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Archive for the ‘Online Advertising’ Category

 

Your Replacement for UDID’s Sucks

Tuesday, May 29th, 2012

(This is a personal opinion, not the opinion of Verve and not necessarily reflecting any particular strategy that Verve may or may not utilize. Verve’s official opinion is here: http://www.adexchanger.com/now-serving-mobile/apple-udid/)

New technology requires new approaches to take advantage of that technology. The creation of the cookie, a tool originally designed for maintaining state primarily for e-commerce platforms, allowed advertisers for the first time to control frequency exposure to consumers.

(Sidenote: My first company, Group Cortex, created SiteTrack, the first NSAPI plug-in for maintaining state in web servers – it did crazy URL modifications to maintain state pre-cookie and it was painful. I attended the first W3C meeting talking about the introduction of cookies. My obsession at the time (and an on-going “thing” of mine): A special referrer should be set when someone uses a bookmark to get to the site. Today it is set improperly to the site you were on when you selected the bookmark. Tracking bookmarks was the 1995 version of “LIKES”. I should have been a billionaire.)

Anyway, Television does not offer frequency management. Radio and print do not offer frequency management. These tools simply never existed before. And yet when we enter a mobile advertising world, the thought that we cannot track frequency of ad exposures is considered preposterous.

iPhone’s are the most common target for mobile advertising today. They are widespread and the people that use iPhones consumer significant amounts of content. Today, the state of iPhone user-targeting is this:

  • Apps are able to access the UDID of the user – a unique ID assigned by Apple – and set cookies
  • The safari web browser, by default, is able to set first party cookies but not third party cookies. It cannot access UDIDs.

While it is possible, with a bunch of work that is very unfriendly to the consumer, to tie UDID to mobile web cookies, we have already take a giant step backwards: In most situations, when frequency capping a mobile campaign, a mobile web user and an application user cannot be separated.

Apple recently deprecated the UDID, meaning that soon, access to that function may go away. This means that between applications, it will soon become impossible to tell one user from another. Advertising networks are scrambling to replace this technology with a variety of solutions, but two seem to dominate the conversation:

1) MAC Addresses: This is a hardware identifier burned into the system. It works essentially exactly like UDIDs which is why it is such a focus of interest. Unfortunately, for exactly these reasons, I suspect that anyone that uses it will find that it is deprecated simultaneously with UDID. It is harder to deprecate because some applications maybe designed to interact with the network protocol layer and hence need the MAC address for functionality, but Apple can probably figure this stuff out.

2) Pastebin Solutions: This uses the Pastebin (the copy/paste buffer of the OS) to hide an identifier for the user. This holds the promise of creating a potentially cross-platform solution, but it seems the most frought with compromise of user-data. A lot could be hidden in the copy/paste buffer and I would expect to see Apple act to prevent such inappropriate use of system resources.

So it turns out that today there is no suitable replacement. Many Advertisers seem to hope that Apple will address this. I am not optimistic. I have not seen Apple express any knowledge or interest in improving the life of Advertisers.

We may be living in a world where mobile advertising is simply less measurable in this way than Display. That is not the end of the world, but as mobile becomes the domain of digital media planners, we are told that this is some kind of horrible show-stopping turn of events. What it really means is that media planning around this becomes more important – it cannot be simply taken for granted.

Frequency cappings most powerful effect is on performance – the proof of whether a publisher is achieving reach or ever increasing frequency will be in the performance of the campaign. It is easy to imagine living in a world without frequency control if the performance of campaigns is strong and sustained. This will require work on the part of advertisers and publishers, but it is achieveable.

How off-base am I?

Engineers irrationally hate advertising

Thursday, March 15th, 2012

What engineer thinks this sounds very interesting:

  • Big data
  • Incredibly complex algorithmic learning
  • Huge scale
  • Millions of users daily
  • APIs
  • A de-emphasis on the user interface – EXCEPT WHERE IT IS EMPHASIZED

The answer is most engineers. Because most engineers cannot stand the idea of working for an advertising company.

One of the things I have noticed in the course of recruiting people to work at Advertising.com, Deconstruct Media, and Verve Wireless is that engineers have an irrational loathing of working on advertising projects. Despite the fact that their rational mind recognizes that advertising funds free content (including search engines like Google), they have no desire to help make the world a better place for advertisers and help fund the development of better content.

Why is this? When I was at Ad.com and random people would ask me what I do, I would say, “You know all those University of Pheonix ads you see on the Internet.”, “Yeah, I see those everywhere, they drive me nuts”, “I put those there!”

I would say that because it was funny. Engineers would feel like it was the truth and be depressed by it.

When you compare some of these projects to other projects, they frankly don’t compare too badly:

  • LivingSocial: We sell pizzas at half price – is that what engineers want to do?
  • Government contracting: We are building tools to help the FDA manage case applications
  • Yahoo: We help people read their email (where success=seeing more ads)
  • Google: We help people search for stuff
  • Even Quora: We help people get answers to their questions

Call me crazy, none of those seems inspiring. But advertising seems to create a response that is 100% pure loathing.

This is particularly tragic given the fundamental interestingness of advertising technology online today.

I will add to the list of good qualities advertising companies have:

  • Clear path to revenue, profits, and fundraising
  • Huge market
  • Rapidly growing

It is easy to start a company in this space – why aren’t engineers diving in?

Logged-In Contextual Ad Units

Wednesday, February 15th, 2012

Saw some new ad units on Grooveshark today:

Both of these were ad units that took advantage of the fact that I was “logged in” to those accounts to show me contextual information. Amazon showed me the last few products I looked at, LinkedIn showed me relevant job offers. (I find it interesting that LinkedIn thought it was necessary to pay some ad network to show me these job offers. Do they need a certain amount of traffic here to justify their existence to recruiters? I suppose so.)

Interestingly, it is only a hop, skip, and a jump to LinkedIn licensing this data to the ad network to drive other targeting – maybe AppSumo uses LinkedIn data to drive offers to me or something.

Frankly, I don’t love it, but this is basically the same as all retargeting. It is a good thing I wasn’t looking at some illicit product on Amazon and someone isn’t looking over my shoulder!

Millennial Media: Good luck, and thanks for all the fish!

Wednesday, January 18th, 2012

Disclosure: I know tons of people at Millennial and am good friends with many of them. And I hope they all make crazy bank.

But as they say, “No conflict, no interest!”

Anyway, I haven’t talked to anyone there since the S-1 filing and I am not an employee, so I can complain about the coverage that Millennial is getting from the Business Insider. They have written a couple of articles that I take exception with. Also, Business Insider is a rag and I wish I could stop reading it.

Finally, I have been wanting to do a blog post about Millennial’s IPO and how their Q4 was probably boffo.

The first article I take exception with: http://www.businessinsider.com/millennial-medias-ipo-is-dependent-on-accounting-gimmicks-2012-1

I think the URL says it all: Millennial Media’s IPO is dependent on accounting gimmicks.

This is a bullshit article.

Business Insider is dismayed that that an ad network recognizes dollars that pass through as revenue and then the publisher payments as COGS. Although they note that this is how every ad network does it.

But folks, this IPO is not about small revenue – although I actually agree: The revenue is smaller than I expected.

This IPO is a growth story and a story of needing cash. Historically, networks have a negative cash cycle. Publishers expect to get paid by networks quickly and agencies pay slowly. The result is that you need a lot of cash to front the business.

But let’s talk about the growth story: In 2010 Millennial did 40% of their revenue in Q4. I expect more of the same and a key part of their IPO is putting the puck on the ice with a great announcement in a few weeks – immediately prior to their IPO – about a blowout Q4. How do I know this?

  1. This business is seasonal. Q4 is when it happens. You saw it in 2010.
  2. I had a great Q4. Q4 was great for mobile advertising – I have seen a number of anecdotal industry data points.
  3. Millennial knows what they are doing. These are the same guys that hit it out of the park at Ad.com and they ran that business with strong operations. I am telling you right now: They know exactly how much money they make every day. When they filed their S-1 in the beginning of January, they already knew what Q4 was and they filed knowing they were going to have a great announcement to make prior to the IPO. They know. Their bankers know. This is orchestrated.

The second article I take exception with: http://www.businessinsider.com/this-chart-shows-the-no1-problem-at-millennial-media-right-now-2012-1

“This Chart Shows the No. 1 Problem at Millennial Media Right Now”

What is that problem? Let’s quote.

The real culprit is general and administrative expenses — “product, operations, developer support, business development, administration, finance and accounting, legal, information systems and human resources employees,” as Millennial describes them. G&A expenses (in orangey-brown, below) are growing faster than any of the company’s other operating costs:

millennial media

This ought to be CEO Paul Palmieri’s No.1 issue right now: Controlling his bloated admin costs. If Palmieri (pictured at top) can’t get those down as a portion of gross profit then it doesn’t matter how successful his salesforce is.

This is pretty much 10000000% wrong. The hypothesis that a business needs to cut these costs imply that a business is mature. Millennial’s plan is not to control costs to generate profits. It is to grow. GROW. GROW.

This is the Amazon model. If you want to win, you spend. They will grow their way to profitability, but Business Insider talks out of both sides of their mouth: This company is tiny! This company has bloated admin! What no one can deny is that they are growing super fast. They could be 10x bigger in 4 years. Bet they will throw off tons of cash then. When you raise money and when you build a business, people always need to be thinking about optimal velocity. This spend is about maximizing market opportunity, not maximizing quarterly profits. That will come soon enough!

Did they hire people to work in Publisher Services and lock up tons of inventory for Q4? Yep.

Did they scale up operations like crazy? Yep.

Did they hire finance people to get all SOX-compliant? Probably. My understanding is the business is swarming with finance people now.

Is this a bad idea? Nope.

It is the top of the first inning. They have a chance to be a dominant player in the industry. Why would you underinvest?

They are going after it. That is totally the right thing to do. In a market like this, you grow your way to profits. Skimping on the business is a recipe for disaster. Why Business Insider would encourage this demonstrates their naivety toward the opportunity in mobile advertising.

 

 

How the contribution of retargeting has changed in reselling ad inventory

Wednesday, January 11th, 2012

Was just thinking back to a period at Ad.com when I was running the behavioral products. At one point, retargeting probably contributed >50% of the margin of the business: Buying a billion or two impressions a day at cut rate prices and showing performance ads on them was essentially a breakeven business that we used to acquire reach. Acquiring reach allowed us to show retargeting ads. Retargeting ads generated profit. We are talking about, probably 1% of the impression volume of the network generating most of the profitability of the network.

Pretty amazing!

Also, it is amazing how exchanges have changed that business. That strategy is not nearly as interesting as reach becomes a commodity.

I would love to hear from our readers: I used to hear how complex decision-making was in “buying the right networks for retargeting”. Advertisers ended up doing a lot of “buying more frequency” when they were trying to buy more reach. As inventory has consolidated to the exchanges and SSPs, it would seem like advertisers could, more than ever, rely on just a few providers to get the retargeting reach they need, yet as Darren Herman reported over the holidays, people still drop dozens of retargeting pixels.

I think part of the driver is that retargeting has gotten more complex as people seek ways to add value to retargeting by optimizing the retargeting in different ways.

Tell me what is up in your world! As a mobile guy (now), I don’t really think about retargeting at all today.

Google: Dedicated to making the world less interesting…

Wednesday, December 21st, 2011

Another blog post I have been meaning to write for 6 months.

If the FTC asked me for my opinion on the Google/AdMeld acquisition, I would tell them that they are actively reducing competition in a market and that Google should not be allowed to do it.

What proof have I? Look no further than the DoubleClick acquisition. With DoubleClick owned by Google and the free Google Ad Manager product, I got the distinct impression that the life was sucked out of the ad serving market. When you talked with investors, they would tell you that no one valued ad serving – it was a commodity product. When you talked with customers, they would tell you how ad serving was a commodity and they expected to pay virtually nothing for the product.

This, despite the fact that ad serving products basically sucked. (Apologies in all these regards to OpenX, 24/7, AdTech, etc.)

I suspect that we will see much of the same now with SSPs – AdMeld, probably the market leader from a technology perspective, will now be a part of Google. How could someone fund a competitor? And AdMeld is good (I know Ben, etc.), but DCLK was good 5 years ago.

Lot’s of people I talk to feel like the industry is going through a period of maturation and consolidation – I see very few (none?) companies that blow my mind like that first meeting with Invite Media did when they were 8 guys in an apartment in Philadelphia.

And let’s face it, online advertising still sucks. I laughed time and again at the new commercial for Siri with Santa Claus. I made my wife come watch it. I haven’t seen a good online ad since subservient chicken. Online advertising is good at bottom of the funnel, not so good at the stuff that TV excels at. Big opportunities out there remain unrealized.

Of course, Google recognizes that this is where they will make their money so they are land grabbing left and right. I can’t blame them, but it does make our industry less interesting.

The Gift of Daily Deals in the Internet Landscape

Monday, December 19th, 2011

I realized recently that my  perspective on “what is interesting about daily deal companies” is different than most people, so I wanted to articulate it.

Lot’s of people worry that consumers will suffer daily deal burnout and they say, “these daily deal companies whole businesses are built around email marketing lists, when consumers burn out, they are doomed”. That drives headlines like, “BURNOUT IS HAPPENING”. Don’t get me wrong, that is a concern, but this is not what makes the daily deal companies so interesting to me, and it is precisely what I find interesting about them that makes them so valuable in my opinion.

For a decade, Internet start-ups bemoaned the challenge of penetrating the local market – no one had the sales force. Everyone dreamed of partnering with people like the Yellow Pages that had 10,000 feet on the street. Every start-up had a product that, if they could somehow magically motivate a third party salesforce of thousands of people, they could turn into a mint of money. The problem was, building a sales force was super expensive. Only one company really did it: ReachLocal. They raised huge chunks of money at extraordinary risk and successfully made it happen. But they were the exception, not the rule.

With the advent of the daily deal, several companies have had the chance to build out giant sales forces – Groupon and LivingSocial now have sales organizations that dwarf ReachLocal and they are rapidly going international.

Sure, there is a finite limit to the amount of daily deals a vendor will offer. And a finite limit to the amount of daily deals that consumers will buy. But that is not bad. All they need is more product. LivingSocial and Groupon suffer today because they have this huge sales organization, but they really only have one thing for them to sell. They go to all this trouble to build a relationship with a business, they do a daily deal, and they are done. Can’t really sell them anything else for six months or a year. What they need is MORE STUFF TO SELL THEM.

That is easy. Go buy companies. You have the equity to do it. You have cash in the bank too. I predict that Groupon and LivingSocial will start munching up companies left and right in the next few years. They need more product in the pipeline for their salesforce. And being a salesforce, they will always want something new. Now the ideas will meet distribution in a beautiful marriage and tons of early stage companies will be gobbled up to feed the hungry maw of sales. And many entrepreneurs will get to see their dream fulfilled as their idea is used by thousands of small businesses.

Check Crunchbase out: Groupon has already done 10 acquisitions. LivingSocial has done 7. This is just the beginning.

 

How Important is First Look?

Tuesday, October 25th, 2011

Man, John Ebbert didn’t call me on this, but I have an opinion and here I go:

AdExchanger recently asked a bunch of people about the value of “First Look” at inventory.

I felt like the answers reflected a range of sophistication on the topic, but I am here to tell you that first look is the whole ball of wax.

In fact, first look is so important that it drives home the value of RTB as a disruptive force in advertising: the chance to see every impression is incredibly valuable.

I have blogged a fair amount about the incentives and value of front-running inventory, but let me recap in brief:

  • Getting “Frequency 1” users allows a network to have more reach than competitors – a powerful lure for brand sales: This was one of the keys that helped (and continues to help) people like Yahoo! and Ad.com dominate the market.
  • More visibility improves the reach of behavioral campaigns – if you see more of a user with a given behavioral characteristic (e.g. retargeting behaviors), you can show more impressions and make more money.
  • The more ads a person has already seen, the worse an ad performs: The chance to use earlier impressions has a powerful impact on conversion
  • More reach – particularly low frequency reach – is a key driver of monetizing CPA campaigns.

The result is that both DR advertisers and brand-focused ad networks reap substantial benefits from peaking at inventory.

RTB has been a great equalizer here – suddenly boutique companies that have very low fill rates or occupy a tiny niche in the market have the chance to peak at huge volumes of impressions without committing to purchasing them. This capability has helped drive the success of many of the ecommerce companies that have sprung up in the wake of the evolution of online advertising.

Going “Blind” with Ad Networks

Tuesday, October 4th, 2011

http://www.flickr.com/photos/metabolico/809618775/sizes/m/in/photostream/

When I worked at an ad network, many of our publishers wanted to be “blind” – that is, not identified as available inventory in our network. Let me give you an example: Yahoo might give an ad network some of its excess ad inventory to monetize. Yet Yahoo does not want other sales organizations out there telling advertisers, “Oh, I can get you on Yahoo inventory, buy from me instead of that Yahoo sales guy”. Yahoo wants the ad networks money and the network values high-quality, good performing inventory, so the best of both worlds is to be “blind”. The ad network promises not to use Yahoo’s name and Yahoo gives them the inventory on this “blind” basis.

As a product guy, I always respected the desire to be blind, but I always wondered how effective it was out in the field. People have to get paid and a lot of people will do what it takes. I generally imagined there was a fair amount of “wink, wink, nudge, nudge” that took place when agencies and network sales guys talked about inventory – “Let’s just say that I can get you a lot of inventory on sites about Yodeling”. It always seemed like there was a lot of potential for miscommunication about what was blind and what was not as well.

Now that I am in a product role as a company that is first party to a lot of inventory, this has tempered my thinking about a lot of network interactions: I don’t trust “being blind” as a panacea for channel conflict. I was already involved in a situation where one network that I gave inventory to on a blind basis told an agency that they had our inventory – we fired them the next day.

One of the amazing things about networks that don’t respect blind status is how the desperate sales guy – who may indeed close that one sale – thinks that it doesn’t get back to the publisher. OF COURSE IT GETS BACK TO THE PUBLISHER. Generally speaking, the agency has no horse in this race, so when the publisher asks why they aren’t getting a buy, the agency invariably tells them, “Network X said I could get your inventory through them”.

I would love to hear Ad Networks perspective on how they make sure that blindness is respected. Similarly, are there publishers out there that have a “system” to make sure that blindness is honored?

 

I Love Math

Thursday, May 12th, 2011

Some of my favorite people have already responded, but I had been planning to write a blog post for so long that I feel like I still have to get it off my chest:

An article in Ad Age Digital, “The Dangers of Online Advertising’s ‘Math State’“, struck me as verging on irresponsible. I know people love a contrarian view point – look, I am blogging about it – but c’mon!

I had two immediate reactions:

  1. I am as online quant geeky as it comes. But even I recognize the value of great creative. Making great creatives has not gone down in value – I predict it will be the primary driver of the growth of online advertising over the next 20 years. But there is science there. Everyone who has written software knows that “great process provides a framework that can unlock creativity”. We have not yet determined how great creative can be expressed online – there will be an element of math and science to that – but that is no reason for a creative person to be scared.
  2. Kendall devalues what we have done online in the worst way. If I told you that we had developed tools that could determine with amazing precision, person-by-person, at an individually targeted level, the effectiveness of TV ads, would Kendall have said, “All the creativeness has been removed from TV advertising.” Not at all. We are introducing amazing new targeting and measurement in a new advertising world. That is good. The fact that the creative format is not as good today as it should be does not take away from the value of what has been constructed.

One of the things that I loved about this business from the moment I got started in 1993 was that we have the opportunity that John Wanamaker dreamed of: The chance to figure out what advertising is working and what advertising is not. And make it work better.

And I love math. Math is beautiful. Working with numbers is a beautiful act of creation and discovery that is fun and makes you a better person. Math is a gift to humanity that we have been given to explore our universe. Take that.