Category Archives: Media Agencies

How real-time bidding works

By Eric Picard (First published on July 19, 2012 on

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

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

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

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

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

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

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

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

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

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

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

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

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

Why Facebook will ‘own’ brand advertising

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

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

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

Facebook is a platform

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

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

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

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

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

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

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

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

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

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

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

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

Facebook will dominate local advertising

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

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

3 ways that display advertising must change — or else

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

3 ways to increase ad engagement, conversions, and ROI

(Originally published in iMediaConnection, June 2011

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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.

Next page >>

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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Automating Media Agencies

(Originally published in ClickZ, September 2007) by Eric Picard

I spend a lot of my time with media agency folks. And two recent conversations with senior people have struck me.

The first conversation was with a digital agency managing director in the U.K. We were discussing advertising’s future, and he said:

Agencies don’t spend nearly enough time strategizing for ourselves. We purport to be the strategists for our customers, but there is enough of a gray area in all the things we touch that even in online, there isn’t a huge amount of accountability. We suggest a strategy, we decide how it will be measured, and we get buyoff from the customer. If it doesn’t seem to be working as the campaign rolls out, we shift strategies and attack from another direction.

We try to keep our fingers on the pulse of advertising innovation on behalf of our customers — but we don’t hold our finger to the wind on our own behalf. We don’t invest in research or strategies that let us evolve or be particularly proactive. Mostly this is because everyone at an agency is focused on winning, keeping and improving business for the next quarter’s revenue. We have no idea how we’ll differentiate from competitors in five years — because we don’t have the time to think about our own business.

I’ve had plenty of conversations with smart, even brilliant, people at ad agencies over the past few years that were very forward-leaning. And I’ve had many great discussions about the market’s future . But this managing director was right: almost all these conversations focused on how to help their advertiser customers win. Not how the agency could win.

This is actually a large part of my work at Microsoft. I spend a lot of time thinking through the impacts of market changes on all advertising ecosystem participants, and I try to build models that will help them evolve and thrive as the ecosystem changes. Advertising agencies occupy a big part of my thought process.

Which brings me to the second conversation I had, this one with a senior executive at a U.S. digital agency. We were ruminating on my earlier conversation, and I asked him how agencies were going to evolve. He responded:

All the major agencies, especially at the holding-company level, recognize that the market is shifting and the existing models aren’t going to work much longer. We get paid mostly on an hourly rate, which worked out as a proxy for value for the last hundred years or so.

But as media fragments, we can’t keep shoving more people into the mix. At a certain point, this all needs to be automated. Our agency buys from hundreds of publishers a year — significantly more than our traditional agency counterparts. The average ad network deals in thousands of publishers. Just logistically, we can’t deal with trafficking, reporting, billing, and mundane issues like over- and under-delivery with any more publishers than we buy from right now. We need to automate the buying and campaign management process significantly. And once we automate things, if it actually works correctly, the billable hourly rate system simply won’t work any more because the manual processes will be too efficient.

I asked him how the big five holding companies were going to figure this out, and he said something striking: “They’re just going to watch the market and buy their way out of the problem. Why do you think WPP bought 24/7 Real Media? They’re trying to figure out how to scale. How many publishers does the 24/7 ad network deal with? Can they apply that model to media buying?”

This fascinates me because it intersects with my thinking for the past year. How will ad agencies deal with automation? I’ve talked to almost all of the major digital agencies and a bunch of traditional agencies, and everyone agrees we must find a way to scale online advertising. Everyone agrees that traditional media will move to digital processes over time (even if the delivery isn’t digital, the buying, selling, and measurement tools will use online ad models). And everyone agrees that even with the most cutting-edge tools for online media, we’re not close to solving the problem yet.

Whether they figure it out internally or buy their way out of the problem, media agencies must keep an eye on the future. They must find a way to scale their businesses, grow margins, and add significant value to the ecosystem.

People who don’t understand this ecosystem, especially those from a technology background, will rub their hands together gleefully and drool over the opportunity to disintermediate the agencies. But this is asinine. Agencies perform a valuable service to advertisers, and it isn’t just about manual execution, even though this has been the accepted proxy for value from a billing standpoint. Agencies aren’t to be trifled with. Antagonize them at your peril, technology startups.

The opportunity is not to kill agencies but to help them survive and thrive going forward. There’s a lot of money in that business, and that sounds suspiciously like an exit strategy.

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.

How to Play Nice With Technology Gatekeepers

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

Back when Bluestreak was a rich media company, I could have written a doctoral thesis on working with tech gatekeepers. This was back in the heady days when publishers had a certain sense of superiority fueled by the artificial inflation of their valuations. We went to extreme lengths to develop rich media technology that didn’t impact user experience — to the point we nearly killed ourselves getting our initial software download down to 5.7k.

For the Web publisher, a technology gatekeeper manages the adoption of third-party ad technologies used by advertisers on the publisher’s site. These include ad servers, rich media, and analysis technology. The goal is to make sure third-party technologies won’t crash the Web site, make user experience suffer, or cause significant data discrepancies between the publisher and the third party.

It wasn’t only technology providers like Bluestreak that faced the gatekeeper issue. Media buyers and creative teams faced it as well. Nearly all the players in the industry were under the close scrutiny and influence of the technology gatekeepers.

They were the sheriffs of the Wild Web portals back in the gold rush. They carried the fastest six-shooters and had a posse of deputies to research, track, and nail the most miniscule bug in a technology. A license to run rich media on Yahoo or AOL was like having Wyatt Earp let you carry your guns into town because he deemed you a “good guy.”

Eventually, a time came when the sheriff was running the town. It was difficult to do any kind of business without making him happy first. When the gold rush dried up, the sheriff lost his posse. The town fathers turned the jail into a welcome center. Suddenly, everyone was allowed to carry his guns in town, even those who fired them into the air after 7 p.m.

Things have started to equalize. Once again, technology gatekeepers have budgets and teams. They are regaining the ability to say no to technologies they don’t approve of. That means it’s time to start learning about this breed of hombres so you can work with them easily (and without flinching when you’re asked to present your guns for inspection).

The technology gatekeeper as sheriff metaphor wasn’t chosen at random. There are a lot of parallels between the jobs and the psychological makeup of these roles.

Keeper of the Peace and Protector of Babies

The technology gatekeeper does her job with a clear conscience. She’s making the experience of visiting her Web site a safe one. She keeps unsavory technology that misbehaves from causing problems in the community. This could be a rogue Java applet, or a Flash file that causes older machines to freeze because they overwhelm the CPU.

Remember: Gatekeepers feel they act in the best interest of the people they represent. Approaching them in any way that puts them in conflict with that role is a bad idea.

Don’t try to sway them by offering a bribe, even an innocent offer of industry schwag or tickets to a trade show. This is a surefire way to get their hackles up. Any tech gatekeeper worth his salt would be insulted or worse by that kind of behavior.

Never try to strong-arm or go around them (to the mayor
— or VP of sales) to get your way. If the VP includes the gatekeeper in the meeting you’ve set up (which she’s likely to do), things will just get uncomfortable. A better approach is to start off on the right foot by having a meeting with all parties ahead of time. Then, move on to the gatekeeper as part of the process. This gets all the issues on the table, sets the everyone’s expectations (including the gatekeeper’s), and makes everyone happy.

The only way to win trust from technology gatekeepers is to be trustworthy. Demonstrate you will not screw them. Keep them from getting in trouble for letting you walk their streets. Build the relationship over time and make sure you don’t let them down.

In ad technology, it’s likely you’ll eventually have a problem. These are the moments when you can actually improve your relationship with the gatekeeper. By being open and honest and doing everything in your power to fix the problem and keep him in the loop, you’ll win his trust and respect.

They Don’t Make ‘Em Like They Used To

The biggest problem we’ll face now that power is returning to gatekeepers is the majority of them are inexperienced. Disney, Yahoo, AOL, and some other major players have kept those important and skilled people in their roles, but they’re the exceptions. Most gatekeepers moved back to the traditional world where jobs with real salaries still exist.

Many of today’s new gatekeepers aren’t experienced in being empowered to turn away revenue under almost any circumstances. They gained their experience in a world where they were left to clean up the mess made by a third party rather than keeping the mess from happening in the first place.

Now that gatekeepers have some say again as the pendulum approaches center, they need advice on how to use of this power. Here’s mine:

Let’s not return to the “good old days” of letting technical issues drive the publisher’s business decisions. I’m a technologist. I completely understand why testing is needed and what can happen when things explode. But many lucrative deals were lost by this industry because of technology gatekeepers’ excessive conservatism.

There was fear user backlash from intrusive technology or techniques would drive people away from the publisher’s free content. This wasn’t the case. Let’s learn from that. Be flexible. At the very least, run live tests with companies without taking weeks and weeks to do so.

In the end, we should all strive for the same thing: success. Ours in particular, the industry’s in general. Everyone needs to work together. The overriding goal of the gatekeeper should be to facilitate the process, not throw a monkey wrench into the works.