Monthly Archives: March 2012

3 steps to salvaging the online display industry

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

Every mature media has one thing in common, and that is scale. Whether we discuss television, radio, newspapers, magazines, or out-of-home, they all have locked down their basic planning, buying, and selling processes in ways that enable a new employee in the space to learn the basics quickly, and everyone in those spaces has agreed on currency, methodology, and KPIs. Any two media planners in television can understand each other’s approach quickly, and can explain their goals to a sales person quickly, and can execute a media buy quickly. All with common knowledge within their industry — that is broadly available. This leads to scale — the ability of a marketer to reach large audiences in these media types at reasonably low costs per thousand impressions, and without a huge amount of work or cost to execute.

I’ve written before about the problems facing the online display industry, and how the early decisions made about ad serving technology are some of the drivers of the biggest problems we face. Essentially my belief is that because we took requirements from an emerging media — which are radically different from the requirements of a mature media — and locked them down at the heart of the inventory management systems behind the industry, we are screwed.

Emerging media have some common characteristics:

  • Small amounts of available inventory, with relatively high demand, thus driving high prices
  • Small overall budgets because they are coming from experimental media budgets, which are highly scrutinized and optimized during the life of the campaign
  • Technical people are usually involved (i.e., experts with arcane knowledge of how to tweak the emerging media for maximum value extraction, across all phases of a deal, including sales, service, production, operations, and analysis)

Every emerging media type that I’ve touched, studied, and participated in over the last 15 years have all had these characteristics. From online display itself, to mobile, to in-game, to paid search, to rich media, to real-time bidding, I’ve seen this happen over and over. So why do I say we’re screwed in online display? Well, mostly for effect — to get your attention and see if we can dig our way out of the problem.

We built all of the original ad serving platforms, created all the processes for buying and selling inventory, set in place the KPIs, and invented ways of planning and measuring the effectiveness of the campaigns when the amount of available inventory was low, average deal size was quite small, and differentiation from other media was the driver of all the decisions. Not a bad thing in itself, but a horrible thing when we locked all those requirements down in software right off the bat. Because now it is nigh impossible to change the way those systems and processes function. And we really need to if we’re going to scale the industry.

I bring this up now because we’re going through the biggest revolution we’ve seen so far. Real-time buying and selling could solve all our problems. But the players in this space are falling into the same trap that all emerging media have fallen into, and if we’re not careful, we’ll have the same problems later that “standard” online display has today.

    1. We need to reduce the amount of arcane knowledge needed to successfully execute on a real-time media buy. The market feels a lot like paid search in the early part of this industry, where only a small cadre of experts could really pull off anything interesting. Those people are all the ones leading paid search practices in the industry today. Good for them, bad for the space.
    2. We need to optimize for efficiency over effectiveness. By this I mean that in an emerging media that is trying to prove itself, much of the effort is applied to a small frontier of effectiveness gains that will show numeric advantage over the competition. “We achieved 30 percent better results than competitors” sounds great until it is understood that the actual value created was miniscule. The big opportunity for the real-time space is scale, which is why I like the term “scale display” for this emerging space much better than anything else. Efficient (and effective) buying and selling is what the industry needs to solve. Not squeezing an extra 3 percent of yield or ROI — with 30 percent more effort. That’s an emerging media type approach. We need to see “scale display” as the way we help online display move beyond an emerging media and become a mature media.
    3. We need to understand the metrics of traditional media and how they play with the metrics of online. What can we change? What can we give up? How can we make it much simpler to spend much larger amounts of money on our media?

 

Rich media advertising is a great emerging media type to look at and understand when we talk about scale. Back in the early days, every company had its own proprietary ad formats; some companies were the “expanding ad guys” and others were the “interstitial guys,” and others were the “video ad guys,” and others were the “floating ad guys.” Each company had their own ways of buying and selling the media. Each had their own way of measuring the effectiveness of the media. It was a complete disaster.

It wasn’t until PointRoll figured out how to sell the media at scale, and all the other providers copied its model, that rich media became a mainstream media type within online display. All the providers began offering all the formats and functionality that their competitors offered. The big issue is that they made it easy to buy efficiently, and quickly the percentage of media sold as rich media grew.

Scale display needs to be easy to buy and efficient to manage. We need to make sure that the complexity of an emerging media doesn’t block the success of the entire market. Because I believe that scale display is the way that online display becomes a mainstream media.

Why publishers are afraid of real-time bidding

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

Real-time bidding (RTB) is a hot topic in the online ad industry these days. (Personally I wish the industry would talk about real-time buying and real-time selling — because bidding is not really a requirement to get the benefits. But that’s perhaps the topic of another article.)

There are a lot of misunderstandings about the issues in the RTB space, particularly from publishers. Many publishers are jumping in with both feet, but a large number are still in wait-and-see mode, and have big concerns that they want addressed before they enter the fray. Some of these concerns are not areas that should cause concern, and there are other issues that they should probably care about — but that aren’t even on their radars.

Years ago, publishers were very concerned about sales channel conflict with ad networks. This concern ultimately was addressed by publishers only allowing resale of their inventory by networks if it was sold blind, meaning that the network could not identify the publisher as the inventory source. Over time, ad networks have become deeply ingrained in the industry ecosystem, and for the most part, the channel conflict issues have been addressed through this blind resale mechanism.

When RTB companies first entered the market, publishers treated them just as if they were ad networks (some of the RTB companies are ad networks, by the way), and they limited the inventory relationship to remnant inventory that was sold blind to match the way it had worked in the ad network case. Most publishers at this point are over focused on the issue of channel conflict here, because the drivers of RTB are different than many in the industry realize.

The RTB space has two faces — one that is focused on acquiring good inventory at a steep discount, and another that is focused on enabling programmatic media buying and selling. The latter focuses on removing the human negotiation process in order to increase efficiency in the purchase and sales processes. While the first group of buyers is discount focused, the second is focused on more efficient and effective media buying. And publishers should not only enable them — they should encourage them.

When publishers sell inventory using RTB, they not only reduce their cost of sales, but they also remove a huge amount of their ad operations costs. The buyer only picks up the inventory if it matches the buyer’s goals, and there is no guarantee involved. No manual hunting for placements that have enough traffic to cover the campaign goals. No fire drills to handle at the end of the month.

While publishers should be concerned about advertisers trying to get media discounts by playing the human and automated sales channels against each other, that’s easily overcome. Almost any mechanism publishers would use to expose their inventory to RTB — such as an exchange or a supply-side platform — would also enable them to set floor pricing. This means that the inventory would be protected from RTB prices undercutting their sales force.

I actually suggest that publishers expose their entire premium portfolio to RTB, and that they should not sell it blind. They should think of the RTB channel as part of their sales forces — a non-human sales team that lets the buyer achieve its goals more efficiently and reduces the costs of sales.

One issue that many publishers (rightfully) fear with RTB is data leakage. But this is an endemic problem that has been floating in the industry for years. Let me start with a more fundamental description of the issue:

Let’s say an advertiser makes a premium buy from a publisher for 50,000 impressions of a behavioral targeting segment called “auto shoppers,” starting on Jan. 1. The buy is frequency capped at a frequency of one, and the advertiser is paying a $45 CPM for the privilege. The ad is being served using third-party ad serving, and the advertiser also drops a tracking code from its demand-side platform into the creative — which they don’t to disclose to the publisher.

Now that the campaign has gone live, the advertiser is reaching an average of about 1,500 unique web browsers per day, setting a cookie on those browsers. Immediately, the advertiser pulls the trigger on a RTB campaign that looks for those same cookies on the various ad exchanges, and it pays a $1.50 CPM to reach them. To make matters worse (from the publisher’s perspective), if that publisher is exposing remnant to RTB in an exchange, the same advertiser might well deliver ads during the run of its $45 CPM campaign on that same publisher for $1.50 CPM to users it has already reached.

This is a real issue — something that happens every day. From the publishers’ perspective, these are data that they have worked hard to collect, and they believe they are their proprietary data. And they feel strongly that nobody should be able to steal those data from them.

The reality is that every ad network out there has been doing this since the beginning of the industry. If ad networks buy targeted inventory, they can cookie users quite easily, and then resell them as part of their targeted network sales.

But ultimately, there is a bigger conversation to have about the value of publisher targeting data:

  • Publishers only know what a specific browser is exposed to when on that publisher’s site, which can be a very slim aperture of activity viewing.
  • Most data that advertisers want access to are pretty much a commodity. How many times does an advertiser need to know what kind of car someone drives, and who has access to that data? A lot of parties know this information, and many have the right to sell it. Only data that are either fairly unique (people who follow their finances on Yahoo Finance probably aren’t going to MSN Money) or that are processed and matched with other activity data (search engine results or shopping activity) have proprietary value that a publisher should protect.
  • Given the industry discussions about privacy, it’s very possible that third-party tracking of data for targeting could run into some issues over the next few years. This will set publishers up with many more unique data opportunities than they currently have.

Ultimately publishers need to grapple with the issue of RTB through the lens of their own business challenges. However, the two biggest issues that I usually hear about from publishers — channel conflict and data leakage — are ones that shouldn’t stop a publisher from participating in RTB. In fact, these issues should probably bring a new view to the conversation.

RTB ultimately has an opportunity to change the game for the better for all ecosystem participants — but only if enough valuable inventory is made available to the channel.

Why consumers think online marketing is creepy

(Originally published in iMediaConnection, December 2010) by Eric Picard

When the concept of cookies was introduced into web browsers, the idea was simple and designed to allow for some permanence in the relationship between a person and a website beyond a single session. Cookies would allow someone to visit a site, return to the site, and have his or her user ID already populated into the browser. It also would allow the website itself to create a persistent relationship with a person who visits the site across multiple visits.

These browser cookies were left fairly open and flexible, and were not just limited to the sites that people were visiting. They enabled broad collection of browsing information by any entity that had rights to place images or content onto any site, even from different domains than the person was visiting. This broad capability is what enabled the creation of third-party tracking as a business. And it is extremely useful to companies that market online to consumers. Various ad serving companies enabled this capability (anonymizing the person’s browser such that no personally identifiable information would be passed to the advertiser, just a unique number representing the person) for advertisers, which then were able to understand broad consumer behavior in new ways. And the anonymous nature of these cookies made everyone involved feel justified and comfortable using the technology in this extended way.

More recently, the online advertising industry has gone through a series of revolutions that are fundamentally changing the way these tracking cookies operate. This change has the potential to radically improve the utility of advertising to companies that market online due to the advent of advertising exchanges like the Google-owned DoubleClick ad exchange, the Yahoo-owned Right Media exchange, or the AppNexus exchange, which recently closed $50 million in funding from various sources including Microsoft.

An entire ecosystem of companies has grown up around these exchanges. On the side of publishers, there are the supply-side platforms (SSPs) like Pubmatic, Rubicon, AdMeld, and others. On the side of the advertisers and agencies, there are the demand-side platforms (DSPs) such as Invite Media (owned by Google), MediaMath, Turn, DataXu, Triggit, and others. And all of these providers look for as much data as possible to be injected into the ad impression stream so that an appropriate valuation of the impression can be made. The publishers and SSPs push some data into the chain from what they’ve collected. The advertisers come to the table with what they’ve collected. And the exchanges enable third-party data companies to inject data as well. At the end of the day, the battle has become about who has the best data that nobody else has in order for someone to get an edge and either make more or pay less money than competitors. This space is loosely referred to as the “real-time bidding” space, even though RTB is only part of the story and not always used.

So let’s examine the data side of this market, and what’s going on. Because either what is going on is all perfectly fine, or it is not. And consumers are getting creeped out by it. The question is: Should they be creeped out, or not? Is everything happening in this space completely benign, or is it harmful in some way? From a more philosophical point of view, should companies be able to use cookies to track behavior of individual people via their web browsers and use that data to make money without consent of the person, and without asking first? Should this be legal? That’s at the heart of the FTC’s recent “Do not track” discussion. The commission is proposing a simplified “opt-out” of tracking that does not quite go to the onerous “opt-in” requirement that many have feared, but that would certainly let consumers easily stop being tracked.

Let’s investigate how the ecosystem for data companies works today, and let’s really ask ourselves if there is an issue here. Over the past few years, third-party data companies like AudienceScience, Tacoda (bought by AOL), BlueKai, eXelate, Bizo, and others have found that they can create business arrangements with various websites to enable tracking of behavior, which can then be sold to one of the companies in the RTB space. A good example of this kind of relationship would be a travel website that enables a data company to cookie any user that is searching for travel arrangements and collect the dates and destinations of those travel plans. Or an automotive website that lets a data company track which models of car a person is shopping for. Once the data is available to advertisers and ad agencies, either through a publisher, an SSP, an exchange, or a DSP, the advertiser can bid on impressions specifically based on the audience characteristics suggested by their browsing behavior.

All of these companies go to varying lengths to ensure that no personally identifiable information is exposed when they trade this information over, and nothing I’ve said above sounds overly concerning — especially when you think about the messaging that this is anonymous. And some companies in this space have gone to great lengths to ensure that there is at least a potential consumer upside. BlueKai comes to mind immediately with its BlueKai registry, which enables consumers to see what data are collected about them, edit their profile, and then select a charity to which a portion of the proceeds from their tracking can be assigned.

Very few people outside our industry are aware of all the “cookie matching” that goes on. This process essentially lets two different data providers compare cookies and match the intersection of the audience members between those cookies. This is typically done through a third-party service like Acxiom or Experian, which don’t allow the two parties to match the users in such a way that they can accidentally match personally identifiable information to a profile. A scenario would be an advertiser that has a list of cookies of its customers, which could compare those cookies to a data provider’s list of cookies that show their customers’ other profile attributes from surfing across various websites. Then the advertiser can bid differently on its own customers when it sees them. Given that the cost of acquiring a customer is far higher than retaining a customer, this is good business in many ways. But is it good in general?

It does beg the question about whether you should have to go and opt-out of this in the first place. I’ve had dozens of conversations with people about this, and not one of them was happy about being tracked this way. Some were resigned and disappointed, some were creeped out, and others were downright angry. When people start saying things like, “What gives them the right?” I get a bit concerned that legislation can’t be too far behind.

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Why killer content is not enough

(Originally published in iMediaConnection, November 2010) by Eric Picard

In the world of media, content is king. Television networks with the content most people want to watch beat those with smaller audiences. Magazines with the biggest distribution beat those with smaller distribution. And in all of the traditional media, the funding and creation of this high-value content is fundamentally at the basis of their businesses; those who can create it and distribute it to the biggest audience win.

Online media has long been seen as a continuation of traditional media. Yahoo at one point went so far as to hire media legend Terry Semel as its CEO so it could try to replicate the success of traditional media in the online space. This, of course, failed miserably. Similar efforts among the biggest online media companies — those that have focused on building “killer content” in order to attract massive audiences and monetize them — have not done as well as they might have.

Online media is successful when the way the media is generated takes advantage of the power of software. Search engines generate incredibly powerful media because they algorithmically generate content that people are looking for. It doesn’t hurt that they happen to connect advertisers and potential customers at a moment in time that is frequently far down the purchase funnel — a spot that happens to be incredibly rare, has high competition, and therefore drives incredibly high yield. Facebook doesn’t have a human editorial staff writing content; it organizes content written by humans in ways that make that content relevant and interesting to people. And it happens to do so in such a way that it collects incredibly valuable data about the people that both created the content and are consuming it — and can sell the resulting ad inventory for very high yields.

Media companies have missed out on this type of success because they aren’t technology companies. They don’t understand technology, nor do they understand the people who successfully build the most powerful and disruptive technologies. They mainly fail in this area because they believe that programmers and technologists are IT people. They believe that business people, editors, and content creators simply need to tell the techies what to build, and that they will end up with a valuable outcome (which somewhere in there is about creating great content that attracts a large audience that can be sold to advertisers for lots of money.)

Amazing technologists are not “IT guys.” They are brilliant computer scientists who are creative, disruptive, and inventive. They tend to be way smarter than almost anyone you ever meet in an editorial or sales discussion. This isn’t said to diminish the value or intellect of editors or sales people. Rather, these software wizards are simply among the most brilliant people alive. Rather than applying their creativity and intellects to develop smart bombs, encryption software, or a cure for cancer, they have applied advanced mathematics and programming techniques to build better media models.

Sometimes they get it wrong. But every once in a while, they get it very, very right. And when they do, the results are astonishing. They create more revenue as individual companies than some entire industries — or countries, for that matter.

And again — I say all this in no way to diminish the value of human-created content. But simply writing good editorial will only get you so far in the online industry. You might build a great blog or even an associated blog (TechCrunch). And you might be able to attract humans with incredibly well-written or produced content online (New York Times, Hulu, The Onion, Slate). And some of the places where other people’s content is curated well (MSN’s WonderWall) work pretty well.

But the reality of value creation online is where you can apply the power of software to do something unexpected and valuable — in completely new ways. The portals all have the opportunity to do this, but they’ve tended to take an approach to creating media that doesn’t use the power of software to increase its value exponentially. Instead, for the most part, they take a tabloid-like approach, assembling hot topics for their homepages such as, “Details of Tiger’s new estate,” or “How to make a small room look big,” or “What we learned from NFL Week 10.” Yahoo seems to be in rapid decline, and Paul Graham’s essay on why seems pretty telling. I think Microsoft has the right DNA, but not the right focus to pull it off (i.e., online equals search at Microsoft these days). AOL seems to be in rebound, and I’m curious to see what it pulls off in this area — but can it overcome its brand’s association with the early days of dial-up internet?

There are dozens of Googles and Facebooks waiting to be started in the halls of computer science departments across the country. And media will continue to be revolutionized. As will the way that media is monetized.

The real reason consumers are creeped out by online ads

(Originally published in iMediaConnection, September 2010) by Eric Picard

Direct response marketers have been using various statistical models for decades to determine how to predict human behavior. They’ve built proven models that can help a marketer reach a highly targeted audience with a high degree of reliability and show that audience a message that has a higher probability of success than a random untargeted message. The easiest way to see this at work is to buy a house.

Two years ago, I bought a house (my timing was impeccable). Within weeks of my mortgage closing, I began to receive all sorts of interesting things in the mail. This was interesting because I explicitly opted out of having the data from my mortgage shared with anyone (or so I thought). As it turns out, this isn’t really possible — at least, I wasn’t able to pull it off, and I am aware of how the DR industry works. The average consumer hasn’t got a chance.

The kinds of mail I began receiving included lots of offers for things like mortgage refinance (despite that I had only bought my house weeks before), various types of insurance (most were flavors of home warranties), and then literally hundreds (possibly thousands) of offers from local businesses to try their services. This included some that were logical and tied to my physical relocation to a new neighborhood — various dentists, hair salons, landscapers, accountants, hardware stores, and roofing companies.

The DR industry has statistical models that clearly show the series of marketing opportunities that are associated with major life events. So when you have a baby, there are many things you’re likely to need to buy. When you buy a house, it’s very similar (in fact, these events are highly correlated). For instance, having a baby frequently is followed by purchasing a new (and safer or more spacious) car, SUV, crossover, or minivan. Life insurance is another highly correlated purchase.

These models are built, and the “sensing” mechanisms flow out into the various sources of publicly available data, as well as numerous private sources of data like financial services companies. For decades, your every credit card purchase has been carefully scrutinized and analyzed and applied against highly refined statistical models to figure out what opportunities exist to sell you other products and services.

Many people have begun to realize this — but it took decades to build the systems, and decades more to have the knowledge of its existence permeate the culture. So by the time you read this, many of you have simply accepted that this is standard practice. You’ve come to terms with your outrage at the fact that, without explicitly asking for your permission, data about your private life has been used to segment you into various buckets in order to more effectively market to you.

One of the major problems with this traditional direct response marketing is the massive expense behind it. Despite being a highly profitable, high-revenue business, it’s extremely expensive to operate. Building the statistical models, mining the data across numerous sources, and then building personalized (not private in any way, mind you) profiles against which to sell the personal contact information you’ve amassed — including phone numbers, physical home addresses, and names — isn’t cheap. And when it first started out, the costs were much higher because computing power was relatively much more expensive.

And that’s been the problem with DR since it began: Building these mailing lists of highly personalized targeting opportunities is so expensive, the pools of individuals who match them are so small, and the amount of time that the data are fresh and relevant is so short that the opportunity for any single marketer to reach target audiences is pretty small. Maintaining the freshness of the data is a big part of the expense. From a marketer’s perspective, the decision to use these mechanisms is quite simple — the response rates are well known and the ROI decision is easy. But the number of customers any one company can create using these tools is low enough that other forms of marketing are needed.

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If the benefits of DR are its targeted, effective nature and clear ROI, its handicap is the limited audience size for any one company. DR is like fly fishing; pick the fly that will work on that specific type of fish and get the fly into the right location at the right moment. Good old brand advertising has nothing to fear from DR for this reason. The benefit of brand advertising is that you reach a large-scale audience at a low cost and get your message to the masses. Brand advertising is like fishing with a big net; you catch a lot of fish, but you have to throw a lot of them back because they weren’t what you were looking to catch. The problem is, at these large scales, the ability to know how effectively you’re reaching the ideal audience is pretty limited.

Over time, a secondary market of service providers using panels of users that fit various criteria has developed. And at very large scale, marketers have been able to look at various media planning tools for decades that can show them the likelihood of reaching a desired audience based on association of the audience with various television shows, magazines, radio stations, newspapers, etc. But all these tools show is that there is a probability of reaching a certain relatively broad type of audience (e.g., women in a certain age group). But this is better than nothing and has worked fairly well.

And thus the market flourished. And along came online advertising.

When online advertising began, many saw this as the holy grail of marketing. Finally (they said) here is a place where computers are deeply integrated by nature, and we can combine the two methodologies: We can build systems that enable DR and brand advertising to coexist, and eventually we can find a way to do both things. We can reach highly targeted audiences at large scale and low cost and dynamically generate targeting profiles that radically improve ROI.

I cannot tell you how many meetings over the past 15 years that I’ve been in where the conversation flowed essentially like this. “What we’re really trying to do is build a database with one row for each person on the planet, and one column for each targeting attribute we believe we can sell to marketers.” This 6 billion row database with millions of columns has been theoretical of course; neither the technology to pull it off nor the reach to every person on the planet has been available.

And there is, of course, the major issue with privacy that keeps coming up and biting this industry on the backside. Whereas it took decades for the idea of big DR databases with personal data to permeate into the culture, online advertising showed up when the issues were a lot clearer to most people. And since the state of the art of behavioral targeting has begun to show some noticeable results, people are beginning to get “creeped out.” Recent Wall Street Journal and New York Times articles have highlighted how the industry has begun to change; they’ve talked about all the various targeting tags all over the commercial web that track interest and behavior. Users are noticing targeted ads, for better or worse. And the consumer response typically has been something along the lines of, “Who gave you the right?!”

Recently a friend of mine said that she had searched for a specific pair of shoes online, added them to the shopping cart of a website, and then decided to hold off on the purchase. For the next few days, she saw ads for that specific pair of shoes on numerous websites as she surfed across the web. She didn’t find this targeting of a relevant ad to be useful or “less annoying” than non-targeted ads. She found it creepy.

When I talk to people in our industry about the issues surrounding privacy and targeting, they frequently fall back on the defensive leg of providing consumers with more relevant advertising. They say that that once ads are more relevant, consumers will resent advertising less — that they might even like it. I’ve used these arguments myself in the past. The reality is that consumers would benefit from more relevant ads and might resent advertising less if the content of those ads matched better against their interests. But when we make them feel like someone is watching over their shoulders as they do things online, make no mistake — they resent it.

The example of Amazon.com comes up frequently in conversations around our industry. Amazon inherently shows products that match the kinds of things you’ve shopped for or purchased in the past. And often I’ve heard examples like, “When I go into a store and the shopkeeper recognizes me and makes a recommendation for me, I like it, and I begin to frequent this store more often because of the personalized service.”

But the reality is that this is a direct relationship that the consumer has with a specific merchant. It’s a one-on-one relationship that gives specific benefit and that has a clearly understood set of relationship rules. One colleague recently described behavioral targeting like this: “It’s like you are shopping in a store, and a guy in dark sunglasses and a trench coat is following you around and whispering into his watch. Then when you go into another store, he sidles up to the merchant and whispers in her ear that you were just shopping for negligee in another store down the street, and that you seem to prefer underwire cups.”

The reality of behavioral targeting is not far off from this example, and this seems to be missed by the marketing industry. Ultimately, consumers will decide what is and isn’t acceptable to them, and beware the marketing industry executives who believe they will make that decision on the consumer’s behalf. Now that people are relatively aware of the DR marketing practices in the traditional world, they are getting fed up with them in the online world, where they felt relatively anonymous and private. Consumers recognize that Amazon.com might know a lot about their purchase and shopping behavior while on that particular website; however, they would likely feel very uncomfortable if that data were then sold on the open market without their explicit permission to any advertiser willing to pay for it. Politicians have become aware of this growing consumer resentment, meaning that legislation is likely not far behind.

The online advertising industry isn’t wholly clueless, and many have been trying to come up with new approaches that they feel are less antagonistic to consumers, while still providing value to advertisers. In future articles, I’ll be exploring some of the ways that companies are thinking about the problem and beginning to address the issues.

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Fixing Online Advertising’s Privacy Woes

(Originally published in iMediaConnection, August 2010) by Eric Picard

Privacy is something I’ve been concerned about for some time when it comes to online advertising. John Hagel and Marc Singer’s excellent book “Net Worth” raised the issue in a significant way for me from a business perspective, way back in the ’90s, and Cory Doctorow’s recent novel “Little Brother” paints a bleak picture of what could happen to private citizens if privacy isn’t carefully guarded.

I raise this, of course, because of the recent Wall Street Journal and New York Times articles that have raised the specter of major privacy concerns because of the widespread tracking done by numerous parties in the online advertising space. I began worrying about the likelihood that targeting and privacy would begin to clash in a significant way back in 2004 when I started to understand what was going to happen with display advertising as we moved as an industry away from selling mainly context-based display ads and toward personalized, highly targeted audience-based display ads. And as we began moving toward automated buying systems and real-time bidding for ads based on audience attributes over the last five years, I knew we were in for it once again. From my point of view, it’s always been about when, not if, we were going to run into a consumer backlash against how much data we can (and do) collect in the online space.

Of course, the part that is a little ironic is that very detailed tracking of purchasing behavior and extrapolation of that behavior to other personal life stages and psychographic profiles (a process that is pretty accurate) of each person’s behavior has been common for decades via credit cards, financial services, and offline (traditional) targeting for direct marketing. And for the most part this hasn’t been widely reviled by the press, nor has it caused a consumer backlash against so-called massive mega-corporations with vast amounts of data about what we personally buy, do, and who we are.

Yes, it’s ironic that traditional marketing media have been tracking far more data than we can today online, and yes, it really could be interpreted that we are “less bad” than our traditional media cousins. However, this is not really a strong defensive statement, though it is still frequently stated by my colleagues in this industry. Perhaps only slightly less frequently than that other old nugget about consumers getting the benefit of “more relevant” or “personalized advertising” if they submit to being tracked for the purposes of selling targeted advertising against their anonymous profiles. This is, of course, only a statement I’ve ever heard espoused by folks in the online advertising industry — and not something consumers are consciously happy or excited about, nor something almost any consumer would react positively to.

It’s a bad meme — something we as an industry know to be true (after all, many magazines, as an example, are bought just as much to see the ads as read the articles. Think fashion, home improvement, and technology magazines if you disagree.) But that just isn’t a powerful message for consumers, and it is generally used by the press with some sarcasm to show how out of touch we are with consumers. And don’t get me wrong — I’ve made these statements myself. In fact, I was videotaped last year for a privacy-related video where I talk about targeting and online advertising — and I ultimately don’t get much beyond any of the arguments above in my short clip.

So, what is the issue here? Let’s look at some of the main questions being posed:

  • Should we be able to target ads based on tracking of anonymous user behavior? I believe so.
  • Is there significant chance of consumers being personally identified and something nefarious happening to them? Not today — although down the road, that could change as computing power gets much more advanced.
  • Do consumers get any value from targeting that we can use as a value proposition in educating them about these issues? Absolutely yes, but which messages we should use are not always clear.
  • Is the massive amount of data being tracked about consumer behavior a good thing or a bad thing? Well, that depends.

The advertising economy
When my parents were children in large working-class families in Massachusetts, it was a very big deal to have chicken for dinner. Chicken dinner was something their families typically had on Sunday — with a large family carefully dividing up a relatively small bird (by today’s standards.) Oranges might be available at certain times of year, but year-round access to all sorts of fresh vegetables and fruits was simply unheard of. And products in general were scarcer, relatively costlier, and were generally less affordable to large swaths of the population.

But with advances in supply chain management, modern manufacturing and farming techniques, and reduced transportation costs, the way the average modern family lives would be considered vastly wealthier and more privileged by the standards of my parents’ or grandparents’ generations.

As technology across all industries improves, we continue to see cost reductions in products and a wider variety of products due to general efficiencies and capabilities growing over time. And as media has fragmented, we’ve seen the costs and inefficiencies of marketing and advertising grow significantly as well. Targeting and personalization of marketing are mechanisms that help us rein in the growing costs and gain efficiency as well as effectiveness.

I have a core belief that I’d like to share with you. I believe that advertising is a fundamental driver of our economy. Advertising, as it so happens, actually works. Companies that advertise (especially those that do it well) sell more products and services. Those companies prosper, and hire more employees to work for them, thereby creating more jobs. And this virtuous cycle is very clear.

It is fairly well understood that watching the marketing spend of major corporations is a major predictor of the economy. When marketing spend drops, the economy soon drops as well. And it’s a leading indicator of a return to economic health — when marketing spend increases, the economy is on its way back to health. The question is: Which is driving which effect? Ultimately, I believe that advertising is both a predictor and a driver of the economy. It’s been shown repeatedly that those companies that increase marketing spend during an economic downturn generally do better during that downturn than competitors, and they tend to have incredible long-term advantage over competitors that decreased spend during the downturn. In some cases, this long-term advantage can create a market-leading company.

So when we talk about techniques for improving the effectiveness of advertising, like targeting, I get very excited. I believe there is incredible value to increasing the effectiveness, reducing inefficiency and increasing the amount of spending we do on advertising as a society. The overall increase in economic value from advertising is something I believe in. And one major way to increase the amount of spending done on advertising is to increase efficiency and decrease waste.

That’s where targeting and personalization of advertising are incredibly important. By showing ads to consumers that are relevant to them — and personalized to whatever possible degree — we can help advertisers hone their messages, spend money on reaching the audience interested in their products or services, and do it at scale. The positive impact of this isn’t well understood by most people — even many of those in our industry. Many parrot these words about “more relevant” advertising as if they are a shield to keep away the hounds of regulation. But there is a truth in this message that goes far beyond what is generally understood.

So — is this economic boom on its way? When will we feel its effects? Read on.

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In reality, even the most sophisticated systems we have for targeting and personalizing messages to consumers are pretty bad at it. Even if we knew literally every piece of information about a consumer that could possibly be used to deliver a targeted advertising experience, we couldn’t really do much with it today. Maybe publishers are able to charge a bit more for those ads that can be sold on a targeted basis. And maybe advertisers and agencies can bid higher in real-time for ads they know are going to be delivered to their target audience. But this is really just the beginning of a much more sophisticated advertising industry, and not a world where we can effectively reach an audience with the mythical “right ad at the right time in the right place.”

In a sense, the whole way we go about it is wrong. The surreptitious surveillance of the population in order to data-mine their online activity and build statistically driven models for how to deliver appropriate and relevant ads is possible to some extent today. As computing power grows over the next few years, it will become even more accurate and effective. And eventually the ad creative itself will become intelligent and customize itself to fine-tune the images, sounds, videos, and even the pitches to the individual consumer’s preferences. But doing this quietly in the background — hiding that it is being done — is perhaps destructive to the relationships businesses should be building with their customers.

Hagel and Singer raised this issue very effectively in “Net Worth.” Their prediction was that some entity would become an “infomediary,” building a set of tools and technologies that would allow the user to control what information is tracked about their behavior. This infomediary would enable the user to control which other entities would get access to this data, and perhaps even ensure that the consumer is paid for access to the data that enable better targeting of marketing. In other words, the infomediary would represent the consumer’s data to marketers on their behalf and share the proceeds with them. In 1999, this sounded like so much science fiction. And in a sense, it was. But we’re much closer to a world where this is possible — and desirable to both consumers and businesses.

So is the infomediary the only way to protect consumers?

No. There really isn’t anything shady going on here. While every industry will always have a few “bad actors” who try to game the system, the motivation for targeting marketing communications to potential and existing customers is self-evident value. Any company trying to sell its products must educate potential customers of the fact that its product exists (make them aware), educate them on the value proposition of that product (create purchase intent if it’s possible), and ultimately create demand for that product.

Some products are well suited to some consumers and ill suited to others. Enabling the kind of filtering that shows ads for adventure vacations to those who like to take them and quiet romantic beach vacations to those who are more likely to take them is an easy-to-understand motivation to most people. The concern is that something nefarious will be done with this data. People are concerned that, at best, some big faceless corporation will profit off of data collected on their customers. At worst, people fret that information that is sensitive or embarrassing would be used in a way that somehow affects the consumer.

And why shouldn’t people be worried that something bad will happen, or that they are being “used” by companies and taken advantage of?

Ultimately, we’re in a nice quiet moment where the technology is not yet advanced enough to have much happen — good or bad. While there is definitely a statistical advantage to having the data applied to marketing campaigns, the advantage is really just tightening up efficiencies for marketers at this point. But there’s little question in my mind that things will progress pretty quickly; within three to five years, much more sophisticated and effective technologies will exist.

I do think that the ad industry has a golden opportunity to self-regulate, and it’s also likely that some form of regulation will be applied to this space as well in the next few years. I’m personally not happy about this, as the nuance in how these technologies work is quite important. Heavy-handed regulations will stymie the development of this space at a time we can ill afford it.

An argument could be made that if a viable infomediary model were to arise, consumers could share in the revenue generated by it. But the reality is that we’re talking about a very small amount of money. On the individual consumer’s behalf, it’s probably not enough money to be meaningful. On the other hand, the impact that the data could have on advertising spending is significant, and the positive impact of this would be incredibly valuable to all consumers.

Before legislators begin jumping in and trying to “protect consumers” from this kind of technology, they should really understand what both the downside and upside of these technologies are likely to be. The downside is relatively painless, while the upside is potentially massive. There are great opportunities for this nascent industry to get momentum and really create a positive impact. But that will only happen if we as an industry are careful to avoid any perception of bad behavior in the way we track consumer behavior and target the delivery of ads.

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DSPs: What they really are and why you should care

(Originally published in iMediaConnection, May 2010) by Eric Picard

Recently on the Internet Oldtimers List, someone posted a link to a video mashup where someone had taken a clip from the movie “A Few Good Men” and replaced the famous “You can’t handle the truth!” dialogue between Nicholson and Cruise with a farcical semi-humorous debate about demand-side platforms (DSPs). What was interesting about this clip was that its central argument was that DSPs lower the CPM of premium publishers’ impressions (with Cruise arguing for the premium publisher and Nicholson arguing for the DSP).

The video is cute — pretty well done, and worth a view if you’re someone on the inside of this particular space online. But what really surprised me about it was that very few people seem to really understand what’s happening with DSPs in general — and there’s obviously misinformation going around. This particular debate about DSPs lowering the yield of publisher impressions was one I hadn’t heard articulated before.

So let’s get started digging into this by discussing what a demand-side platform really is. These advertiser/agency facing systems let buyers do self-service media buying from publishers; publisher aggregators (sometimes now being called sell-side platforms, or SSPs) like PubMatic, AdMeld, Rubicon, and others; and ad exchanges. The most important part of these mechanisms is that they enable real-time bidding against inventory on these sites. This is really important because in real-time bidding, the DSP can let the buyer specify business rules describing the value of impressions based on their audience attributes. That means the buyer can assign monetary value against specific audiences, and the DSP can bid on every impression in real time based on its actual value to the advertiser.

One reason real-time bidding is so valuable is that advertisers can bring multiple data sources to bear on the valuation problem. This would include the targeting attributes that the publisher lists about its own impressions, data attributes from third-party data providers like BlueKai and others, and most importantly, proprietary data that the advertiser owns about its own set of customers. Based on all these different targeting attributes, the buyer can assign various business rules that align the campaign goals against potential impressions, and the bids can be set against all the various providers of inventory.

The DSP then will begin bidding across the sell-side platforms, exchanges, and any publishers that directly support real-time bidding, and will automatically optimize the bids based on success and results. The result can be as simple as reaching 100,000 people that fit some specific criteria — or it could optimize across CPC or CPA. Real-time bidding is vastly superior to other mechanisms when it comes to ensuring that the advertiser gets the best ROI. But there are some issues.

I’ve heard from many of the DSPs that they are running out of real-time biddable inventory, meaning that their CPMs are rising because their supply is constrained. This might sound funny to those who fondly quote that there is unlimited supply of display inventory — but consider that there are short- and long-term factors driving this imbalance. In the short term, the sources for this type of inventory are still somewhat limited; even with the explosive growth we’re seeing in this category, there are not enough impressions available to satisfy demand. DSPs can still participate in non-real-time auctions in order to supplement impressions, but they lose the extra value they bring to the table when they can examine the impression before bidding.

Long term, there will be lots of impressions being made available. (In fact, I predict that most impressions will ultimately be made available in real-time.) But this real-time bidding world is all based on audience targeting — and the same users that Whole Foods wants to reach are also highly valuable to Best Buy and The Home Depot. This means that those impressions driven by highly desirable audiences will be a small percentage of the total number. But note: Although from a percentage perspective we’re talking small numbers, from a volume perspective that could still represent massive amounts of high bid-density inventory. Paid search impressions are a tiny fraction of display impressions today, yet drive half the revenue in online advertising. This could change significantly if we can drive enough bid density on a small fraction of display inventory that represents valuable audiences.

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I have heard some premium publisher folks state concerns that there could be issues with real-time bidding on display inventory due to asymmetric bidding and low bid density. Consider the following example that illustrates how low bid density (leading to asymmetric bids) could be a problem in the future as more impressions become available for real-time bidding. I’ll make it unrealistically simple to illustrate the issue:

An impression shows up for bid. It has the following attributes:

  1. Male
  2. 34 years old
  3. Greater than $150,000 income
  4. Chicago DMA
  5. New parent
  6. Auto shopper
  7. Jewelry shopper
  8. Health club member
  9. Impression is 300×250 pixels
  10. Site category is entertainment

Four advertisers participate in the auction:

Advertiser 1: Pampers — knows nothing extra

Advertiser 2: Ford — knows user owns a BMW and has been shopping for Land Rovers through proprietary data deals

Advertiser 3: Zales — has existing customer data that shows this is an inactive customer, a high spender in past who bought an engagement ring three years ago

Advertiser 4: An independent Chicago diaper service — knows nothing extra

The bidding follows like this:

Pampers bids $1 CPM.

Ford bids $5 CPM — it knows it has a low likelihood of converting this profile, so it doesn’t bid very high.

Zales bids $40 CPM — it knows that this customer bought his engagement ring at Zales three years ago, and given the new parent status, he is likely to be open to buying an expensive Mother’s Day present.

The Chicago diaper service bids $10 CPM based on simple CPA optimization.

Because this is a second price auction, Zales will win, but only pay $10 CPM for the impression. In this simple example, that might not seem too bad. But in reality, it should be possible for the publisher to predict that this impression, based on past bids on similar impressions, would sell for much higher than $5 CPM. So the publisher has not gotten the maximum yield it could have gotten based on the auction it had in play.

In the future, I predict that publishers will make use of yield optimization technology to fix this problem. The publisher should be setting a floor price on a per-impression basis based on its prediction of value to the advertisers in the marketplace. The publisher probably could have comfortably set a floor price that would have given it a higher yield (e.g., set the price at $12 or even $20 CPM based on historical trends for this type of impression and the current bidders in the auction). But this is a very hard technology problem to solve.

In paid search, we’ve seen high bid density drive very high CPMs on highly desirable keywords within the auction. And where the bid density is lower, we’ve frequently seen lower CPMs. Essentially, bid density refers to how many participants within an auction are bidding over the same item. In paid search, overall this hasn’t been a problem — mostly because there are “single digit” millions of commercially viable keywords, and about half a million advertisers competing over them. This leads to pretty good distribution, with some keywords getting lots of competition, and some getting very little — and overall the average yield being very high for the search engine. It’s a supply and demand problem for the most part.

But in online display advertising, there are trillions of display impressions a month with fewer than 10,000 advertisers (at least, in the world we live in today), with most dollars being spent in the U.S. coming from fewer than 3,000 advertisers. Further, the role of agencies could significantly change under this new set of mechanisms. There’s no reason that an agency using a DSP couldn’t withhold bids from its stable of advertisers so that only the top bid available for any advertiser for each impression would be placed. From a bid density perspective, this could be damaging without the kind of yield optimization I mentioned above and the creation of competition between multiple advertisers that normally wouldn’t have competed in the past. But there are still things that could drive lower bid density and lower publisher yield.

For instance: In an extreme world, each agency holding company could have its own DSP, and each of these would offer only one bid per impression as it reviewed the available targeting parameters and determined — based on each advertiser’s business rules — which of their campaigns would have the highest bid. In other words, each DSP could run an internal auction prior to placing a bid in the publisher-facing system. That would reduce the density of the auction on the publisher side significantly, causing the publisher to reduce yield. But it does require significant process change from how things are done today.

In the end, I think publishers would be foolish to worry too much here. It’s likely that their highest value impressions are going to go way up in yield, even if they see a drop on the rest of their impressions. And at the least, those two things should make up for each other. At the best, this could drive average yield higher in online display than we’ve ever seen before.

The secret media-buying revolution

(Originally published in iMediaConnection, November 2009) by Eric Picard

While you were going about your day-to-day business over the past year, the world changed, and you didn’t realize it. Everything you think you know is simply wrong. I’ve been predicting this change for years, I’ve spoken about it at conferences, and I’ve written articles predicting that this change was coming. But even I didn’t realize it had happened.

Last week, at the ad:tech New York conference, keynoter Sir Martin Sorrell, chief executive at WPP, talked about the massive oversupply of manufacturing capacity in every manufacturing category, in every market in the world. And he succinctly pointed out that another way to describe this oversupply of products was a shortage of customers. This hit me hard. Although the whole market has been talking for months about the vast (some even have said unlimited) over-supply of impressions, the reality is that there is a vast shortage of opportunities to expose advertising messages to actual potential customers. The glut of impressions is a glut of low value impressions — impressions that don’t get the message in front of the right person to achieve the campaign objectives. I thought about this for the rest of the day. It was like getting tapped in the nose with a series of quick jabs. Thwap, thwap, thwap.

Later at ad:tech, Quentin George, chief digital officer of Interpublic Group’s Mediabrands, sat on the panel “The Rise of the Audience Marketplace.” He followed up Sorrell’s eye-opening remarks with a few more taps on the nose. Thwap, thwap. He articulated much the same message as Sir Martin, but then added this: “In a world with such massive overcapacity, the only way for companies to differentiate and capture a disproportionate share of dollars is through building a brand.” It was the follow-up — the second half of a one-two punch — that just about knocked me flat.

What really caught me off-guard with this revelation was something I’ve understood intuitively, but hadn’t crystallized for me yet. These new models are not just about direct response buying of cheap remnant inventory based on CPA calculations. The opportunity is much bigger than this. It’s about everything: every methodology, every type of inventory — every type of objective. We’ll be able to measure brand effectiveness, target ads to audiences, and pay for reach as well as for performance. We’re witnessing a radical shift in an industry worth hundreds of billions of dollars — and most people haven’t even realized it yet.

On the panel, George spoke mostly about Cadreon, the new-model agency that IPG has rolled out on top of the various ad exchanges — which competes with Publicis Groupe’s VivaKi, among others. He talked about how efficiency and effectiveness has been improved between four and 10 times on campaigns run across the exchanges in this new model, and that the demand among the IPG agencies worldwide was immense. “If I don’t roll this out in the next six months in China, I’m going to be in trouble,” George said. He also described the complexities of this, given the lack of standards in formats and provisioning across each market.

In a brief conversation with my friend Dave Smith, CEO of San Francisco-based Mediasmith, he talked about his agency’s experiences in investing in these new models for buying, and expressed a deep excitement about how quickly and completely this was already changing things. Smith is the original innovator in our space — he’s been applying technology to the problem of media buying in more innovative, sophisticated, and effective ways for longer than anyone else out there. Thwap.

Also while at ad:tech, I sat with Joe Zawadzki, CEO of New York-based MediaMath, one of the new so-called “demand-side platforms” or “demand-side buying systems.” He talked about his company’s technology investments and the way that MediaMath is extending its system to support buying in every marketplace it can get access to. He talked about efficiency and effectiveness. We talked about the ability of these systems to bid in real time on every impression, about how the technology was going to change the face of the ad ecosystem. Thwap, thwap, thwap. Zawadzki has been at this for a long time now, as he was one of the founders of [x+1], now one of his competitors in this space.

Prior to attending ad:tech, I spoke with Brian O’Kelley, CEO of AppNexus, another player in this space. Like Zawadzki, O’Kelley is one of the early players in this space; he was a cofounder and CTO of Right Media. We talked about the advances in bidding mechanisms, the massive scale that this new segment of the industry is going to need to support, and how AppNexus was building applications to support this, as well as plumbing and infrastructure that he hopes the rest of the companies in the space come to rely upon. Thwap.

Up on the stage of the ad:tech panel, alongside Quentin George, Bill Demas, CEO of Turn, spoke about the differences in the way the market is currently working from more “traditional” online display ad buys. He talked about how the inventory that the players in this space have access to currently is “non-premium” inventory — that for now, at least, the premium inventory is still being represented by human sales forces. He also noted that media buyers and agencies are still negotiating on guaranteed buys, and he talked about how this new medium is primarily about discounts on the inventory.

But the panel was quick to point out that this idea of “premium inventory” was a relative concept. While brands certainly care about running ads alongside content that is of a premium nature, the quality of an audience is not qualified by this alone. While Demas talked about the discounts that advertisers are getting on inventory purchased this way today (since there is a disparity between those bidding on the high quality inventory that is “lying fallow” on sites today), I believe there is another dynamic that will play out.

Much like the early participants in the various paid search marketplaces were able to find incredible bargains on keyword buys due to a lack of competition, these early participants in these online display marketplaces are finding steep discounts on highly targeted audiences. But this is bound to change. George raised this issue specifically, pointing out that advertisers are more than willing to pay a fair price to get their messages in front of valuable audiences and reward publishers for attracting them. But the difference is that only the impressions created by valuable audiences would be rewarded in a world where every impression could be analyzed and bid upon in real time.

This does beg the question of what value premium versus non-premium publishers would provide to the market. One interpretation of all this is that The New York Times is only as valuable as the individual audiences it represents — and that the same users reading a blog would be monetized the same way.

I have my own theory on this. I believe that valuable audiences are going to drive high eCPMs, regardless of the publisher. Combining high-value audiences with high-quality content will drive that price up even higher. And impressions that contain fewer targeting parameters will drop in value. But I believe that untargeted impressions on non-premium publishers will become almost completely worthless in this world.

This bodes very well for premium publishers, which will get ultra-high eCPMs on their most highly targeted impressions of quantifiably valuable audiences. They will get lower, but still respectable eCPMs on their less qualified impressions that are still associated with high-quality browsing experiences. It’s the lower quality content — the UGC and impression 15-1,000 in an online photo gallery on a social networking site — that is going to take a hit on a blended eCPM basis. The hope is that some small portion of their impressions will cover a valuable enough audience that they’ll still monetize effectively.

Now don’t get me wrong. It’s going to take years for the industry to shift to this new model. Agencies will continue to hire armies of liberal arts majors for the foreseeable future and arm them with massive budgets and negotiating power. And publishers will still hire armies of salespeople to answer the RFPs and buy drinks, dinners, and golf games for the buyers. But I’ll officially call the fight at this point. Thud!

While we were going about our day-to-day, this new model has been playing rope-a-dope with us and is winding up for a haymaker. Ignore this message at your peril. Ding, ding, ding!

Facebook’s frighteningly impressive ad potential

(Originally published in iMediaConnection, September 11, 2009) by Eric Picard

I’m pretty active on Facebook. I check my account at least once per day, and I frequently will fill downtime by reading through my friends’ status updates on my phone. I find Facebook to be a brilliant and incredibly useful tool. It has reconnected me with old friends, given me a closer relationship with relatives who live far away, and helped create a closer, more personal relationship with many of my professional colleagues. And the amount of data that Facebook stewards for me is both impressive and scary.

In 10 years, Facebook will know what an entire generation’s boyfriends, girlfriends, spouses, and children look like. It will not only have a map of the social graph and deeply understand the relationships between people across the world, but it will also know what things they like, what companies they’ve worked for, and, in many cases, minutiae of value to advertisers — such as what products they’ve owned.

And despite the relative quiet around what Facebook is doing in advertising, the network has created one of the most powerful and elegant advertising tools I’ve seen so far. For the past six months, I’ve been telling people in almost every advertising discussion I’ve had that they should go and create an ad on Facebook. The process is a revelation.

The buying process inherently involves targeting. Keyword targeting is only one method used — and not required. Ads can be targeted not only to geography and demographics, but also according to workplaces, relationship status, and even ads shown on people’s birthdays. The tool implicitly gives you an estimate of the audience size you could potentially reach. And as an advertiser, I can’t imagine a buying scenario where I’d trust the estimate more. In a city like Seattle, which has numerous technology companies, an advertiser could even build offers specifically to employees of specific technology companies.

Recently I saw an ad from a guy who was trying to find a job in marketing at Microsoft (I work at Microsoft). His ad had a picture of him, a brief background, and a goal for what kind of job he was looking for. And it linked to his profile. Now, I must admit that I had mixed feelings about this ad, but I was also impressed at his chutzpah and also by the simple fact that it was possible to do this.

Scott Tomlin is a colleague of mine who owns a comic book store here in Seattle called Comics Dungeon, and we’ve chatted repeatedly about the difficulty he has as a local small business owner with advertising online. This is despite the fact that he has worked as a software engineer on advertising platforms for the past six years, and knows quite a lot about advertising.

Unfortunately the lessons of national advertising don’t apply very well to his local small business. He’s tried all the “usual suspects” in traditional media, but has really pushed hard on the idea of advertising online, especially given his main career. And he has had a hard slog of it — with the exception of his efforts on Facebook.

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Scott’s main push with online advertising has been selling subscriptions to comic books, and while he’s a local business, customers of his subscription service are spread across the U.S. The main reason he focused here is that he can justify the relatively high acquisition costs for a subscription customer, rather than just driving in foot traffic. And his acquisition costs with online advertising have been high — especially via paid search.

As I mentioned, the one shining ray of hope he’s had is Facebook. With Facebook, he can target so incredibly well that he can get his ad in front of folks he could never reach using other methods. He walked me through some of the campaigns he’s running on Facebook right now, and the results were pretty impressive. With Facebook he’s been able to branch out beyond his subscription sales and effectively target local customers to bring traffic into his store. And with Facebook’s features for hosting events, he’s found a very powerful tool to bring potentially high value customers from around the region into his store.

Unlike a national advertiser, as a small business, it’s in Scott’s best interest to spend some time honing his campaign to address incredibly small micro-targeted audiences — audiences that would be too much work and too tiny for a big advertiser to bother with. He showed me one campaign he’s been running to promote an event at his store. With the five targeting parameters he’d assigned to the campaign, his estimated audience was only 620 people. But he had more than 40 clicks on this campaign and, at last check, had 24 people who had signed up to participate — using Facebook’s event promotion tools. It is this integration of incredibly rich targeting with tools specifically available for individuals, organizations, and companies that make Facebook so incredibly valuable from a small local businesses standpoint.

I first recognized this power when I happened to notice an ad for a local Vietnamese restaurant called Monsoon East on my Facebook homepage. I still don’t know if Facebook was somehow able to glean that I love Vietnamese food, or if the ad just targeted me as a local. But what really grabbed my attention was not the ad itself, but what happened when I clicked on it. The ad didn’t link me through to the restaurant’s website. It brought me to a group page for the restaurant. My first thought was, “Oh — smart — it’s providing a landing page for local advertisers so they don’t need a website.” But then I saw that Monsoon East did, in fact, have a website — and after a bit of clicking, I realized that the restaurant actually has one hell of a website. It’s elegant, beautifully designed, and a fantastic site for a local restaurant. At first I was baffled as to why Monsoon East didn’t link to its website, but I quickly realized that its group fan page is brilliant.

This was a fan page with concise, relevant information that told me about why I might like the place, and then the magical “bit at the end” — the members’ list and discussion board. Monsoon East currently has 109 members on its group page, mostly filled with young, good looking, active-lifestyle (judging by their profile pictures) people. Despite my cynical ad-pundit view of advertising, I thought, “This looks like the kind of place I might like.” Just that they had 109 members on their fan page made this restaurant much more legitimate to me (as a consumer). And that’s powerful.

So kudos to a savvy set of local entrepreneurs who are unleashing the power of social networking to promote their businesses. I think we all have something to learn from them.

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5 reasons Twitter simply doesn’t matter

(Originally published in iMediaConnection, August 2009) by Eric Picard

Over the course of the last few weeks I’ve had about a dozen conversations with people about Twitter. People’s feelings range from gushing love of the 140 character medium, to disdain for the narcissistic tweeters among the digerati who simply won’t shut up.

I don’t have any particular beef myself with Twitter, and I’m as jacked in, connected, and narcissistic as the next guy. But much of the conversation about Twitter is incestuous and “insider-ish.” There’s a bit of haughty staring down the nose at the unwashed masses who aren’t tweeting — as if those who don’t tweet are simply showing that they have nothing to say.

And of course this week, discussing the denial-of-service attacks against Twitter has been all the rage. Which is to say that when you don’t have a vehicle to talk about nothing — or should I say, to tweet and re-tweet the nothing that is being tweeted — folks are tweeting about not being able to tweet.

A lot has been said about the power of micro-communi-blogging, or whatever category of the week that Twitter sits within. And as a communications tool, while I personally find it unwieldy and a bit untargeted, I’m nothing but respectful of those who get value out of Twitter. Shelly Palmer, for instance, is full of ways he’s gathering value out of Twitter. He said recently that by simply tweeting that he was thinking about dinner, he immediately had a readymade dinner party without having to make a single phone call or send a single email. Or should I have said, rt: @shelly_palmer?

More power to folks who find this to be a powerful medium for communications. But have you noticed that, for the most part, the people who are “power-tweeters” are either professional writers, or are using Twitter for personal PR?

Here are the reasons the buzz surrounding Twitter is a lot of hype.

1. Twitter is a recursive conversation among individuals who are promoting their own careers.

Not participating doesn’t hurt you. In some ways, it will help you if the folks you’re trying to impress are not part of the twit-clique. There’s nothing like mutually being on the outside to solidify a relationship with an interviewer or potential client than showing your anti-Twitter camaraderie. Because goodness knows that anyone who has chosen not to tweet at this point is resentful and annoyed by all the Twitter hype. And if you’re not an idiot, you’ll have already made certain that the person you’re meeting with is not an avid tweeter — because, well, that’s quite an easy thing to verify. And for the small part of the population that is hooked on the newest form of crackberry, stroking their ego is as easy as “following” them.

2. Signing up to follow someone on Twitter is easy and painless (especially if you never check your account).

Twitter is mostly about making the folks who are tweeting feel important and loved. Not to say that I don’t love them all already. But if all I need to do is simply sign up to follow them on Twitter, what a marvelously easy thing it is to make them feel better about themselves. And of course, when someone looks me up and sees that I’m following the “who’s who” of the online advertising digerati, I look both connected and very important. Oh, and I am, baby, I am — it’s how I roll.

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3. Nobody can really follow what the hell’s going on anyway — who can read all that crap?

It’s really easy to say that you follow along on Twitter. But it’s way worse of a time-suck than email. I get about 300-500 email messages a day. Most need to be scanned or read, and about 100 of them need to be responded to or handled one way or another. I also try to read the top-of-mind industry news every day — that’s about 10-20 “must read” articles.

Last week I wrote more than 150 emails. And when I went through them (I am just that kind of geek), most of them are a few paragraphs at least. About a dozen of them are several printed pages. Plus I wrote several long documents last week. Oh — and I actually did work. Who has time to tweet?

And of course there’s the blogs of my favorite people, and my Facebook account — where I’ve shut off most of the feeds from Twitter (sorry FB friends) because I just don’t care about reading updates from whatever talk, conference, or luncheon most of my industry friends are attending. I prefer to find out what my friends are up to on Facebook — not read unedited input from my reporter friends while they’re sitting in a session at “advertising show of the week.” I’d rather read their edited article the next day, or their blog posting that night.

And there’s always my recent and growing love of Kodu on the Xbox 360 to suck away my free time.

4. Most of the professional tweeters are not writing their own stuff anyway.

Come on… you know better, don’t you? You really think all these CEOs, VPs, and entrepreneurs are writing their own tweets? Really? Yeah — and they really write all their own trade articles too. Honest.

Why do you think all the PR folks love Twitter? Just like blogging, it’s been a huge shot in the arm to the PR industry. If you have to be up to date, always responding, and seemingly always “in the know,” the only way to do that — and earn your executive salary — is to pay your PR firm to tweet for you. (Disclaimer: I write all my own articles — and I write all my own tweets.)

Yes, there are some seeming superhumans out there who manage to run their own companies, post on numerous mailing lists, tweet all over the place, write a blog, post on Facebook, spend time with the family, and have a garden (Yes, I’m talking about you, @thespos1Hespos.com,@_marketingLLC). But for the rest of us, it just doesn’t work that way.

5. It’s the future of communications!

In 20 years, we’ll find Twitter right alongside the CB radio and personal blogs. Well — maybe not personal blogs, but…

Despite my tongue-in-cheek commentary above, I actually do use Twitter — and I do find it to be an amazing communications tool. But I will say that the hype is a bit, well, hyper. Twitter is a communications tool like many others. And it’s a new type of tool that has incredible network effects. While it is popular, the value of Twitter is incredible. The more people who use it, the more valuable it is. But whether Twitter is the CB radio of our decade — or the next form of IM and email, but for broadcasting to the masses — is entirely uncertain. It will only remain as valuable as the number of people who really read it (or at least mine it and use analytics to tap into the mass-mind.)

Oh — and you can follow me at @ericpicard. I’m really active on the tweeter.