Monthly Archives: November 2013

Nov 20 2013
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Ad Ecosystem, Marketers, Media Agencies, Online Media, Publishers

The fundamental disconnect between buyers and sellers

By Eric Picard (Originally Published on iMedia – November 20, 2013)

If we break down the way that buyers and sellers view the world from an advertising perspective, the buyer wants to reach a specific audience on quality publications. And the seller wants to sell as much inventory as possible at the highest price.

To these ends, each party has built their own set of processes, technologies, and methodologies. Historically, media buyers would come up with a plan for reaching ideal target audiences, identify publishers that match brand goals and have access to the target audiences, and then send RFPs over to those publishers. Once buyers passed along the RFP, control was largely out of their hands. Buyers could say yes or no to things, they could ask for clarification, and they could negotiate price. But the control over exactly which audience they reach or what pages their ads land on have not been in their control. That has reverted back to the publisher’s sales, account, and operations teams.

Publisher sales organizations, meanwhile, have spent an immense amount of time and effort coming up with methods of “packaging” inventory to ensure the most sales, at the highest price. They have created significantly complex packages — with combinations of highly desirable and aligned inventory to an RFP — with less aligned and less desirable inventory that they require the buyer to take in order to get the inventory they really want.

In conversations with media buyers, I’ve been told that they see their job as “forcing publishers to blow up packages and unbundle the bad stuff from the good stuff.” This tension between buyer and seller can be quite intense — because their goals are generally not seen as aligned. There is a problem of “information asymmetry” in this world, meaning that publishers have all the information about both the buyer’s goals and the publisher’s own inventory and audiences. Ultimately they package that inventory without much input from the buyer other than the original RFP and media plan. Buyers have very little information in this world and rely on the publisher to interpret the buyer’s goals properly and to deliver what they’ve agreed to.

Over in RTB land, media buyers have much more control. In this world, the “information asymmetry” goes in the other direction. Within a DSP or other buying tool, the media buyers specify the audiences they want to reach and the kinds of inventory that are acceptable — even down to creation of a white list of which publishers are acceptable. They use inventory quality vendors, verification vendors, data providers, and all sorts of techniques to gain control over the buying process.

In this world, publishers add very little value (basically none) to the buying process, and they exist with absolute data asymmetry. Not only do they not know why their inventory is being bought (they don’t get an RFP or media plan), but they also often don’t even know who is buying their inventory. They maintain very little control over the selling process in this circumstance, which rightly makes them nervous about RTB.

As the technologies and markets evolve, a new process needs to be developed where publishers and buyers can collaborate. This process must allow publishers to gain insight into the goals of the buyers such that they can make good decisions about where to invest in building content — content that attracts the kinds of audiences that buyers want to reach. And buyers need access to data that publishers have about their audiences (which they don’t normally make available to generic ad exchange buys) that can be bound together with inventory via private exchanges or even programmatic direct technologies. So between the buyer and the seller, we can come together with a strong handshake that drives the right kind of symmetry of information — one that drives the right business outcomes for everyone involved.

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Nov 05 2013
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Ad Ecosystem, Ad Technology, Economics, Marketers, Online Media, Predictions, Publishers

Enterprise Adoption Of Ad Tech Will Supercharge The Market

By Eric Picard (Originally published on AdExchanger 11/5/2013)

The appetite for ad technology is just beginning to appeal to new markets in new ways. Expect to see significant growth in the sector over the next five years as marketers and large publishers invest significantly in technology at a scale we’ve never seen.

The context for this shift: Ad technology is moving from a marketing or sales and operations expense to an enterprise-level IT investment. We’re now seeing very significant interest in this space by CIOs and CTOs at major corporations – beyond what we’ve seen in the past, which mainly came from the “digital native” companies, such as Google, eBay, Amazon, Yahoo, Facebook and Microsoft. Now this is becoming much more mainstream.

Historically, digital media was a very small percentage of advertising spending for large advertisers, and a small percentage of revenue for large, traditional media publishers.  But in the last two years, we have passed the tipping point. Let’s handle the two areas separately – starting with the marketer.

Marketers

First, let’s call the marketer by a slightly different name: the enterprise.

Large corporations, or enterprises, have invested massive amounts of money in IT over the last 30 years. Every major function within the enterprise has been through this treatment – from HR to supply chain, finance, procurement and sales to internally driven traditional direct marketing (the intersection of CRM and direct-marketing channels, such as mailing lists and even email marketing).

The great outlier here has been the lack of investment in advertising, which mainly has been driven by the fact that advertising is managed for the most part by agencies. Most marketing departments have allowed their media agency partners to take on the onus of sorting out how to effectively and efficiently spend their marketing budgets. And up until the past few years, digital marketing was a small percentage of spending for most major marketers.

Since there really hasn’t been much value in investing in advertising technology at the enterprise level for marketers on the traditional side, there was little driving change here. But as the percentage of the marketing budget on digital advertising has grown, and as the value of corporate data to digital advertising has grown, a significant shift in thinking has taken place.

Now we’ve got a way, through the RTB infrastructure – and, ultimately, through all infrastructure in the space – to apply the petabytes of corporate data that these companies own to drive digital advertising right down to the impression level. And we have mature infrastructures, bidders, delivery systems, third-party data and data pipelines,and mature technology vendors that can act on all this. None of this existed five years ago at scale.

Publishers

Just as the large marketers are enterprises, so are the large media companies that own the various online and offline publications that create advertising opportunities.

Until the last few years, the very largest of the traditional publishing conglomerates were still not paying much attention to digital media since it was a tiny fraction of overall revenue. But over the last few years there has been a significant shift as executives finally realized that despite the lack of revenue from digital as a channel, from a distribution standpoint, digital media is experiencing explosive growth. And ultimately all the traditional distribution channels – from print to television to radio – are all being subsumed into the digital channel.

You need to look no further than the people who have been hired into the major media companies in the last few years with titles like VP of revenue platforms, GM of programmatic and trading, director of programmatic advertising and VP of yield operations. These senior positions didn’t exist at these companies two years ago, and generally were areas reserved within the digital natives.

The fact that we’re seeing new focus on digital media, with both senior roles and significant investments in people and technology, means that we’re likely to see additional significant investment by these media enterprises over the next few years. I expect to see the shift happen here quickly since the consulting companies upon which they and most enterprises rely to lead these initiatives already have media and entertainment practices.

Suddenly major advertisers and publishers – who are all major enterprises – are looking at the opportunity to apply their significant IT expertise to marketing in a new way. So let’s talk about the way that IT evolved in other channels historically to try to understand what’s about to happen here.

The Evolution Of IT

A major corporation will typically hire large consulting firms with a vertical practice in the area they want to modernize. Note that the biggest consulting firms – we’ll use IBM and Accenture as examples here – have developed vertical practices around nearly every department, large initiative or focus area within an enterprise. Also note that wherever these consulting firms step in to build a practice, they assemble a recommended “stack” of technologies that can be integrated together and create a customized solution for the enterprise. One interesting thing: In nearly every case, there are significant open-source software components that are used within these “stacks” of technology.

When we look carefully at where they’ve developed practices that smell anything like marketing, they’re typically assembled around big data and analytics. There are obvious synergies between all the other vertical practices they’ve created and the intersection of using big data to inform marketing decisions with analytics, based on detailed analysis of other corporate data. So this isn’t a surprise. It also isn’t shocking that there are many major open-source software initiatives around big data, ranging from staples such as Hadoop to startups like MongoDB.

But nowhere in the digital advertising landscape do we see major open source initiatives. Instead we see the massively complex Lumascape ecosystem map, with hundreds of companies in it.

So when we look at the shift to enterprise IT for digital marketing, there are plenty of companies to plug into a “stack” of technologies and build a practice around. But there is very little in the way of open source, and no clear way to actually bind together all the vendors into a cohesive stack that can be used in a repeatable and scalable fashion.

We are seeing some significant consulting firms come into existence in this space, including Unbound Company and 614 Group. I’m certain we’ll see the big players enter the fray as they sniff out opportunity.