Amusingly, Matt Marshall goes on a VentureBeat rampage with some slam dunk reporting that I feel compelled to discuss. I will try to note where I am simply applying common sense and where I actually have a bit of knowledge related to the on-going proceedings.
Paid Content discusses the matter fairly well, including an interview with Lynda, but I will get into that as well. VentureBeat updated their post to point to PaidContent on 1am on August 4th. Good to see Matt working late, but sad to see a mangled story. Everyone cites a ton of un-named sources. No idea who these people are, but it is pretty funny to see these sources used to justify uneducated statements. I have to imagine his sources, assuming they are good, cringe at the way their comments are misinterpreted. A great example of reasons to not go on the record.
Matt is obviously super-confused about the roles of publishers and advertisers in networks. Lets break it down:
The entity, recently bought by AOL, is instead being folded into AOL’s Ad.com/Platform A division. This is a shocking move for some, because Ad.com doesn’t target much at all, and offers ads of $1 or less per a thousand views — and is generally considered a “bottom-feeder” by some in the industry. The company apparently hasn’t communicated very well about what sort of targeting technology Ad.com will offer to the affected customers (see memo below).
Hello, there is no targeting here. This is buying inventory from publishers to show ads on. Ad.com buys more inventory than anyone. They are the biggest network around. The result is that they pay less. Volume discounts happen in this industry. Generally, Ad.com has a strong performance focus and tends not to pay high CPMs for inventory. Lower prices improve back-end performance of direct response activity. When someone buys inventory, the kinds of targeting they offer advertisers isn’t really relevant.
I will say that I have knowledge that Tacoda is being integrated into Platform-A, as are all of AOL’s recent advertising acquisitions. I will also say that Ad.com targets a lot.
The next paragraph is where he added the update referring to PaidContent and Lynda’s interview:
She says Ad.com was targeting the same way Tacoda was, and thus the implication is that Ad.com was paying as much. But that’s not what we’ve heard from sources. Only time will tell.
The sources are probably right because that is not exactly what she said. She said that Ad.com offered similar targeting. Probably, advertisers pay the same kind of CPMs for similar targeting. This has nothing to do with buying inventory. Advertising.com buys a lot of inventory from publishers and is able to monetize non-behaviorally targeted impressions fairly efficiently. The result is that Ad.com can buy every impression for sale, not just ones that contain behavioral data. This allows Ad.com to pay less for your average piece of inventory than someone that is only taking very specific, very lucrative impressions.
Back to Matt’s original article:
Tacoda became popular because it offered an industry high rate of $2 to $6 per a thousand views (CPM).
Publishers love networks that pay a lot for inventory. But what was Tacoda’s fill rate? They bought a fraction of the inventory that Ad.com buys. That is great if you are the publisher… why not sell 10% of your unsold inventory for $2 instead of $1? Still, if you were Platform-A, you are simply competing against yourself by continuing to pay these rates for inventory that you probably get anyway.
Matt concludes with:
A letter sent out by Tacoda today suggests publishers will have to sign new contracts, and will have to change tags on their web pages.
He then includes the text of the letter, which says, “take down our ad tags because we aren’t buying inventory, but if you want to remain in our data network, you do not need to change your tags at all.” Seriously, that is what the letter says.
Not sure why Matt wanted to write a grind article on AOL, but it really seems like he felt like breaking out the hatchet. Was he being fed by an ex-Tacoda person? I certainly thought so when I read a quote like this: “Tacoda, all automated, paid rates well above other comparable “remnant” networks. It did so by working hard to target behavior of Web users.” The idea of the company working hard seems to me unsupported fact, although everyone I worked with at Tacoda worked very hard. Much like people at Platform-A.
Anyway, the one thing I thought was weird in the PaidContent article was this “source”:
One source presented this view to me earlier today when asked about AOL’s decision: “Given the fact that publishers must take all [Advertising.com] ads to get any behavioral targeting/Tacoda ads—with Ad.com selling all the ads—it sounds like AOL has abandoned a large, fast-growing and very profitable market all in the name of functional alignment with a slower growing legacy business.”
Is he saying that publishers only want really high paying ads? Certainly true, yet my impression is that inventory, particularly arbitrage-able (read: inexpensive inventory (frequently social media) that contains valuable behavioral data) is growing more rapidly than it is being monetized today. Advertising.com has great reach now. They do not need to pay a premium to cherry pick behavioral impressions. They see everyone already.
If Tacoda and Advertising.com were bidding against each other for inventory, I have no doubt the media would lambast Platform-A for not leveraging economies of scale. With a single inventory acquisition team, it seems like they are being smart.
I know this kind of thing happens in the industry, but I can still blog about it.