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Archive for August, 2010

 

Football Strategy Dissected

Tuesday, August 31st, 2010

Every couple of months I veer wildly off-topic to indulge my personal interests (nee the “Basketball category” on this blog.

I want to break down a few of my personal theories on football and how they relate to some more commonly held football beliefs.

Let’s start with this tenet: The goal of the defense is to put mental pressure on the offense.  If the defense puts the offense, and particularly the quarterback, out of sorts, they probably win.  The quarterback that is hating life the most is probably going to lose.

For the purpose of this discussion, I want to focus on the passing game.  If the defense is too weak to stop the run, the quarterback never throws, is never out of sorts, and they win.  Stopping the run is assumed.  People that can’t stop the run lose every time.

So anyway, mental pressure usually comes from pressure rushing the quarterback.  Pressure arrives in one of two ways:

  • A great defensive line
  • Blitzing

A great example of “great defensive line” was the NY Giants the year they defeated the previously unbeaten Patriots in the Superbowl.  Justin Tuck, Osi Umenyiora, and Michael Strahan were all absolute superstars that could not be blocked one-on-one, they would rush 4 guys, and to double team all three of those guys and block effectively would have taken 7 blockers ((3*2)+1), more than the Patriots kept in with their spread offense, and the result was that Tom Brady was discombobulated the entire game as he constantly felt the heat.

This is why Right End is the highest paid player on most defensive teams.  If the defensive line can generate this kind of pressure without a blitz, it makes everyone’s life easier.  That guy, creating that pressure, is worth his weight in gold.  Conversely, this is why everyone talks about the Left Tackle and how much Left Tackle’s make.  If a Left Tackle keeps a QB from being scared that someone he can’t see is about to hit him, then a QB doesn’t feel pressure.  A great LT is the single biggest thing a team can do to help a QB feel secure.

Finally, relative to other things that I will discuss in a moment, great defensive linemen help stop the run.  Which, as we discussed, is a preliminary criteria to play the game.

Most people don’t have enough talent on the defensive line to be able to harass the quarterback with just a few men rushing.  The result is that many people blitz to create pressure.  Defenses that blitz to create pressure rely on another key player (and this is my area of unique contribution to football schools of thought finally make their appearance): The Cornerback.

Cornerbacks are the defensive backs whose primary area of responsibility is covering wide receivers.  In a defense predicated on the blitz, the ability to single cover wide receivers, even the best wide receivers, gives a defense unparalleled flexibility in where they bring the heat and how much heat they bring.  If you look at the most successful blitzing defenses, you will find teams that value good cover corners:  The Philadelphia hey-day under Jimmy Johnson features a slew of Pro Bowl corners: Troy Vincent, Bobby Taylor, Lito Sheppard, Sheldon Brown, Asante Samuel.  They were never without two superstar corners.  With those corners, they could blitz from all over the field, including bringing Brian Dawkins, the free safety, down into the box for blitzing and run support.

The Jets defense last year keyed off of Revis Island.  Rex Ryan simply never had to game plan for changing coverage to account for great receivers.  He put them on the island and then felt free to go back to blitzing the QB with all the other players.

Without great cornerbacks, a defense needs to drop safeties back to protect over the top.  Once you drop safeties back, you are more vulnerable to the run.  Furthermore, now the flats and middle of the field are less defended, so you need your linebackers to keep an eye out for the tight end and running backs.  You have fewer players to man up with the safeties supporting the corners.  Now you can only blitz one or two guys or risk leaving people wide open in the middle of the field.

Pressure comes from great corners!  Take that to the bank.

AOL and AppNexus

Monday, August 30th, 2010

I have been gone from AOL for almost a year now so I know less than nothing about what is going on in the world, but I wanted to throw out a random opinion or two on these rumors.  I have already given my opinion on the future of Ad Networks, so, no surprise, my opinion ties in closely with what I see going on out in the market.  Here are my theses:

  1. Ad Networks will acquire most of their inventory by bidding into exchanges
  2. Algorithms and access to exchanges will rule the day

Given the lack of announcements by AOL about the status of RTB bidding activity and anecdotal evidence regarding the state of the engineering team and the current focus of the engineering team, one could reasonably postulate that AOL has not been able to invest like they would have liked in scaling their bid engines to look at billions of transactions per day.

This implies that acquiring AppNexus, which has the bidding engine scale and is one of the premier intermediaries between exchanges and advertisers, might be a great tech fit.

AppNexus is a fairly unique company that is laser focused on building better technology than everyone else.  I am a big believer that whoever doesn’t acquire them will kick themselves for missing that opportunity.

So are they interested?  Fo’ sho.

Could it happen?  Seems unlikely.  For a company that has raised $15 million and is in the fairly unique position that they are in, they probably won’t want to sell for less than $100 million and it will be difficult, given the debt convenants AOL has, to do a larger deal.

Of course, this blog post could probably have been compressed to a tweet for all I know: AOL probably wants to buy AppNexus, as do many, but it seems unlikely.

Innovation in Venture Capital

Monday, August 23rd, 2010

http://www.flickr.com/photos/vermininc/2777441779/sizes/m/in/photostream/

I met recently with an entrepreneur who used to work in venture capital.  One question I asked him was, “Why quit venture capital and go back to the grind.  I always felt like venture capital gave you the high level fun of dabbling in companies and working on their worst problems, similar upside, and lower beta!”

His answer was, “I found that venture capital was largely a financial exercise and I just wasn’t a finance guy.  I kept spending all my time working with portfolio companies on their problems and getting in really deep and finally I realized I just needed my own company.”  He went on to tell me (and I hope I am not perverting his explanation to much) that he found VC to not be innovation, it was mostly meet with tons of companies and write a few checks and he was interested in something else.

I thought this was interesting and immediately thought about First Round Capital and Andreesen Horowitz.  Why?  Here is why:

They are innovating.  They are changing the way capital gets attracted.  They have taken the “Keiretsu” idea that KPCB pushed so hard in the 90’s to the next level with a variety of tremendous innovations in the way that an investor supports their entrepreneurs.  As Josh, founder of First Round, pointed out in a recent post:

  • Portfolio subject-specific conferences (I remember they did a tele-conference on javascript architectures)
  • Road shows (I remember they did a bus tour dragging their portfolio around to big ad agencies)
  • The Exchange Fund (A competing VC recently said, “This won’t actually move anyones needle”, but the perception of helping entrepreneurs lower their beta is huge)

These guys are finding ways to innovate in venture capital.  Maybe it was that they all started their own fund without working for a VC.  They had a framework to innovate from: experiences as entrepreneurs but not as VCs allowed them to “not play by the rules”.  This guy I was talking to went to a traditional VC and because he was the new guy, maybe he didn’t have the empowerment to innovate.

Clearly, great entrepreneurs find places to innovate in even the most staid and traditional markets.  While I am no historian, VC had probably not really changed significantly in decades prior to the 21st century.  Now we are seeing an incredible market change.  Fun to sit in the bleachers and cheer!

Help Me Make The World A Better Place For Online Marketing

Monday, August 23rd, 2010

So I went to SXSW for the first time in 2009 and I had a great time.  (I didn’t go in 2010 because I was in San Francisco the entire previous week and my startup travel budget was blown.)  I tell everyone the same thing: At SXSW, because it is out in the middle of Texas, everyone is a visitor, no one is running home to their family, and the result is that everyone is totally open to meeting people.   You can walk up to anyone and say, “What is your story?” and they will totally engage with you.  It is a great way to meet new people, network, and build interesting relationships.

Sounds great, right?  But here was the problem: I could not find my people.  I ended up saying, “What’s your story?” and learning tons about crazy obscure movie directors and probably 124025820628 graphic designers.  I wanted to meet my people.  My online advertising people.  But I was unsure how.  There were exactly 0 panels or events for online advertising.  I ended up hanging out with Greg Yardley most of the time and while I thought that was great, he can testify to how annoying spending an extended amount of time with me is.

I have become convinced that what the world needs is an advertising panel at SXSW to provide a forum for online advertising geeks to find each other and commune at this esteemed event.  Thanks to the power of panelpicker, that can now happen.  Selecting speakers for SXSW is partly driven by user voting, so now is your chance to vote for next year:

Click here to go vote for my panel (Registration Required):

http://bit.ly/aq1llV

I know registering is a drag (or as we like to say, conversion rates drop precipitously), but think about it, every other panel has to get people to register, so if you just put yourself out for 2 minutes, we can have a higher conversion rate than everybody else.  That translates to winning!  This is going to become THE EVENT for online advertisers at SXSW.  We are going to be uber-connecting people.  Help us make it happen.

Pricing and Delivery Managers – The Unsung Heroes of the New Marketing Age

Tuesday, August 17th, 2010

They are the people that price CPA deals.

A lot of them have fancy titles like “Director of Yield Management”, some have lowly titles like “Manager of Ad Operations”, but at Advertising.com, they were known simply as Delivery Managers.  Every ad network has them and they form the lifeblood of most yield optimizing organizations.

I suspect that, simply given the age of the organization, Advertising.com had the first delivery managers.  This is the story I was always told about how it was created:

When Gar Richlin joined the organization, many CPA deals were essentially being negotiated by the sales organization – a group that did not have the in-depth knowledge of the network required to understand what reasonable price points and volume correlations might look like.  This is critical in an ad network because a low CPA, while appealing initially to an advertiser, might turn out to drive limited volume because a low eCPM might prevent the campaign from getting widespread network distribution.  Working hard up front to negotiate a fair CPA would maximize the volume of conversions an advertiser receives, making happy advertisers and happy networks.  Gar created a ninja team of the best and brightest half-dozen or so people in the organization.  They were given ultimate power in accepting or turning down CPA campaigns from advertisers.  They tended to be senior people that had the respect of the sales organization, but they were not sales people.

This was a key inflection point in the organization.  Suddenly customers were given reasons to pay a higher CPA.  Delivery managers would come to sales people and say, “If customer X would increase their CPA by Y, we think we could generate Z more conversions for them per day.”  That moved the needle for customers.  As I said, many, many times at Ad.com, “If a sales guy runs into his bosses office and says, ‘If we pay $11.00 instead of $12.00 per sale, we will get 200 more sales today’, I think the head of sales does that deal every time.  And the next day, if he runs in again and says, ‘Paying $13.00 instead of $12.00 will generate 200 more sales today.’, the head of sales does that too.  Right out to the absolute margin of profitability.”

Delivery managers are the people that take on the risk in the organization.  Their willingness to take responsibility for making a CPA campaign work makes or breaks the success of an organization.  Advertising.com used to have a guy, Rich Morrissey, that was the absolute guru of pricing educational campaigns.  He had done so many of these deals and managed so many campaigns that he knew where we would get volume at different price points, what effect different creatives and landing pages would have on conversion rates, and what fair prices were.  He priced all these deals and we used to joke that if he were hit by a bus, it would cost us hundreds of millions of dollars.

The in-depth knowledge of how the network works is what allows these people to do their jobs.  What is a good frequency cap for campaign X?  What is a reasonable starting CPM to bid if we get paid on a CPA and how much can we spend before we have to stop or change it?

A delivery manager that knows the answers to these questions are worth their weight in gold.  On the one hand, they are developing such an esoteric, specialized skill set that they are virtually unqualified for other jobs.  They have a resume with one programming language on it: Ad Networkian.  On the other hand, the demand for these people is exploding: Inside agency trading desks, DSPs, Exchanges, Ad Networks, Publishers (up to and including Facebook), and many more all need these skill sets.  In a story that rocked Baltimore, Tribal Fusion opened an office in Baltimore just to hire Advertising.com delivery managers.

I am predicting now: If the people you have doing your delivery management are people that you treat like “Ad Traffickers”, they will find better homes that value them more appropriately in the near future.

What do you call your delivery managers?  How did that position come to exist in your organization?  Share your story now!

Cogmap’s host, Media Temple, got hacked. Pardon the interruption.

Tuesday, August 17th, 2010

Yeah, that malware notice Google flashed was kind of the real deal.  Our illustrious hosting provider got hacked.

http://blog.unmaskparasites.com/2010/08/08/malicious-ads-and-bars-on-rackspace-mediatemple/

Sorry about that.  We have taken efforts to ensure that we cannot be hacked in this fashion again, regardless of what happens to Media Temple.

Impact on Market of Online Education Collapse?

Sunday, August 1st, 2010

Was talking with one of the smartest people around the other day and he said to me, “Yeah, but what happens when the government stops subsidizing all of these online universities?”  And I said something to the effect of, “What?”

So then I did some research.  Lo and behold, he is right.  (No surprise there.)  The federal government is loaning 25% of for-profit students $30k each to attend school and then 40% default on their loans.  So it seems reasonable to imagine that the government will cut these guys off at some point.  And these guys are big spenders in online advertising.  A conversion is worth a ton to them.  They pay some of the highest CPAs in the industry.

Other is the online universities bucket in this table.  As you can see, they comprise approximately 10% of online advertising spend today and are expected to be (according to Forrester), one of the fastest growing segments of the market.

Is this sustainable?  As we have already demonstrated, there are people that know way more about this stuff than me.  Maybe Jay or someone can weigh in?