Category Archives: Ad Ecosystem

Mar 03 2012
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Ad Ecosystem

How to Succeed in Emerging Media

(Originally published in ClickZ, May 2006) by Eric Picard

I’ve been working with emerging media my whole career, since I began working with ad agencies in grad school. I helped them learn how to shift from print to CD-ROM design in the early ’90s. As I started working on the technology side, I learned an immense amount about how to bring a new advertising technology to market — and how not to. So this column will focus on some of the standard mistakes I see when companies in emerging advertising categories try to build their businesses.

Agencies Are Not the Enemy

Advertising technology companies look at the advertising industry value chain and think the best approach to creating value is to cut advertising agencies out of the loop. At the very least, they think they’ll have more success dealing directly an advertiser’s own marketing team. At the other end of that spectrum, they believe they can create corporate value by disenfranchising ad agencies.

But agencies have proven impossible to disintermediate. Advertisers hire an agency because they provide a service that’s very complex to manage in-house. Most companies have a very strong relationship with their agency, so much so that when a CMO or marketing VP switches companies, she typically brings “her” agency along with her.

When an emerging media company approaches a marketer, it’s typically given a meeting. It’s usually sexy stuff, after all. But after the meeting, the marketer invariably tells the company the next step is to meet with his agency.

How much do you want to bet an agency account director or media director who gets a call from a zealous sales rep at an emerging media tech company is happy and excited to work with them — after they find out they’ve been gone around? Agencies feel it’s their job to present new opportunities to the advertiser. They tend to be angered about situations in which they’re not able to do this.

At the same time, agencies are notorious for their slowness to respond to emerging media. I can’t tell you how many times I’ve arrived at an agency for a three-person meeting to show off a hot new technology and 50 people show up. Despite this, you wait months for the first test, then months more before a second test is run. In cases where I’ve seen tech companies count on agencies alone to bring their product to the market, the ramp time is very, very long.

So what to do? Go around agencies and you alienate them. Rely on agencies alone and you have a long ramp time. My goodness — the answer’s so simple, I’m almost embarrassed to tell you.

Advertising.

If you’re an advertising technology startup and you’re debuting a hot new technology that’s supposed to be very effective, you may want to consider doing some trade marketing. Oh, and some PR, too.

Almost all ad technology startups fail to spend any money on advertising at all within their own trade journals. You may also want to do some PR work and perhaps sponsor a (professional-looking) booth at some trade shows.

And you may want to consider hiring a team of agency relations people who speak an agency’s language. Frankly, you’re in serious trouble if you don’t.

Format Differentiation Is Not a Winning Strategy

Let’s look at the rich media ad space for a moment. Every online rich media company started with its own unique ad format. Bluestreak had the expanding ad and video ads. Unicast had the Superstitial, a branded interstitial. Eyeblaster had the floating ad. The Comet Cursor had a customizable cursor.

Are any of those formats still unique to the companies they began with (if they even survived)? Nope. Every single category soon had three other companies offering the same thing. Now that rich media advertising has matured, every one of the companies still standing offers virtually identical ad formats as their competitors. All of them spent years of fruitless labor getting every publisher to accept their unique implementations of a new format.

The same will happen to any company in every new category that tries to differentiate itself by having “such a cool ad format, everyone will want to use it.” The formats may be cool, but unless an advertiser can buy a significant amount of inventory you won’t get any traction.

So it’s another chicken-and-egg problem. How do you achieve adoption across publishers (giving you inventory an agency can buy), while getting agencies to use your company’s stuff? And if you can’t differentiate on format, what should you differentiate on?

Counting Methodology Is Not a Point of Differentiation

Methods of counting impressions in emerging media aren’t a place to compete. Organizations do this work; talk to the Interactive Advertising Bureau (IAB) and the Media Rating Council (MRC). Get involved with your competitors, and don’t believe the way you count an impression is how you can buck the trends.

This will be played out very soon in video-game advertising. Every company in this space counts impressions differently. That doesn’t work, and the IAB and MRC will likely get involved to help sort it out.

Honor the Ecosystem and Honest-to-Goodness Business Sense

Stop trying to disintermediate everyone. If you must fight, pick someone you can beat. Find critical alignment by determining where your value proposition aligns with companies you must work with. If you’re going to battle a category player, learn where the rest of the ecosystem is in turmoil. Solve that problem. Be the pain reliever.

If you require your technology to be adopted across enough publishers to provide access to a critical inventory mass, the publisher has to sell your ads, or at least some of them. If agencies are the ones buying your ads, you may want to make it easy for them. PointRoll did a great job of this by making its ads available from major publishers at no additional costs. There was also a perfect market condition that allowed this to happen. Essentially, the publishers offering this deal held rate cards on their ads at a time when no agency paid anything close to the rate card.

But there are always angles to play.

Businesses succeed not because they have a gimmick or extremely cool technology that doesn’t solve a real business problem. They succeed because they offer real value. Some tips for building that value:

  • Find the market’s pain points and build solutions to address them. Don’t assume the pain point is the ad format. That’s a hook, not a winning strategy.
  • Look carefully at the ecosystem you work in. Map it out and determine where the power lies. If you can find a point in the value chain that’s ripe for disruption, test your theory. But be sure you can compete with the one you hope to disintermediate.
  • Build a very strong client services team. If you don’t provide good customer service and technical support, you may as well forget it. Acquisitions typically have more to do with customer relationships than technology, or at least equal importance.
  • Work with competitors in these emerging categories. Your real competition is the absence of your business model in the marketplace. Without one or two strong competitors to help share the burden of building a new market, you’re in more trouble than you realize. Embrace your competitors, and keep them close. They’re more with you than against you.
Mar 03 2012
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Ad Ecosystem

Interpreting the IAB Measurement Guidelines

(Originally published in ClickZ, February 2005) by Eric Picard

On November 15, 2004, the Interactive Advertising Bureau (IAB), American Association of Advertising Agencies (AAAA), Media Rating Council (MRC), Association of National Advertisers (ANA), World Federation of Advertisers (WFA), and numerous other industry organizations released new global measurement standards for online advertising. I was part of the Measurement Guidelines Task Forcethat established these standards, so I have a unique perspective on them.

There’s been a lot of misunderstanding around the measurement guidelines. Let’s start with the official name: “Interactive Audience Measurement and Advertising Campaign Reporting and Audit Guidelines.” It’s a mouthful, but it’s important to understand what the document aims to accomplish.

The document sets standards for audience measurement in online ad campaigns and for ad campaign reporting. It also establishes auditing guidelines for how various vendors and publishers should be audited, both to ensure everyone is doing things properly and to reduce discrepancies between publishers and third parties.

This all started because of Adam Gerber, who at the time chaired the AAAA’s Interactive Marketing & New Media Committee. Gerber was trying to resolve one of the industry’s biggest issues: constant discrepancies between publishers and third-party ad servers. This problem leads to significant work on all sides and has a huge affect on internal accounting processes because of the procurement guidelines most major advertisers are required to follow.

One of the first things this document tackles is the oft-disputed definition of an ad impression. It’s amazing it took so many years to establish the definition of our currency, but it’s now accomplished. Next, the document establishes the appropriate methods of counting impressions for publishers and third-party ad servers and a few related things, such as caching and robot and spider filtering.

The measurement guidelines require third-party ad servers and publishers to be audited. It defines the audit process. The guidelines also recommend which set of numbers to use if one party isn’t audited: if the third party is audited and the publisher isn’t, the third-party numbers should be used for billing. If both sides are audited, the publisher numbers should be used. This second point is left to final negotiation between the publisher and the agency/advertiser. Larger advertisers will likely have more negotiating power than smaller ones.

The guidelines seek to lower systemic discrepancies below 10 percent. They try to explicitly determine whose number is used for billing, and under what circumstances an investigation is warranted. If everyone goes through the excruciating auditing process the MRC is putting together, you can trust all the numbers will be as good as we (as an industry) can get them.

Complying with these standards will be expensive. Big publishers won’t have a problem as they’re already audited. This is just another layer of refinement to existing audits. But for startups that aren’t currently audited, this will be costly.

The good news is the auditing guidelines are comprehensive. When the publisher and third party follow the proper methodologies and are audited, discrepancies should be minimal. The exceptions, the outliers, are really at issue.

If the guidelines are followed, impression discrepancies between the publisher and third-party server should be under 10 percent. If an outlier event occurs (discrepancies higher than 10 percent), both parties should investigate. It’s highly unlikely either party would refuse, as this is a standard practice.

The outcome should be for contracts between publishers and advertisers to define which set of numbers to use for billing, so discrepancies shouldn’t hold up billing. But for extreme examples, say higher than 25 percent, this may require discussion. I’ve heard of discrepancies as high as 60 percent, which obviously should be considered extreme.

Perhaps the contractual language should require that in the case of discrepancies greater than 20 percent, the higher set of numbers will be used. Typically, true discrepancies lead to the “wrong” party having lower numbers, so this would be safe. I’ve seen legitimate cases as high as 20 percent, caused simply by Internet latency.

There are systemic problems and exceptions. The guidelines are designed to reduce these. You should see average discrepancies well under 10 percent once all parties comply. If there are specific problems with implementation or if someone has a network problem during a campaign (this happens across the board more often than people realize), those issues should be relatively easy for most publishers and third parties to sort out between themselves.

Mar 03 2012
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Ad Ecosystem, Predictions

Media’s Believe-It-or-Not Future

(Originally published in ClickZ, October 2004) by Eric Picard

TV and radio serve up content in a linear broadcast format. It’s dished out in time slices according to schedules that make sense to broadcasters and the marketers who buy their ad space.

The change coming to media is so radical, many colleagues I speak with within the industry would rather not engage in the discussion at all: All media are going digital. Media will be nonlinear in the next few decades. Look at what’s happening with DVRs (define), such as TiVo. The latest estimates are that DVRs will control 80 percent of the market within five years, as cable and satellite companies begin distributing them. All a DVR does is strip linear content out of a broadcast and make it nonlinear. Why continue viewing linear broadcasts when you can simply download content as you want it?

Giving consumers control is a key driver in new technology adoption. DVRs are popular (and will be adopted) because they offer consumers much more control of their television viewing experience. Consumers can time-shift TV to watch a show when it’s convenient for them. They can skip ads just as they do in magazines, stopping to watch only those that interest them.

Look what Maven is up to with branded broadband video, if you don’t believe me. Pretty cool stuff. It’s on the cutting edge of this new market, and watching the beginnings of revolutions is always good.

Radio is where “delinearization” will happen next. Satellite radio providers XM and SIRIUS are making decent headway into changing traditional radio. Yet their model is more of the same, with an emphasis on “more.” Yes, more choice and better (wider) selections of various genres. But it’s still linear.

Those of us who’ve used Web-based radio solutions know the writing’s on the wall for current models. (I’m listening to Real’s Rhapsody service on a nearly-free trial as I write, and I’ve kicked the others’ tires as well.) Once you can queue up your own selection of music and listen to it all day long, there’s no reason to buy an album. New developments such as iPodder from former MTV VJ and Think New Ideas cofounder Adam Curry let consumers dive into the blogosphere and download music playlists directly to an iPod or other digital music devices.

Microsoft’s recent release of local radio that mimics major markets’ radio playlists is an astute move on its part, and only a tiny piece of its overall plans for the media’s future. Redmond is stretching toward the future in ways that remind me of the shifts it took after Bill Gate’s all-night Web surfing sessions drove it toward incorporating the Web into the OS.

The Windows Mobile site gives a bit of a view into where it sees things heading: Windows MediaPlayer 10 Mobile, Windows XP Media Center, and the new Portable Media Center interact seamlessly, allowing the consumer to manipulate digital content in unprecedented ways.

Sure, today these solutions are aimed at technology hogs like me. But Microsoft’s media device strategy is broad, well-planned, and in early execution phase. The revolution is hardly over yet. What happens when wireless blankets the world?

Wireless will change media once Wi-Fi (define) coverage is as large as cellular network coverage.WiMAX is the first step in this direction. Intel can’t talk enough about it.

WiMAX is essentially wide-area broadband Wi-Fi. Intel’s plans include building wireless into cheap-enough chips on such a scale that almost everything will connect wirelessly to the Internet in a few years.

What happens when radio and TV signals are sent via wireless IP instead of the current analog and digital broadcast signals? Once that happens, control over how, when, and where media are used and consumed falls squarely into the hands of — the consumer.

I rest my case.

Mar 03 2012
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Ad Ecosystem

Let’s Use Percentage of Audience to Buy and Sell Media

(Originally published in ClickZ, September, 2004)

One of our industry’s big problems is the lack of a good predictor of media availability, or media forecasting. This comes back to the stubborn issue of inventory control, which forecasts media availability for publishers’ sales groups.

Yes, a few companies claim new, more effective methods of inventory control and forecasting, notablySolbright and CheckM8. But the complexity of inventory control and forecasting is increasing all the time, mostly because there are too many methods of buying media on the same Web sites.

Ari Rosenberg, a media sales consultant, and I recently had this conversation, as I’ve had with a number of media planners/buyers over the years. Let’s first look at the ways media can be bought today:

  • CPM. Cost per thousand impressions
  • Frequency-capped CPM. CPM with frequency caps applied to limit frequency on unique users
  • Geotargeted CPM. CPM limited to unique users within specific geographic areas
  • Dayparted CPM. CPM limited to specific dayparts
  • CPC. Cost per click
  • CPA. Cost per acquisition
  • Behaviorally targeted media. Buy impressions displayed to specific users based on their profile
  • Surround sessions. Buy impressions around a specific user that follow them around the site
  • Fixed locations. Unlimited buy impressions in one specific placement on a site

If only one method of selling were used on a site, the inventory control problem would remain complex but manageable. Unfortunately, most sites are forced to accept multiple, if not all, types of buys. This results in chaos when forecasting available inventory for the sales team. No one wins if inventory forecasts are wrong.

Rosenberg’s concerned that in CPM, the prevalent method of selling inventory, media value isn’t tied to audience size. CPM prices are fixed, regardless how big the audience is. And a bigger audience doesn’t necessarily convert equally to a number of impressions, as some users visit many pages and others visit few.

Using Percentage of Audience

Let’s move to selling and buying online media by percentage of audience as the baseline. This would be a far more predictable method of selling and buying, as the exact number of impressions wouldn’t be calculated ahead of time. If there’s one thing sites can predict relatively reliably, it’s the number of unique visitors they can expect over a specific period.

No, the numbers won’t be exact. But that shouldn’t stop us from going this way. Many other media are bought and sold without precise control over how many people will be reached. We could even refine it a bit for more control, like buying a percent of audience with a frequency cap.

Here’s what the world would look like when buying a percentage of a site’s audience:

  1. A publisher’s rate card would list the average number of unique visitors to the site over specific periods: quarterly, monthly, weekly, daily, even dayparts. It’d back this up with unique visitor numbers for recent periods so media buyers could verify the likelihood their goals would be met.
  2. The publisher would set a value for its audience, based on the number of unique visitors, their demographics, the type of activity (conversions) driven historically, and other factors. The media buyer and publisher would negotiate the type of buy desired based on the average audience size for whatever period they desire.
  3. Additional desired-audience tweaking by the media buyer would be applied to the model, including things such as geodata, dayparting, frequency capping, and so forth. Each additional targeting level would increase the price. In this scenario, frequency-capped visitors would actually be a preferred selling method for publishers; it would increase available inventory. Of course, this works just as well with behavioral targeting, as it’s also audience-based.
  4. Both parties agree to a threshold. If audience size is outside a certain percentage of the average, a makegood can be negotiated ahead of time. These thresholds must be clear and appropriate.

This method of selling may not be the best solution for all sites, particularly those that sell CPC and CPA media. But it would solve a lot of problems. It’s a great idea for sites that typically sell out or ones that frequently overcommit inventory and sell more impressions than they can deliver.

Hey, I’m not a media buyer or seller. But I do know one thing: The current system isn’t very good. It’s time for industry leaders to start kicking around some new ideas.

Mar 03 2012
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Ad Ecosystem, Rich Media

Make Rich Media Richer

(Originally published in ClickZ, July 2003) by Eric Picard

Last month, I pronounced control the killer app. Let’s discuss how to make use of that knowledge when it comes to the advanced use of rich media.

It isn’t enough to build hot rich media creative to seize user attention. It isn’t enough to follow any one or even several strategic “rules” to get the best results. To squeeze the greatest value out of your interactive efforts, approach your offering from the user’s perspective. Give users as much control as possible. At the very least, don’t make it hard for them to help you achieve your campaign goals.

Back in the days when Bluestreak was primarily a rich media company, I ran our rich media services group. We provided strategy and production. I worked on hundreds of rich media ad campaigns. We learned a lot about what works. At the time, much of that required our proprietary Java technology. Now, Flash supports almost all the things we toiled away on in rich media’s early days.

I no longer consult on rich media creative strategy, so I thought I’d share some insights (given there’s no conflict of interest). Below, how rich media can serve you better than most of what’s online today.

Remove Barriers

Ignore interactive design constraints at your own risk. Far too often, direct response campaigns employ rich media in ways that create barriers to the transaction. In many game ads, for example, a user is required to complete a series of relatively complex actions before gaining access to a form or being able to click to the Web site. This is fine for a branding campaign, but not for direct response.

If the goal is branding and building brand perception, measure as much about the interaction within the ad as possible. Record interaction time, conduct a Dynamic Logic study, track every action taken. This provides a good sense of increase in brand awareness driven by keeping users engaged with the ad.

But for goodness sake, if the goal is to drive traffic or convert users within the ad, don’t erect barriers that keep your audience from achieving your goal. It’s your goal, not theirs. Want to elicit a specific response? Make it easy.

Collect Data Locally

This one blows me away. Plenty of pretty advanced rich media ads collect data. But data is collected on a remote Web site, not within the ad itself. There are huge increases in response when data is captured within the ad rather than on a remote site. Back in the day, we averaged roughly a 70 percent conversion rate for non-credit card transactions within rich media ads.

Part of the increase could certainly be attributed to novelty. Few advertisers were doing this at the time. But much of it has to do with basic human nature. People are unlikely to disrupt what they’re doing to sign up for a newsletter or contest (even if they’re interested). If the conversion can occur right on the same page they want to be on, they’re more likely to convert.

Collecting data in Flash is a simple, straightforward process Flash developers should understand. (If they don’t, the help files are a good place to start. Everything’s clearly explained.) Flash can submit data from an ad to your Web site as easily as you collect it from the site itself. You can even pass data into a Flash file from a remote site using a DNS alias (bounce me an email if you need details) or Flash Remoting.

Create Multipage Ads

Think of a rich media ad as a miniature Web site. There’s no reason to be limited to one page. Flash easily runs multiple “pages” of ads, and even loads multiple Flash files in one main placeholder file. The user experience can be broken into reasonable, bite-sized chunks, all from the same Web page the ad resides on (Warning: Make sure the publisher doesn’t set the page to automatically refresh on a regular basis).

By breaking the ad into multiple Flash files and loading them separately, the file size of each section is low. The ad loads quickly and adheres to the publisher’s size limits. Remember to delay loading additional content until either the page is finished loading (typically less than 10 seconds) or the user clicks within the ad.

Provide Value

Make sure you provide some reason for the user to go through multiple pages of ad content. Too often, rich media use is gratuitous. Each element of creative must be justified from a user perspective:

  • Let the user research your offer. There’s an unlimited number of pages at your disposal. Let the customer research the offer within the ad. Flash can load text files and information files dynamically. Take advantage of it! Use the pages on your Web site dedicated to describing the offer and includethem in the ad rather than popping open a new browser window.
  • Let the user explore. Employ multiple assets to make your case. Rather than build numerous creatives with different purposes, link all creative to the same back end to save money. Again, you can load new Flash as a separate file, so file size limitations aren’t an issue.

    For example, three separate “teaser” ads might attract attention and bring the user into the content. Load the same content into each ad. You could use a tabular interface with one option showing a product video, another providing a product description, a third displaying detailed technical specifications, and a fourth letting users sign up in the ad for more information or a newsletter. Further options might include a print option, chat, customer service or sales callbacks, even full product purchase — all right within the ad.

  • Expand your horizons. Even if you’re not dealing with large-format ads, there’s no reason not to think big. Many publishers let you expand ads right over page content. There’s no reason a 468 x 60 ad can’t expand up to three times the size of the original, providing plenty of room to maneuver.

Don’t Let Cost Stand in the Way

A complex rich media experience will obviously cost more than a simple GIF replacement Flash ad. Even when factoring in the additional cost of rich media production, return on investment should more than justify the expense. Don’t judge results on just a single campaign. You will learn more each time and will likely improve with experience.

Attend conferences, join discussion lists, and feel free to send me questions about your goals. Most of what works well is grounded in common sense. Above all, track everything you possibly can. The data will set you free!

Mar 03 2012
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Ad Ecosystem

Control: The Killer App

(Originally published in ClickZ, June 2003) by Eric Picard

Every once in a while this topic comes up, “The killer application for is [idea of the day].” When discussing the Internet, the following have been described as “the killer app.”

The list could probably run hundreds of items long. But I think I’ve finally figured things out. It struck me today. The killer app of the Internet is really control. Giving a user more control makes online efforts successful.

Brenda Laurel was first one to get close to this in her seminal book on interactive design, “Computers as Theater“. In it, Laurel introduced a concept called “constraints.” This deceptively simple concept made my jaw drop when I read the book in graduate school. Constraints, essentially, are rules about what can and cannot be done within an interactive environment. All interactive interfaces and environments have constraints.

When designing anything interactive, a primary concern is to constrain users in an unobtrusive manner. In other words, design your system in such a way they won’t want to do things that they can’t do.

A real-world example we can all relate to:

An automobile is an interactive device, perhaps the quintessential interactive device. You can go wherever you want in a car. If you crash a car into something, it tends to stop working. Therefore, most drivers avoid running into objects. Most drivers don’t want to crash into objects because the consequences ruin their interactive experience.

What I’m propose is pretty much the inverse of the constraint concept. A constraint limits control. If you want to elicit a response from users in an interactive environment, give them control.

An example of a constraint in online marketing relates to spam. Putting your email address in a questionable online form often leads to spam. Hence, people are often reluctant to give out their email addresses. The proliferation of anti-spam software is a result of the reduction in control users have over their email communications. It’s a good bet anti-spam software will be successful for that reason.

I’ve often been told by people who “get” the Internet, “It’s all about interactivity.” That’s a hard thing to argue with. Of course the Internet is about interactivity. But that still doesn’t explain why the Internet is powerful. It’s like saying water is valuable because it’s wet.

The Internet’s strength is the control over information and communications it provides users. To really drive online marketing, we need to understand the kinds of things users want to do and enhance their ability to control contact.

Recently, in an online discussion list, Derek Hewitt, a former Fortune 100 senior interactive marketing executive (now president of iMediaLearning) said his former company’s greatest branding successes came from “themed content.” Content more editorial than advertising. This reflects the medium.

In any medium, ads should reflect the user’s state of mind. Online, users are willing to spend time digging into the details — in fact, they demand the opportunity to do so.

Yes, cool rich media ads that draw users in are more successful than static banners. But ads that provide real opportunity to learn more about a topic that interests the user are the ultimate winners. This is clearly indicated in search marketing’s success. It’s why paid contextual links have always performed. Users actively seek information about services and products related to their online investigations.

The primary problem is most online ads are either completely direct response focused or eye candy. But there’s a sweet spot enabling a perfect intersection between the two.

Years ago, we built a rich media ad for a major car company primarily renowned for safe vehicles. Its core market was families with children. The ad was an interactive quiz about the proper way to use a car seat.

The ad provided five multiple-choice questions about car seat safety, then calculated a score. Depending on the score, the user received a targeted message and was enabled to learn more about car seat safety. It was an immensely successful campaign from both direct and branding perspectives.

By giving users an opportunity to dive into detail and more control over the way they get details, you’ll succeed in online marketing. If you hit users with fly-by creative in hope of driving response or try to build a deep emotional connection with complex TV-style creative, you probably won’t achieve the full benefit of the medium. Both approaches work, but there’s so much more on offer.

Mar 03 2012
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Ad Ecosystem, Ad Technology, Economics

How to Fix Online Advertising (Part 2)

(Originally published in ClickZ, February 2003) by Eric Picard

In Part 1, I discussed three major problems rooted in online ad technology’s architecture. Now, possible solutions.

Neither is final, but at least we have a starting point for discussion. For those of you who read this for the “sparkling wit” of my commentary, bear with me. This is serious stuff for serious times.

Any solution must be industry-wide. It isn’t something one company working alone can achieve. Many approaches are possible. Below, two possible directions, both of which address the following:

  • Media costs are too low to support the industry. The widely accepted solution is conversion to reach-and-frequency-based media buying and selling. There’s no way to implement this today due to technical barriers.
  • Discrepancies between site-side and third-party ad servers are too high. Both proposals remove serving duplication by the publisher and third-party ad servers. Only one counts impressions.
  • Inventory control systems are too unpredictable. My proposals make this more predictable by streamlining inventory control system function and selling by audience as opposed to general volume.

Let me clarify my definitions of ad servers. I refer to an ad server representing a publisher’s inventory as a “site-side ad server” (SSAS). An ad server delivering an advertiser or agency campaign on its behalf is a “third-party ad server” (3PAS).

Some basic assumptions are made in each proposal (you may disagree):

  • Reach and frequency planning and buying are desired to increase online media’s value.
    • Media planners/buyers need tools covering reach and frequency/gross ratings points.
    • Third-party ad serving is required for multiple-publisher buys.
  • Business models are as important to the architectural changes as working technology.
  • Adopting a new architecture will be a long process but must happen within two years. A plan must be achievable in that timeframe.

Architecture Today

Current architecture separates SSASs and 3PASs. Integration issues include:

  • A 3PAS is managed by the site-side system through a redirect, but site-served ads are not. This is the root of the discrepancies between the systems.
  • Advertisers pay twice to serve ads: to the publisher and the 3PAS company.
  • There’s no mechanism for a 3PAS to request the SSAS change how the media is rotated or handled. This is required to support cross-site frequency capping (a root requirement of reach and frequency).
  • Inventory control is viewed as a linked system to site-side serving. No mechanisms support views into inventory control from the 3PAS or from media planning tools.
  • Little integration exists between all systems used in online advertising, and virtually no automation exists.

Cookies: A Major Barrier

A barrier to any workable system overhaul is HTTP cookie handling. Due to cookies’ use restrictions, a solution enabling identification of unique users between publisher and 3PAS is needed. Not a privacy issue — this is anonymous. To track and value activity of aggregate anonymous users, a mechanism is needed to recognize them when they intersect with a campaign across multiple publishers.

There are two schools of thought resolving this issue. One advocates a universal cookie carefully shared across the industry with companies agreeing to a strict privacy policy. The other calls for some kind ofDNS-alias-creating mechanism. Both are complex, but it’s believed resolution is possible. The solutions below assume the cookie problem is resolved.

Solution 1: Divorce Inventory Control From Ad Serving

Change the relationship between inventory-control and ad-serving systems. The 3PAS’s nature won’t change much. It still serves its own content and the site maintains control over inventory. But hierarchy changes. In essence, the site separates inventory control from content delivery. Any ad serve is treated as a redirect, whether served by the publisher or third party. The impression is tracked at the same point for either server.

Pros:

  • Media pricing will be “purer.” Ad delivery cost is separate from media cost.
  • The advertiser can have content delivered by the SSAS or 3PAS. Paying twice for serving isn’t an issue. This reduces costs.
  • The ad server — site side or third party — remains on one level, eliminating the discrepancy issue.
  • This supports the need for the 3PAS to serve its own content to track rich media activity (particularly Flash).
  • It creates more room for innovation when a third party serves the content. 3PAS can differentiate technically from others with varied capabilities for rich media tracking or other solutions, such as automated optimization.
  • Inventory control is simplified, with a more specific focus on that part of the system without concern for ad serving.

Cons:

  • Third-party serving fees are not reduced. Savings would have to be on the media side, when the publisher didn’t serve the content.
  • Publishers must trust the 3PAS for tracking or open a pretty deep API (which many are reluctant to do) for tracking integration.
  • Advertisers must accept publisher media volume numbers (impression opportunities) as distinct from the impression number given by the ad server. A business model shift, but the fairest way for all parties to be paid an equitable fee. Billing media on page views versus ad serves is an old debate.

Walk-through:

  1. The media planning tool hooks into the publisher’s trafficking and account management system and queries available inventory. It recommends inventory to the agency or advertiser based on criteria.
  2. The media planning tool exports campaign information to the 3PAS.
  3. The 3PAS traffics the campaign to the publisher’s trafficking and account management system (a component of the SSAS).
  4. A user visits the publisher’s site through a browser. A call is made to the publisher’s server, generating an HTML page.
  5. While generating the page, the publisher’s server calls the inventory control system for an ad tag. The system selects the relevant ad tag based on available inventory, confirms the user is not subject to frequency capping, and returns that ad tag to the publisher.
  6. Depending on the architecture, a call to the ad server (SSAS or 3PAS) may occur. Most likely, this step is skipped.
  7. The page is rendered in the user’s browser, which reads the ad tag. A call is made to the ad server (SSAS or 3PAS) for the creative. Methodology (including the redirect of the user) is identical for all ad servers.

Solution 2: Third-Party Servers Stop Serving Ads

Solution two removes ad serving from the 3PAS. It turns the 3PAS into a campaign management, data collection, and cross-publisher media management system. On the surface, publishers are comfortable. Their side looks much as it does now. But most advertisers will find limitations on rich media and reporting problematic.

Pros:

  • Media pricing model stays much as it is. The publisher charges a mixed cost for ad delivery and inventory.
  • Third-party ad-serving fees drop (the majority of the charge today is for ad delivery costs).

Cons:

  • This solution requires more work and trust between publishers and 3PASs.
  • Reporting timeframes are restricted to what the publisher can support. Most use log files, meaning data will not be updated within campaigns for longer periods of time than most 3PAS customers are used to.
  • There is no way to use a 3PAS to “audit” publisher activity. The publisher supplies all impression and click data. With the broader mix of 3PASs on the market, advertisers and agencies can choose one they feel is accurate rather than rely on the accuracy of the publisher’s tracking.
  • Many innovations are reduced in effectiveness or simply not possible, including rich media tracking (which requires a 3PAS to serve the creative). It relies on publisher-side solutions, traditionally less advanced than those offered by 3PASs and rich media companies.

Walk-through:

  1. The media planning tool hooks into the publisher’s trafficking and account management system and queries available inventory. It recommends inventory to the agency or advertiser based on criteria.
  2. The media planning tool exports campaign information to the 3PAS.
  3. The 3PAS traffics the campaign to the publisher’s trafficking and account management system (a component of the SSAS).
  4. A Web user visits the publisher’s site through a browser. A call is made to the publisher’s server, generating an HTML page.
  5. While generating the page, the publisher’s server calls the inventory control system for an ad tag. The system chooses the relevant ad tag based on available inventory, confirms the user isn’t subject to frequency capping, and returns the relevant ad tag to the publisher.
  6. Depending on architecture, a call to the 3PAS may occur. Most likely, this step is skipped.
  7. The page is rendered in the user’s browser, which reads the ad tag. A call is made to the SSAS for the creative.
  8. Impression and click data passed back to the 3PAS.

These solutions were assembled in my “spare” time. I’m not a programmer or an architect. I just happen to have a good brain for how technology works and an understanding of how things are configured today. My goal is to get things moving. To be a catalyst for change. Without someone taking a stab at this, I fear nothing will happen.

Mar 03 2012
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Ad Ecosystem, Ad Technology, Economics

How To Fix Online Advertising (Part 1)

(Originally published in ClickZ, December 2002) by Eric Picard

 

A few months ago, I wrote an article about some of the problems with online advertising. As a follow up, today I’m going to discuss some major industry problems, but this time from the perspective of how these problems can be addressed. Those problems are:

  • Media costs are too low.
  • Discrepancies between site-side ad servers and third-party ad servers are too high.
  • Inventory control systems are too unpredictable.

I’m going to be so bold as to offer a solution to the industry — probably not the actual solution, but apotential solution — that is, a viable solution that, at least on paper, would solve these problems plaguing the industry.

Today I’ll lay the groundwork for my proposal, and next month I’ll offer a version of the proposal to the industry. This is a big undertaking… and a bit of a risk. Frankly, I know the solution I come up with is not going to be a final solution, but at least it will be a starting point for discussion.

First, let me clarify my definitions of ad servers (for the millionth time) just to make sure I don’t get yelled at by misunderstanding vendors. I’ll refer to any ad server representing a publisher’s inventory as a “site-side ad server” (SSAS). Any ad server that delivers an advertiser or agency campaign on their behalf I’ll call a “third-party ad server” (3PAS).

How Do We Get Online Media to Be Valued Properly?

As I said last time, media costs are low for a number of reasons. But the general consensus in the industry (not complete consensus, mind you) is costs are low because “traditional” offline media teams cannot plan and buy media online the same way they do offline. There isn’t even a translation mechanism available, as far as I am concerned. Therefore, online media does not get valued properly.

Offline media teams plan their buys using reach- and frequency-based tools. The idea is simple. Reach is defined as the unique audience who saw an ad over the course of four weeks. Frequency is the number of times you reached the members of that audience over four weeks. This translates into a system of gross rating points (GRPs) by which each media vehicle is valued.

A number of companies are developing media planning solutions for the online space based on offline metrics. But even if they succeed, there are still big holes that must be filled.

Offline media is very predictable compared to online media. A radio media plan, for instance, is very accurate when it is bought — the planner knows almost exactly how many GRPs he is going to get. Online media is much less reliable — it fluctuates wildly. This means a stabilization factor must be added to online media buying to compensate for this.

Luckily, there is an answer — frequency caps. The idea is simple. Once an individual member of your target audience has seen your ad the desired number of times (across publishers), turn off your campaign for that user.

Unfortunately, implementation isn’t as simple as the idea, because currently no technology is availablethat the market could adopt to meet this need. It just isn’t available today, nor is it possible for one company alone to build this solution. A broad cross-industry solution is needed to enable this, and it won’t be easy to build.

Media Planning, Buying, Trafficking, and Discrepancy Resolution

The next two problems may seem very unrelated but are actually tied together in the chain of processes within our industry. Let’s look first at the way our industry processes work together.

As you can see in the graphic below, the business model for working online is complex.

Working Online Business ModelFor an ad to actually appear on a Web site:

  1. The media planner must research the available Web sites and assemble a group of sites from which to buy inventory.
  2. A media buyer contacts the sales teams at the short list of publishers she’s interested in with a request for proposals (RFP).
  3. The publisher’s media sales team must review the company’s inventory management system to see if the inventory is available, generate an RFP, and send it to the media buyer.
  4. The media buyer reviews the RFP and, if approved, sends an insertion order (IO) over to the media salesperson.
  5. Next, the IO is handed off to the ad operations team on both ends.
  6. The publisher ad operations team gets the space reserved within inventory control.
  7. The agency (or advertiser, if it’s handled internally) creative team and ad operations team put the campaign into a 3PAS.
  8. The creative team creates the ads; the placements are generated with creatives assigned.
  9. The agency ad operations team traffics the ads through the 3PAS to the publisher.
  10. The publisher ad operations team picks up the ad tags through the 3PAS and places the ad tags into the SSAS.
  11. The campaign runs, and the agency reviews reports from both the 3PAS and the SSAS.

Now, in a perfect world, the campaign would run perfectly. The publisher would run the exact number of impressions specified in the agency’s IO. The impressions and clicks shown by the publisher’s SSAS and those shown by the agency’s 3PAS would match exactly. Unfortunately, in the real world, this just isn’t common.

Most likely, the campaign will be either under- or overdelivered by the SSAS. This happens for many reasons, but primarily because the problem of managing real-time inventory is very difficult. Also, the media buy is negotiated by volume of general delivery rather than by audience delivery, which makes the whole thing less predictable.

In addition, there will always be a discrepancy between the SSAS and the 3PAS. It is inherent in the nature of the technology — the SSAS counts before the 3PAS does, and users sometimes close a browser or click an available link before the ad call is received by the third party. This is just a basic fact. Because the SSAS and the 3PAS count separately, the likelihood of them having matching numbers is almost nonexistent.

These are three big problems. How do we fix them? I’ll tell you my answer next time. But I’ll leave you with one last issue to ponder.

Today, SSAS and 3PASs support the workflow model I’ve shown above. Below is a diagram of the way these systems interact, so ads run on the user’s browser when she views a Web page.

SSAS and 3PAS InteractionWhen a user calls a publisher’s Web site in her browser:

  1. The publisher’s Web server asks the SSAS inventory control system for an ad tag.
  2. The browser calls back to the SSAS for the ad (an impression is recorded) and is then redirected to the 3PAS.
  3. The 3PAS delivers the ad to the browser (and counts an impression).
  4. The user clicks on the ad, is sent to the SSAS (a click is counted) — and then is redirected to the 3PAS.
  5. The 3PAS counts the click, then redirects the user to her final destination.

This process is far too complicated. Even though these redirects typically take less than a second, the fact we’re counting at different times makes discrepancies unavoidable. This model also requires publishers to bear the brunt of coordinating complex delivery schemas, when they’re already dealing with a difficult inventory control issue.

In addition, this system requires publishers to continually upgrade their ad-serving systems to manage increasingly complex rich media implementations. Meanwhile, the 3PAS has a far more demanding reporting role and must serve much of the rich media content anyway, so rich media and post-event (beyond banner) tracking can occur.

My proposal will be a comprehensive plan to solve all three of these problems in one rebuilding of the existing process. I hope this column and the next will spark some ideas with readers — ideas that will move the industry forward. See you next time when I make my proposal.

Mar 03 2012
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Ad Ecosystem, Ad Technology, Economics

The Three Biggest Ad Headaches

 

(Originally published in ClickZ, October 2002) by Eric Picard

What does this industry need to fix? I’ll delve into three specific problems here… for starters.

Media Costs Too Low

This might not seem like a problem. For many marketers, it’s a godsend. But it’s a huge snafu. Media costs are depressed, making publishers’ margins too low. The cost of building and maintaining their sites and of serving ads are too close to the amount of money they bring in.

Media sales commissions are hardly lucrative. Really great salespeople won’t stick around in an industry where they can’t make money, because great salespeople are driven by a desire for wealth.

From an operations standpoint, the only way to effectively implement and manage an online advertising campaign across a large number of publishers (from the marketer/agency perspective) is to use a third-party ad server (3PAS) to manage, traffic, and report on campaign activity (see my column on 3PAS). Two years ago, using a 3PAS was a no-brainer for anyone who understood the value proposition.

At that time, media costs averaged around $15-20 CPM. The 3PAS costs were around $1-3 CPM. This was 5 to 10 percent of the media buy. Today, media costs hover around $2 CPM, and 3PAS costs around $0.75 — 20-40 percent of the cost of the buy.

For marketers and agencies that understand the value proposition of a 3PAS, value still significantly outweighs cost. Without a 3PAS, it’s difficult or impossible to calculate return on investment (ROI) and a campaign’s true value. Unfortunately, some advertisers won’t OK the additional cost to agencies managing their online campaigns. The advertiser loses the ability to properly evaluate campaigns, as site-side servers don’t offer post-event tracking (post-impression and post-click analysis). The additional labor involved in trafficking and reporting without a 3PAS cancels out the savings.

Ad-Server Discrepancies Still Too High

A few years ago if you asked what the biggest industry problem was, there’s a good chance the response contained the word “discrepancy.” Nothing’s changed.

Example: Advertiser buys 1 million impressions from publisher. The advertiser traffics the ads using a 3PAS to the publisher. The campaign runs. When it’s over, the publisher’s report shows it served 1 million impressions. The 3PAS shows a lower number. In some cases, a significantly lower number.

The industry average discrepancy rate is 20 to 30 percent, depending on who you ask. A few people tell me they regularly experience 40 percent discrepancies. That’s a big difference. The problem gets nastier. Since the advertiser has an available lower number, it often tries to get the publisher to accept the 3PAS number and lower the bill accordingly. This causes the publisher to request a discrepancy investigation, which costs both the site-side server and the 3PAS time and money.

Why discrepancies? By definition, there should be discrepancies. Really. The publisher serves the ad tag that calls for the ad. At that moment, the publisher counts the impression. The call goes to the 3PAS, which serves the ad and counts the impression at that moment. While the call is being sent the user could close her browser or click away, interrupting the process before the 3PAS counts the impression. By nature, there should be some discrepancy. Worse, some scenarios have 3PAS with ahigher number of impressions than the publisher, counterintuitive as that seems.

One cause is from publishers who filter IP addresses of employees. This is prevalent at large networks that systematically filter out employees at their own IP or domain. As these networks have a large internal population visiting their properties, this alone can cause a significant discrepancy.

Possibly the most common cause of this type of discrepancy between site-side server and 3PAS is caching (a Web page is stored locally for quick future retrieval). If the publisher counts page views rather than ad calls (as IAB counting methodology guidelines require), the publisher may not be aware of a page request if the content is cached. As 3PAS generally “busts cache” effectively, the advertiser may have higher numbers than the publisher. Its number would be more accurate. Since the advertiser got a deal from the publisher in this case, it generally doesn’t complain about this discrepancy. Effectively, the publisher gives the advertiser free impressions.

What’s an acceptable discrepancy? Only you can answer that. Most experts say 10 to 15 percent is OK. If you’re getting a lower discrepancy, you should be happy. When evaluating ad servers, ask the following questions:

  • What’s the average discrepancy between site-side servers and your product? If it’s over 15 percent, ask why.
  • What’s your discrepancy resolution policy? This sets expectations for resolution timelines and what form resolution may take.
  • What’s server response time (the time it takes the server to choose an ad and count the impression while sending the response back to the user)? The lower the response time (sometimes called matching speed), the lower the discrepancy. These should be measured in milliseconds. Due to the nature of Internet traffic, charting can show even a few milliseconds can cause significant changes in discrepancy rates.
  • How do you bust cache? The technology should use at least two methods.
  • Do you follow IAB counting methodology guidelines? This answer should be yes, and make use of the IAB robots and spiders list.

Technical Implications of IE 6 and Third-Party Cookies

Internet Explorer (IE) 6 has a default method for handling third-party cookies. IE 6 only allows cookies to be set by the domain visited, unless a third party has a P3P-compliant compact privacy statement.

This is relatively simple to set up. The third party confirms it’s not collecting personally identifiable user information. On paper, this sounds good. If you’re on Yahoo, for example, only Yahoo can set cookies on your PC unless the cookie is “safe,” meaning it won’t steal any personal information.

But Microsoft did this alone, and it doesn’t reflect the way the Internet works. It’s easy for ad servers. Most 3PAS and site-side servers (to my knowledge) are in compliance. Many publishers are owned by networks of sites that make use of consolidated cookies across all properties. In that case, if any of the servers that set cookies have different domain names, do collect personally identifiable information, or neglected to set up compact privacy statements properly, IE 6 blocks its cookies. This can cause problems: from the inconvenience of not having forms prepopulated or settings remembered to frequency caps not functioning on pop-ups (which really annoys users).

As you surf with IE 6, a red eye in the bottom of your browser’s window provides a privacy report when clicked. It’s illuminating to surf high-profile sites and learn they’re not P3P compliant.

There are plenty of other problems. These three are significant and often misunderstood. Let’s solve them and move forward!

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

Has Interactive Failed? Not the Way You Think

(Originally published in ClickZ, September 2002) by Eric Picard

Interactive industry pundits are complaining a lot lately about the negative treatment we’re getting from The Wall Street Journal and other traditional media.

Can we blame the media? An appalling lack of understanding about industry issues exists even among the online advertising “experts.” If our experts can’t get a handle on the issues, how can anyone outside be expected to do so? We stink at explaining ourselves to the outside world. We stink at communicating internally.

We argue about a host of issues, all from Balkanized perspectives with little respect for other ways of doing things. Add to this cacophony agendas and approaches within various marketing departments, and confusion starts piling up.

Walk in the Other Person’s Shoes

We need empathy — the ability to see things from another’s perspective. How do you respond to the following statements?

  • Online media should be bought using traditional offline metrics, such as reach and frequency.
  • CPM media buys are absurd. Everyone should buy CPC or cost per acquisition (CPA).

The statements are one dimensional. Each points to valid issues but not to answers.

I see five major constituencies in our industry, although there are probably others. How the two statement above are heard and perceived depends on which group the listener is in:

  • Traditional brand advertisers have advertised offline for years, buying media by gross rating points (GRP), reach and frequency, and other traditional brand media metrics. They understand clearly the science behind branding and prove their value to advertisers by showing them how many people they hit within the target market (sometimes through brand recognition studies).
  • Traditional direct marketers scientifically approach consumers via direct mail and other direct methods. They focus only on successful acquisition and care little about brand effect. They have the research proving what results will be before they lift a finger. This group uses very specific methods and language to describe their work.
  • “Traditional” online advertisers/marketers think of themselves as a hybrid of the first two. They love talking about the branding “side effect” (offensive to brand advertisers) and embrace direct measurement. Their dialect doesn’t quite make sense to brand or direct people outside the online space. Most are decidedly weak in their knowledge of traditional offline marketing concepts. They typically misunderstand the direct marketer’s proven science and have virtually no understanding of branding and associated relevant measures, such as reach and frequency.
  • Online brand advertisers have decided the only way to save online advertising is to build measurement tools that will match those used by their offline counterparts. They have stared to eschew direct-response type information in favor of building consensus for the traditional brand path as applied to online.
  • Online direct advertisers only buy CPA or CPC when they have any say in the matter. They buy CPM when they must, but they make darn sure their actual CPA is very low. Some understand traditional direct offline science pretty well, others think they invented the concept of measuring return on investment (ROI). Those who know the science of offline direct are successful by using the same indices to build models online.

What does this all mean? Just because you’re an online direct advertiser, doesn’t mean you should issue orders that the entire industry move to a response metric to value online advertising. And just because you’re an online brand advertiser, doesn’t mean you should suggest we ignore responses and only focus on methodologies such as GRP. There may be two paths to take — as there are offline.

Rather than snipe at each other because each group has its own agenda, we must unify the messaging from our industry. A divergent but strong positioning of each segment (without diminishing the others) would be an improvement. For example:

  • Online advertising is proving to drive direct response better than any other medium.
  • Online advertising offers the best ROI on branding efforts of any medium.

Issues to be aware of: Online direct has been boosted by lower online media costs. If the online brand crowd is successful, online media will be revitalized — and costs will rise. This will hurt online direct, because they rely on cheap CPC/CPA buys. Unlike offline, online direct and brand share a much higher percentage of the same media space.

Diversionary Tactics

As troubling as the lack of perspective between groups is the lack of clarity in technology companies’ marketing messages. Many use industry issues (real or imagined) as weapons in their own marketing arsenals in ways that further confuse an already confused marketplace.

My comments are not aimed at the companies used as examples (which is why I’m using fake names — although some of you know who’s who), rather at their messaging. I’m not saying marketers at these companies should ignore the value they offer customers. Rather, they shouldn’t inflate minor issues or make untenable claims spun as solutions to major industry problem.

TrueMethods’s marketing inflates minor issues. Its Site Side Ad Serving Solution is promoted as the only privacy-friendly server in the industry, making the case all its competitors share ad-serving data across customers. Virtually nobody in this industry does this. Even those who do cleanse and segregate data to protect customer information. They’d be out of business if they didn’t. This is a minor issue for a few publishers and marketers. It’s not a broad industry problem.

OneStream is a rich media technology company. Its message claims it is building standards for rich media advertising. OneStream doesn’t promote industry standards, just its own solutions. As a business, it should sell its products. What does it have to do with standards? Nothing.

A standard, by definition, applies to numerous offerings from different companies. Anyone can build to agreed-upon standards. OneStream suggests that the solution to a lack of industry standards is for the entire industry to unilaterally use its products. How inconvenient for competitors. If its mission is truly to help set industry standards, it should open its formats and offer standards that competing technology can be built to.

ZeroMedia offers an ad-serving and proprietary client-side creative format for ads. It claims to have solved all problems inherent to “first generation” locally installed ad-serving solutions (such as RealMedia and NetGravity) and “second generation” hosted ad-serving solutions (such as DoubleClick) that use their own server farms. ZeroMedia claims to have solved these problems by using CDNs to serve ads and a proprietary “patent-pending client-side intelligence.”

Many ad-serving solutions use CDNs (including Bluestreak, RealMedia, and others). Their “patent-pending client-side intelligence” requires individual users to choose ad preferences so ads can be targeted to them based on their defined criteria. Since the ad-serving solution seems to rely on this, it drags more issues into question.

Unless this industry starts communicating well, we’re not going to get past the misunderstandings in traditional media. If The Wall Street Journal doesn’t stop bashing online advertising, we’re in trouble. But we can’t complain about misrepresentation in the media if we can’t get our own story straight.

The stories above are on my mind, but I’m sure there are others. What are your suggestions for issues needing some housecleaning? We’ll try to air them here.

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