning tips newsletter or go to a store locator for places to buy the product).

In any case, this should always happen right within the ad itself, not requiring the user to jump to another website. Conversions within an ad unit tend to be much higher than those that require leaving the site that the user is on — and the larger ad units certainly have enough room to put some simple forms in front of the user and capture data. Every rich media advertising vendor out there has ways to do this for you; just work with your vendor to see what’s possible.

Tie online ads to the physical world (ideally locally)
Every ad should be a combination of engagement opportunities — driving brand engagement and brand metrics, but also offering quick-twitch direct-response opportunities.

Users are not going to buy a car or a washing machine from an ad. But they might well be willing to sign up for a test drive or visit a store for a scheduled demonstration of a large-ticket product. Working with opportunities that are localized is very smart, if at all possible. Frequently the possibilities exist, but they are outside the normal consideration set for an online component of an overall advertising campaign. So don’t use normal considerations — break outside the boundaries of the norm and drive change.

Examples: If you are advertising a product that is sold by dealers (cars, agents, etc.), retailers, or resellers, create engagement packages with them to drive customers into their stores. In some cases they might be willing to share some of the expenses for successful engagements, or at the least could be willing to participate in a broader proposal. These could be as simple as setting up a special event at their location that ties to the lifetime of the campaign, such as having food grilled at a car dealership on a specific weekend, or offering to give product demonstrations one evening a week.

Getting your online creative to pop outside the box of the ad unit, to drive deeper engagement with the customer, to offer some kind of outcome driver as part of every unit, and to tie to offline (physical world) engagements in the local community will completely change the game and drive much greater ROI for the advertiser.

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