Category Archives: Online Media

Dec 01 2014
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Ad Ecosystem, Economics, Online Media

Don’t Believe The Lies About Digital Media

By Eric Picard (Originally published on AdExchanger Monday, December 1st, 2014)

For years, there has been a series of bad memes spreading throughout our industry. Some of the big ones have caused a huge amount of misunderstanding in our space.

Here’s my favorite: “There is infinite supply of ad inventory. With this overabundance of supply, the cost of inventory will be driven to zero.”

This way of thinking caused the publisher side of the industry to fear and block adoption of programmatic buying and selling until the last year or two, when it was proved to be false.

A simple truth: All ad impressions (in a nonfraudulent world) are created by a person seeing an ad. I estimate that there are 5 trillion monthly digital ad impressions in North America. If we divide this against roughly 300 million active Internet users in North America, assuming they spend on average five hours a day consuming content on the Internet, that breaks down to approximately 100 ads per hour.

So we as an industry have 100 chances an hour, or about 500 chances per day, to reach each person in North America with a digital ad. Of the 300 million people we can reach, advertisers only care about a sliver of the total audience.

Once you break down the audience to the desired number of people to reach, with the relevant targeting, the question becomes: Of the 500 daily opportunities, how many times do you want to reach that group of people? It comes down to several factors: what mechanisms you, as a buyer, can use to identify them and deliver an ad to them, the format of the ad and how effective you believe your opportunity to reach them will be.

So, no – the number of impressions is not infinite. And if we believe that some percentage of the ads in that 5 trillion monthly statistic are fake, meaning fraudulent or simply not viewable, then the number of chances to reach consumers could be much smaller, from 100 to as low as 50 ad opportunities per hour.

Suddenly the lie is turned on its head and it becomes more about maximizing the opportunity with your target audience. And for those opportunities, the cost is definitely not heading toward zero.

Not True: Ad Inventory Can Be Defined By The Publisher And Divided Into Pools Of Undifferentiated Impressions

Ad inventory is made up of a group of individual, unique ad impressions. Every impression has hundreds of points of data surrounding it. The problem with this belief is that it assumes limitations that don’t exist. Publishers define inventory in broad, relatively undifferentiated buckets, which are the lowest common denominator from a complex media plan sent with a fairly detailed RFP by the buyer.

For instance, buying a million impressions of “soccer moms” from a publisher creates a very limited view of that inventory. The range of income, interests, product ownership or geography is broad for the individuals behind those impressions. And some “soccer moms” may be worth more than others depending on an advertiser’s campaign goals.

In a world where inventory is publisher-defined, this lowest common denominator approach was the only way to operate a scale media business. But that’s no longer the case. Buy-side decisioning allows the buyer to define the inventory – and that inventory definition by nature can be more complex than ever.

So what is an impression? Ultimately an impression is a human being engaging in a monetizable experience via a computer or digital device, in a certain modality. By modality, we mean that they’re either passively consuming content (such as watching a video), actively consuming content (reading an article or email), actively participating in an interruptible interactive experience (playing a game with breaks between levels) or actively participating in a non-interruptible interactive experience (writing an email or engaged in a video chat).

All the data about the person behind the impression is captured in first-party (buy side and sell side) and third-party data platforms. And all the data about the content being consumed, and the user’s modality, belongs to the publisher. It is by matching both types of data that we can truly unlock the value of inventory. The more open and transparent we make things, the more value we unlock. By giving buyers access to the unfettered truth of inventory and the ability to peruse and pay for their desired inventory, price ultimately tends to go up, not down. The old world of limited, siloed and blocked data is responsible for this lie.

As we’ve opened up inventory sources and unlocked access to audience and modality data, the market responded by equalizing prices. As a result, publishers can make just as much money from programmatic channels as direct sales. Publishers that are allowing demand from programmatic sources to compete directly with guaranteed inventory are becoming pleasantly surprised with the results. Publishers that started early on this path are gaining some significant advantages that could be sustainable over the long haul.

Not True: Publishers Don’t Let Buy-Side Systems Access Inventory Because Of Potential Data Leakage

This is an old misconception. Back around 2005, some publishers invested in technology to enable creation of “publisher first-party” audience targeting data. They tracked individual audience members’ activity on the publishers’ sites and put these content consumption behaviors into behavioral targeting segments. They could then sell these segments as inventory definitions, rather than just selling locations.

This was very useful when publishers had small pools of valuable inventory that would sell out, such as auto-related inventory that would sell out months in advance. So publishers tracked users who read articles in the “auto content” bucket and created a segment called “auto intenders” so they could sell ads targeted to those users when they were browsing other pages of the publisher’s content. If they charged $15 CPMs for auto content ads, they would sell behaviorally targeted “auto intenders” for $10. They’d deliver those ads on pages that were probably selling for $5 CPMs, more than doubling the yield on those impressions.

The problem is that only the largest publishers with big user bases that consumed lots of their content could assemble enough valuable behavioral data. The small window into a person’s web-surfing behavior that any one publisher had access to was not enough to really create sustainable value. However, that data was created, sold and valued by the market, although it was less valuable to buyers because it originated from user activity on just one publisher, rather than data pooled across publishers.

Right around that time, the first behavioral ad networks, typified by Blue Lithium, figured out that they could supercharge their behavioral targeting segmentation by buying guaranteed targeted buys from publishers and stealing segmentation data from the publishers. They maximized reach by keeping the frequency cap as low as the publisher would allow, then dropped their own cookies on those users and added the publisher’s targeting definition to their own.

For instance, say a buy of “auto intenders” from Yahoo had a frequency cap that was set to one. If the ad network bought 1 million impressions for a $10 CPM, they would add 1 million unique users to their own cookie pool of “auto intenders” for just $10,000. They could then find those same users on cheaper sites, and eventually buy the inventory over ad exchanges for less than $1 but sell it for $8, allowing them to arbitrage the market. Since these networks could turn small expensive direct buys into feeders of their behavioral targeting pools, and then extend those buys to cheap inventory sources, publishers obviously became very concerned about this “data leakage.”

Most publishers, other than the very largest, stopped investing in their own first-party behavioral data technologies, leading to the creation of the lie that publishers are deathly afraid of data leakage. But what people missed is that most publishers simply gave up fighting this battle. Instead they partnered with third-party data providers that paid publishers for the rights to collect behavioral data.

They would then push the behavioral segments back into the publisher’s ad server so they could sell the data as part of their direct buys. The data leakage problem led to the creation of the third-party data marketplace and the tracking of users across publishers, which marketers find more valuable.

The real value that publishers can provide is not in turning the behavior of their audiences into targeting data. Instead publishers can give buy-side decisioning systems access to data about the content being consumed (category-level data) and what users are doing on those pages (modality data). They can also enable the buyer to bring their own first-party data, which is far more valuable for buyers than anything the publisher could assemble.

Everybody wins when publishers open up competition between decisions made by a demand-side or buy-side ad platform and direct buys booked through their sales force. When given the opportunity, buyers are willing to pay similar or higher rates for access to this inventory, compared to what they’d pay for publisher-packaged inventory that only offers publisher-based ad decisions. The two methods competing with one another increases the value of the inventory and maximizes the yield for each impression. It’s a “win-win” or a non-zero-sum game – a good thing for everyone.

Nov 15 2014
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Ad Ecosystem, Ad Technology, Marketers, Media Agencies, Online Media, Publishers

Programmatic buying: The FAQ every marketer needs

By Eric Picard (Originally Published in iMedia – November 15, 2014)

I was at the ad:tech conference in New York last week, and in one of the sessions, three different people asked about programmatic. They didn’t ask any nuanced questions. They effectively asked, “What is programmatic?” They were embarrassed that they didn’t know, but after the first person spoke up, others in the room were emboldened.

For someone so steeped in the programmatic space, this took me by surprise. Certainly, I thought, no one in our industry doesn’t know what programmatic is. Adding to my consternation was that this specific panel was focused on SEO — and I figured that anyone working in search must be in the know on what was happening in programmatic. So I walked around and asked people for the rest of the conference what they knew about programmatic, just so I could see how out of touch I was from the mainstream. While most people were relatively up to date, I was surprised by the lack of general knowledge and the amount of misinformation there was out there.

So I figured it was time to step back and go over the very basics in this classic frequently asked questions (FAQ) format.

What does the term “programmatic” mean?
The term “programmatic,” which I’ve been told I coined back in 2009, really just is the umbrella term for automated buying and selling of media. While this is how I use the term, and what the market generally tries to use it to mean, many people use it to refer just to one part of the “programmatic ecosystem” — real-time bidding (RTB).

What are ad exchanges?
Much like in the finance world where stocks, commodities, and derivatives are sold over “exchanges,” we now have mechanisms to sell advertising over exchanges. Think of this as an auction-based mechanism to sell ads. Most exchanges are second-price auctions, meaning that whoever bids the highest for an ad wins the ad impression but pays the price (sometimes plus one penny) that the second-highest bidder was willing to pay. And nearly all of these exchanges have moved to RTB. Ad exchanges typically perform the function of providing liquidity to the marketplace, letting supply and demand match fluidly. Ad exchanges are not typically where the dollars accumulate; they’re a relatively inexpensive conduit through which demand and supply flow.

What is real-time bidding?
RTB is an auction-based mechanism for media buyers to bid on advertising at the impression level, as the ad impression takes place. When the ad impression takes place, a call is made to the exchange, which submits the impression to all bidders (participants with seats on the exchange). Those bidders have a very short time — usually less than 100 milliseconds — to respond to the auction with their bids. Unlike in the world of paid search, where all the demand for ads sit within the ad system of the search engine, ad exchanges federate out the auction, meaning that each bidder contains its own demand and only submits what it chooses to the exchange. This makes the exchange more of a clearing mechanism, rather than the revenue-generating mechanism that the paid search auction is.

What value does an advertiser or media buyer get by using RTB?
RTB enables a media buyer to specify exactly what their goals or outcomes are and look only for ad inventory that matches against those goals. Sometimes those goals are performance based; sometimes they are audience based. In other words, buyers can specify what audiences they want to reach and buy only those ad impressions that match. This is very different from the experience of buying from publishers directly, where the publisher specifies the inventory definition. Over RTB, the buyers specify the inventory definition and only buy what they want.

Are exchanges only available for banner ads?
RTB and programmatic exchanges are not in any way limited to one inventory type. Pretty much any available media inventory (ironically except for paid search) is available this way. Display, mobile, video, social, and even some traditional media such as television, radio, and print are either already available over exchanges or will be soon.

How do I buy ads on an exchange?
Buying mechanisms for ad exchanges are typically referred to as demand-side platforms, or DSPs. Some ad networks also enable exchange buying but in some cases are not transparent about this (i.e., they might be buying ads on the exchanges and reselling them to their customers). DSPs are available from companies like MediaMath, Turn, DataXu, The Trade Desk, AppNexus, and others.

How do publishers sell ads over exchanges?
Publishers that are quite large can sometimes offer their inventory directly over an ad exchange. Some even have their own. But most publishers use an aggregator of one kind or another — either an ad network or a specialty platform called a supply-side platform (SSP). SSPs are kind of the inverse of a DSP and have specialized software for managing supply on the publisher’s behalf. Some exchanges are incorporating the functionality of SSPs directly such that publishers don’t need a separate vendor to support this need. And some SSPs are beginning to behave as exchanges on their own.

Can I buy directly from publishers programmatically?
Yes, many publishers make their inventory available over the exchange, and most DSPs can specify publishers they wish to include in a buy. Many publishers also have rolled out “private marketplaces” using either ad exchanges or supply-side platforms. These private marketplaces are kind of like private ad exchanges where the publisher makes its inventory available only to specific buyers. These have all the benefits of RTB to the buyer but give the publishers more control over floor prices they want to set — or even fixed rate deals they want to support with specific buyers or advertisers.

Can I execute direct buys, or guaranteed buys, programmatically?
Yes, there’s a whole subset or category of the programmatic ecosystem that is appropriately called programmatic direct. Solutions in this space are less well defined, as it is newer. But the general goal is to provide more automation to the buying and selling of media. These buys can happen over display, mobile, video, social, and even television, radio, and print. The ecosystem has vendors supporting the needs of buyers and sellers independently — and a few that are hybrid solutions. Companies in this space include Bionic Ads, Shiny Ads, Yieldex, iSocket, BuySellAds, and others. Many DSPs are now plugging into the programmatic direct inventory sources as well, allowing one-stop-shop buying of both RTB and direct inventory.

Is programmatic replacing more traditional ways of buying and selling media?
Yes. Interpublic Group, one of the biggest agency holding companies, has stated that it wants to move 50 percent of its media buying to programmatic methodologies by 2015, and ultimately do that across all media types. In public and private conversations across the industry with executives at both marketing and media agencies, the zeitgeist is definitely moving in this direction. Publishers were the holdup until the last few years, when they started to see the benefits of programmatic selling on their own. Many publishers are finding that programmatic selling provides higher yield, either because their cost of sales are lower or because the inventory is being used more efficiently.

Nov 10 2014
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Online Media, Startups

MediaMath Acquires Rare Crowds And Its Founder, Eric Picard

By Zach Rodgers (Originally published on AdExchanger, November 10th, 2014)

MediaMath has snapped up Rare Crowds, a small, 2-year-old startup founded by ad tech trailblazer Eric Picard, AdExchanger has learned.

Under the all-stock transaction, Picard will join MediaMath as VP of strategic partnerships as the media-buying platform builds out products around private marketplaces and “automated guaranteed” inventory (i.e., direct site buys).

The deal has the markings of an acqui-hire. Picard, whose title at MediaMath will be VP of strategic partnerships, is the only exec from Rare Crowds’ small team going over to MediaMath. Co-founder and CTO Scott Tomlin will consult with MediaMath through the transfer of Rare Crowds’ technology.

A well-known figure in the ad tech space, Picard founded Bluestreak, an early ad server and rich media platform. Later he was an architect of Microsoft’s ad platform strategy, and he also held a senior product role at TRAFFIQ before that company exited ad tech and repositioned as an agency.

His responsibilities at MediaMath will include oversight of the company’s relationship with Akamai, from which it acquired Advertising Decision Sciences – along with its pixel-free ad targeting technology – in January 2013.

“MediaMath is making an investment in moving beyond real-time bidding, and taking RTB technologies really far forward into other parts of the ecosystem,” Picard told AdExchanger. “The company is investing in the rest of the media plan that is not currently accessible.”

Rare Crowds was initially focused on helping publishers better package their inventory in a programmatic selling environment, but in the last year pivoted to the buy side.

Here’s how Picard described the Rare Crowds value proposition in an AdExchanger interview two years ago:

“The whole industry has been very focused on prediction. We have to predict how much inventory we are going to have so we can sell it in advance, when you are talking about premium inventory. In RTB, all of the systems that have been developed really allow you to target much better and do not have to worry about prediction.

We’re finding this hypertargeted inventory that has more than four attributes, that’s what we define as a ‘rare crowd,’ all the way out to 12 or 15 or 20 attributes. If it exists, we’ll find it.”

Rare Crowds was backed by angel investors including Hulu’s SVP for ad sales, Peter Naylor, Interactive Advertising Bureau founder Rich LeFurgy and Mediasmith CEO Dave Smith.

Nov 04 2014
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Ad Ecosystem, Ad Technology, Economics, Marketers, Media Agencies, Online Media, Predictions, Publishers, Startups

The Digital Advertising Industry Needs An Open Ecosystem

By Eric Picard (Originally published on AdExchanger Tuesday, November 4th, 2014)

Thanks to amazing new offerings from Facebook, Google, Amazon and others on deeply connected identity and tracking solutions, we are seeing two major developments. For the first time, connected identities across entire populations are available for targeting, tracking, reporting and analytics. But these identity pools exist within walled gardens, siloed to just one provider.

From a tactical and strategic point of view, I completely understand why companies create these walled-garden identity solutions. And to some extent, they will open their walls – metaphorically allowing outside vendors and partners to enter through checkpoints, accompanied by security and wearing clearly labeled badges. Nobody can fault a company like Facebook or Google for being careful about allowing entrée to their walled gardens. The potential for a PR backlash is significant, and that could cause the overall value of their offering to decline. So yes – it’s good to be cautious.

But it does create a significant issue for every publisher outside the top five or so because their first-party data pool is limited to the activity on their own site or apps. They don’t get access to cross-site activity, nor do they have a way to compete with the efforts of the biggest players on their own. It will be hard for publishers – even the large ones – to resist the momentum that will build to plug into these walled gardens, forcing publishers to effectively commoditize themselves in exchange for access to identity, targeting and analytics data.

I’ve long been a proponent of open approaches in the ad-tech space, including open source, open architecture or open APIs. I also am a big fan of well-considered and coordinated industry or consortium efforts. I believe that efforts like OpenRTB, which is pushing for an open API standard for real-time bidding, will be key to helping the industry grow.

Open efforts like this help ensure that the biggest players don’t create huge competitive moats like we saw with paid search, where Google AdWords’ creative, functionality and APIs became the effective industry standard. As a result, any time Google makes any change, all other paid search players must immediately copy Google because of its massive dominance in this area.

Even the biggest players should support these open initiatives because regardless of any disproportionate boost one or two players may get, we’re in a massive growth phase and an open approach has proven a better way to expand industries and sectors. Building significant traction is easier with scale – and by pooling scale, the whole space has the opportunity to accelerate growth.

That said, it’s highly unlikely that Google and Facebook will take a completely open approach on their key initiatives. For one, they have enough scale to catalyze efforts and markets on their own. But more importantly, it’s not in their self-interest to be open. Remaining closed gives them opportunity to maintain control and position in the market while marginalizing smaller players in the ecosystem.

I predict that we will see more industry consortiums created around areas like identity, directly in response to the very large walled gardens that are being built now. It’s really the only way that everyone else in the industry can protect against commodification and ensure a level playing field.

Oct 11 2014
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Ad Ecosystem, Marketers, Media Agencies, Online Media, Predictions, Publishers

Programmatic’s place at the top of the marketing funnel

By Eric Picard (Originally Published in iMedia – October 11, 2014)

For decades, modern marketers have developed significant marketing plans with detailed analysis of target audiences. Often before products are designed, significant amounts of market research have been developed and applied against the product or service development process.

When a brand decides to spend millions of dollars to create a product or service, it typically then spends tens to hundreds of thousands of dollars on market research and product planning to get ready to launch it.  And then hundreds of thousands to millions of dollars to market the product.

Most of that market research and product strategy folds over into the marketing plan. And as part of that process, typically very detailed marketing personas are created — sometimes a handful, sometimes more than a dozen. These marketing personas are decomposed into the marketing plan and drive many of the media mix decisions that are used to divvy up budget among channels. And often these do get distributed to the media agency as part of the marketing plan’s translation into media planning and strategy.

But in my experience, it is fairly common that by the time the media buyer gets the media plan from the planners, the marketing personas have been stripped off. And this is even more true when we bring programmatic media into view. As an example, consider a conversation I had this past year with a media buyer at a major trading desk.

This trading desk handles the media buying for a major home improvement retailer. And when I talked with the trading desk buyer about how the company approaches this customer’s media buys over its DSP partner, the buyer looked a little puzzled. To that person, it was about only two things:

  • Buying the “home improvement” segment
  • Setting the rest of the budget to optimize spend against CPA on its web pages and letting the DSP figure the rest out

The problem with this approach is that it’s extremely one dimensional — and loses much of the value that exists within the systems used. It’s like using an F-16 to commute to work. Or an aircraft carrier to run to the store.

I haven’t seen the marketing plan for the client, but I can imagine (having seen a lot of them over the years) that the retailer has several different ones. I’ll make up a few that probably exist in part, and explain how I’d have approached the campaign using a DSP.

Persona 1: Reggie is a 28-year-old single male who lives in a major metropolitan area in a condo that he owns. He makes more than $50,000 a year and mostly shops at the client’s stores to buy décor items, fans, DIY project materials, and probably will buy things like air conditioners, painting supplies, hand tools, etc.

Personas 2 and 3: Sophie is a 35-year-old stay-at-home mother who lives in the suburbs of a major metropolitan area and is married to Tim, a 35-year-old executive who works in the city and commutes. Together they own a house that is more than 4,000 square feet and has at least half an acre of land. Tim is a weekend DIY warrior, who takes on various home improvement projects. He’s likely to take on light construction projects, buying building materials, painting materials, plumbing and electrical, and lots of landscaping tools such as riding mower, blowers, etc. Sophie is an avid gardener who buys numerous plants and gardening materials, and takes frequent courses on design and gardening at the store.

Persona 4: Arthur is 65 years old. He is retired, lives in a modest home in the suburbs, which he owns outright. He is in the process of getting ready to sell the house as he and his wife are looking to move to a smaller place or a retirement community. But he has three adult children who own homes nearby, and he frequently putters and does projects around their houses. He’s likely to buy building and painting materials.

Although I just made up these personas, they’re fairly typical of the kinds of personas I have seen over my career — if anything, they’re a bit light. Additional information that would typically accompany a persona includes the numbers of each of these personas that exist in each DMA in the U.S., perhaps even broken down by ZIP code within each DMA. And then marketing teams typically will use whatever tools are at their disposal to begin matching against mechanisms like PRISM clusters and do some media mix modeling about how to reach these audiences.

At the handoff to media agency partners for digital media, the planners at that point begin using various tools to determine what sites have traffic that matches their target audiences, and an overall media plan and strategy is devised.

Once the plan is handed off to media buyers and their trading desk partners, the thinking is usually quite distilled. Buyers going directly to publishers will send over an RFP that simplifies the media plan (they may also send the media plan) for sending to publishers. They then wait to hear back regarding what inventory is available. The trading desk partners typically decide what audience attributes align against available data segments for their goals.

Now let’s go back to the example I used above about the trading desk with a major client in the home improvement retail space. Given its customer personas, I’d have recommended a few other ways to engage and find audiences.

Perhaps it could target users who own homes of a certain size or homeowners who have been in their home for a certain number of years. It could target each of these segments by age and geography. It could differentiate both creative and offer by each of these. It could vary what products to highlight in its advertising based on some of the criteria, such as age, gender, and other elements. It could target households with children differently than households with adult children not living in the home. It could even target based on the age of children, assuming parents of college age students might be moving kids into apartments or dorms at the end of summer or fall. Or it could target urban apartment dwellers with fans in the summer and suburban homeowners with leaf blowers in the early fall, snowblowers in the late fall, and lawnmowers in the early spring.

In programmatic, we far too often fall into the trap of only feeding the portion of the purchase funnel that is focused only on CPA at low costs of media plus data. As a market, we need to expand how we see programmatic media and really try to dig into the market for data and the use of sophisticated DSP platforms.

Apr 01 2014
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Ad Ecosystem, Ad Technology, Online Media

The Difference Between Programmatic RTB And Direct

By Eric Picard (Originally published on AdExchanger April 1, 2014)

I had the great fortune to moderate a panel called “Programmatic Guaranteed” at AdExchanger’s recent Programmatic.io conference in San Francisco. The prep conversations for this panel, the conversation on stage and the conversations with audience members afterward were very compelling.

Clearly the market wants to figure this out, and the promise of programmatic means different things to different people. This is a complex space that needs more information and definition, which we’ll do today.

As an industry we have two primary “stacks” of technology that drive advertising between the buyer, seller and consumer. One is what I’ll call the “direct” stack, and the other is the real-time bidding (RTB) stack.

Direct Advertising Stack

The “direct” software stack in play supports publishers. This is the first-party ad sever, the publisher’s inventory management system. Examples include DoubleClick for Publishers, Open Ad Stream and Freewheel.

This publisher system enables publishers to manage their advertising businesses – in particular, this is designed around the need to put ads on pages, monitor revenue and manage sales. But one of the primary uses of these systems is for publishers to package their inventory. One of the core uses of this entire technology stack is to find inventory that is available for sale, and package it in order to sell it to advertisers.

The direct stack is a set of tools and technologies for packaging inventory for sale to buyers. Packages are assembled either in advance, or in response to a buyer’s request for proposal and media plan.

The Programmatic Direct Stack

Over the last few years, a variety of companies have launched in the programmatic direct space, which aims to connect the publisher’s direct systems to buyers’ systems – either the traditional or the programmatic tools. Examples here include YieldEx, iSocket, Shiny Ads, Bionic Ads and AdSlot.

The problem with this stack, from the buyer’s perspective, is that the programmatic direct world is an extension of the direct platforms. They are designed to package inventory according to the ways in which publishers want to sell inventory. They aren’t designed to allow the buyer to manage against their own goals. The contract terms for inventory are defined by the publisher, and executed according to a publisher-centric view of the world.

The benefit that buyers get from the direct stacks are that the inventory can be reserved — in other words, the publishers and buyers can agree in advance on not only the price of the inventory, but the volume and budget that the buyer is signing up to spend. And the publisher is willing to guarantee the buy, meaning that if they under-deliver, they will give the buyer a “make-good” on the inventory that was not delivered.

Programmatic RTB Advertising Stack

The RTB software stack is focused primarily from the point of view of the buyer. There are supply side platforms (SSPs) like Rubicon and Pubmatic that are publisher facing, but like their demand-side partners (DSPs), their focus is on enabling the buyer to find inventory according to their definitions, rather than packaging inventory up on the publisher side.

The systems in the RTB world are very flexible and don’t require packaging in advance.  The only problem with this is the inability of these systems to easily offer a guarantee on the buy. There are some mechanisms that can be used, such as the Deal ID standard, which allows a buy-side system to be assigned to a specific ID in the sell-side system. But typically these are supported more by the SSP, and not within the direct stack of software.

There is an immense amount of investment in the ability to forecast and ultimately to sign reserved or even guaranteed deals in the programmatic RTB software stack, but we’re still a ways from this. We may find ourselves supported here in the next year or two – but matching these systems together has proven challenging – and recreating the ability to forecast and give make-goods in the RTB stack has been nearly impossible.

The ‘Holy Grail’

There is another path that some technology companies are exploring, which is the ability to push the advertiser’s demand goals directly into the publisher’s direct ad server. In this model, the buy-side system allows the buyer to specify their goals, and then through integration with the publisher’s direct ad server, can create line items matching the advertiser’s goals. But this is a new approach that has not been fully productized yet in the market. It will be interesting to see how this evolves.

Jan 18 2014
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Ad Ecosystem, Ad Technology, Online Media, Predictions, Startups

How (and why) emerging media should plan for scale

By Eric Picard (Originally Published on iMedia – January 18, 2014)

People in emerging media spaces frequently ask me how they can get advertising into their content experiences or how they can use their technology to create value for advertising technology companies. Recently someone asked me about using bitcoin in advertising. In the past, I’ve spent hours working with clients who have hired me to help them figure out advertising models for their new emerging media products, despite my telling them early on that it’s unlikely that there’s a “there, there” related to their situation due to scale.

This is apparently hard for people to wrap their heads around, so let’s talk about this specific issue — the issue of scale in advertising. At its heart, the issue of scale is possibly the biggest and most fundamental issue in advertising — and it is frequently misunderstood. Here are my three rules of scale in advertising:

  • Advertisers need to be able to spend relatively significant budgets efficiently at a low cost per impression.
  • Advertising campaigns need to be able to reach relatively large audiences without significant complexity in managing them.
  • Return on advertising spend (ROAS) needs to be able to be calculated in some form (including, in many cases, very simple key performance indicators).

Let’s talk first about the difference between marketing and advertising. I’ll give you my definitions, as the dictionaries don’t do justice to the concepts:

Marketing is about communication; it is a commercial message to a potential or existing customer, and increasingly it is a two-way conversation with potential or existing customers. Marketing includes one-on-one conversations between employees and prospects, mail and email communications, advertising, public relations, and more.

Advertising is about reaching the largest possible audience, with the best available message, as effectively, inexpensively, and efficiently as possible, generally through distribution over a large media channel. Advertising is a subset of marketing, but it has unique properties and rules that one needs to be aware of in order to apply it as a revenue source.

The most important concept that defines advertising as opposed to marketing is scale of reach at a reasonable cost. Advertising generally requires that a very large audience can be reached at a low cost per impression. Not only must the cost to reach the audience be relatively low, but the cost to manage the buying of the advertising media must also be relatively low. In addition, the ROAS must be somewhat measurable. That said, ROAS is a fairly squishy way of discussing a variable and varied set of metrics that are generally constructed on a per-advertiser — or even per-campaign — basis to gain an understanding of results.

At this point, a few of you are probably getting ready to argue with me about some of the things I just said. The likely argument revolves around some high-CPM inventory that is bought by some advertisers for some campaigns at a very high rate. And while this does happen, my points above still hold true. The cost of the inventory is relative based on the goals of the campaign and an analysis of its results.

For instance, some inventory that is highly targeted or highly effective can sell for a high CPM, but it can still meet the ROAS goals of the campaign. This can be due to high performance or a relatively rare target audience (perhaps extremely high income or very niche interests, such as pilots, airplane owners, or sky divers). It can also be due to a highly competitive media set (e.g., auto-intenders or people who manage investments).

ROAS is a superset of all the various means of calculating performance because ROAS can be based on brand metrics as well as performance metrics. It can be as laser-focused as a tightly bound formula including cost per acquisition (CPA) and the margin on the product that the “A” drove. Or it can be as broad as understanding that for every dollar of advertising spent (using some kind of analysis that could be sophisticated or simple) gross sales increased by some amount.

The ROAS calculations can also be derivative. For instance, there may be a very clearly understood metric that has very clearly understood value that can be used as the primary goal of a campaign. For instance, in the automotive space, the value of a test drive is very clearly understood; most car companies know exactly what the conversion rate is between test drives and purchases of their cars. It’s common to use test drives as a campaign goal, which is not really the goal of the advertiser, but it is fairly measurable and clearly understood in secondary value in sales.

For those trying to roll out a new (or emerging) advertising medium — one that is based on new content models, new distribution models, or new devices or technologies — this concept of scale is critical. Until a media type can provide enough reach to be of value, it’s hard to use advertising as a mechanism to fund it. That number varies based on the makeup of the audience using the media.

For instance, if a new hand-held device for hedge-fund managers were launching, the audience size needed to be ad supported would be much lower than a hand-held device for the homeless. For a mixed-audience scenario, one that’s by nature more affluent (since most emerging media scenarios tend to appeal to early adopters, who tend to be affluent), the magic number seems to be at least in the hundreds of thousands, but it can range into the millions.

The more information available about the audience that is adopting the emerging media, the more likely early ad funding is to occur. This audience data must be collected up front. The task cannot be left until later. If it is, there likely won’t be a “later.”

 

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

The fundamental disconnect between buyers and sellers

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

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

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

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

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

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

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

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

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

Enterprise Adoption Of Ad Tech Will Supercharge The Market

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

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

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

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

Marketers

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

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

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

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

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

Publishers

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

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

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

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

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

The Evolution Of IT

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

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

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

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

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

Sep 12 2013
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Ad Ecosystem, Ad Technology, Media Agencies, Online Media, Predictions, Publishers

When will digital take over traditional media?

By Eric Picard (Originally published on iMediaConnection.com, September 12, 2013)

In 2005 I worked on a project to map the infrastructure used for all traditional media advertising and determine if there was an opportunity to inject the new modern infrastructure of online advertising into the mix. This was a broad look at the space — with the goal to see if any overlap in the buying or selling processes existed at all and if there was a way to subtly or explicitly alter the architecture of online advertising platforms to drive convergence.

If you think about it, this is kind of a no-brainer. Delivering tens or hundreds of billions of ads a day in real time with ad delivery decisions made in a few milliseconds is much harder than getting the contracts signed and images off to printing presses (print media) or ensuring that the video cassettes or files are sent over to the network, broadcaster, or cable operator by a certain deadline. And the act of planning media buys before the buying process begins isn’t very different between traditional media and digital.

I went and interviewed media planners and buyers who worked across media. I talked to publishers in print, TV, radio, out-of-home, etc. And I went and talked to folks at the technology vendor companies who supported advertising in all of these spaces. It was clear to me that converging the process was possible, and as I looked at how the various channels operated, it was also clear that they’d benefit significantly from a more modern architecture and approach.

But in 2005, the idea of digital media technologies and approaches being used to “fix” digital media was clearly too early. It would be like AOL buying Time Warner…Oh yeah, that happened. In any case, the likelihood of getting traditional folks to adopt digital media ad technology in 2005 was simply ludicrous.

And despite progress, and clearly superior technical approaches in digital (if lower revenue from the same content due to business model differences), there’s little danger of traditional and digital media ad convergence in the near term. This is actually a real shame because digital media now is stepping into a real renaissance from an advertising technology perspective.

Programmatic media buying and selling is clearly the future of digital, and I believe they will extend into traditional as well. And within programmatic, RTB is a clear winner (although not the only winner) in the space. The value proposition of RTB for the buyer is incredibly strong.  Buyers get to deliver ads only to the specific audiences they desire and on the specific publishers (or group of publishers) they want their ads associated with. While still mostly used for remnant media monetization, this is changing very fast.

Television is the obvious space to adopt digital media ad technology, and with terms like “Digital Broadcast,” “Digital Cable,” “IPTV,” and others, it would seem on the surface that we’re moments away from RTB making the leap from online display ads and digital video to television.

That’s not quite the case. While great strides are being made in executing on targeted television buys by fantastic companies like Simulmedia, Visible World, and others, this space is still not quite ready to make the transition to real-time ad delivery (what we think of as ad serving in the online space) at large, let alone RTB.

This is because the cable advertising industry is hamstrung by an infrastructure that is designed for throughput and scale of video delivery, which was absolutely not designed with the idea of real-time decisions at the set-top-box (STB) level in mind. Over the years we’ve seen video on demand (VOD) really take off for cable, but even there, where the video content is delivered via a single stream per STB, they didn’t design the infrastructure around advertising experiences. Even the newer players with more advanced and modern infrastructures and modern-sounding names like IPTV, such as Verizon’s FIOS solution, haven’t built in the explicit hooks and solutions needed to support real-time ad delivery decisions across all ad calls. That basically means that for the vast majority of ads, there’s no targeting whatsoever.

Some solutions like Black Arrow and Visible World have done the work to drop themselves into the cable infrastructure for ad delivery, but nobody has seen massive adoption at a scale that would let something happen at the national level. And the cable industry’s internally funded advanced advertising initiative — The Canoe Project — laid off most of its staff last year and has focused on delivering a VOD Clearinghouse to get VOD to scale across cable operators. So in 2013, we’re still not to the point where dynamic video advertising can be delivered on any television show during its broadcast, and even VOD doesn’t yet have a way to easily, cohesively, and dynamically deliver video advertising — let alone providing an RTB marketplace.

On the non-RTB side of programmatic buying and selling, I think we’ll see a lot of progress here in traditional media. Media Ocean has been doing their own flavor of programmatic for quite some time — in fact the Media Ocean name of the post-merger company was a product name within the Donovan Data Systems (DDS) portfolio that helped bind together the DDS TV Buying Product with a Television Network selling product and allowed buyers and sellers to transact on insertion orders programmatically for spot television. With Media Ocean’s new focus on digital media (which is getting rave reviews from folks I’ve talked to who have seen it), there’s little doubt in my mind that these products will extend over to the traditional side of the market and ultimately replace (or be the basis of new versions of) the various legacy products that allowed DDS to dominate the media buying space for decades.

If our industry can get to the point where executing media buys across traditional and digital share a common process until the moment where they diverge from a delivery perspective, I think the market overall will make great headway. And I’m bullish on this — I think we’re not far away but it won’t happen this year.

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