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ConversionRater A discussion of online advertising, web entrepreneurship, and personal ramblings from Pat McCarthy.

Monthly Archives: March 2006

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Unique Visitors Isn’t The Best Single Metric

March 30, 2006 4:39 pm / 1 Comment / Pat McCarthy

The web industry has been focused on unique visitors as the best single tracking metric.  I can’t tell you how many times I’ve had companies and people ask how many “uniques” a website I’m involved with gets per month.

For a long time I’ve wondered without doing too much deep thinking if unique visitors was really the metric we should be using as the baseline because uniques are not necessarily accurate when they’re based on IP address, and because isn’t there more value in one unique visitor coming to your site 30 times a month versus them coming once per month?  Doesn’t that say something positive about the site?

Luckily, Matt Belkin of Omniture does some in-depth analysis of unique visitors and suggests that “visits” is the metric we should be using.  Great thoughts Matt.

Posted in: Random, Web Analytics

Facebook for 1 Billion?

March 29, 2006 4:00 pm / 1 Comment / Pat McCarthy

Mike Rundle at BusinessLogs.com discusses some recent rumors that Facebook has turned down an acquisition offer for $750 million, and Businessweek now reports they won’t sell for less than $2 billion.

Wow.  I know Facebook is big, I know Myspace sold for $580 million, and I know that Mike made some good points about how he thinks Facebook will just keep growing as the high school kids in Myspace graduate into Facebook.  Of course, as those college students graduate from Facebook they’re also losing their audience.  It’s a good question if they should build some sort of “post-college” service or just stay focused on the market they’ve dominated.

I congratulate Facebook on their success, but I hope turning down $750 million doesn’t come back to haunt them.  It’s a bubbly time.

Posted in: Acquisitions, Random, Social Networks, Web 2.0

A Critique of Auction Advertising Marketplaces

March 28, 2006 8:31 am / 4 Comments / Pat McCarthy

Michael Katz wrote an opinion piece for Adotas critiquing an auction marketplace for advertising and recommending an open CPA marketplace as a better solution.  Everyone is entitled to their opinion of course, but as someone heavily involved in an auction ad marketplace with Yield Manager, I’d like to discuss a few of his comments.

The auction-based model is an incomplete solution though; a truly efficient system exists only when there is an open marketplace based on pay for performance.

First, I don’t think he ever really proves in the entire article why an open network based on performance is truly more efficient.   Second, I don’t think it’s really true.  Pay for performance has some great advantages, but it also isn’t always the best solution for publishers.  They’re the ones taking all the risk in a 100% pay for performance scenario.

The only people enjoying the efficiency of this program are the owners of the network, though. The advertiser has spent more than they needed to on traffic that did nothing but increase their overall spend and probably did not spend enough in the places where they should have to increase the delivery of highly converting traffic.

How does an advertiser find out what sites will convert without testing all the sites in the network?  I don’t see how it’s possible to ONLY spend money where the traffic converts as Mr. Katz suggests.  Once the system does find where traffic is converting, it spends as much as possible there.

The publisher, similarly, potentially missed out on a higher yielding ad.

No, the way an auction works is the publisher gets the ad that will pay the most for that impression.  That is the highest yielding ad.

By utilizing an open network, advertisers see exactly which publishers comprise the network, view performance by site placement and can adjust bids on a site specific basis to ensure that no impressions are wasted.

I am a fan of open network concepts, don’t get me wrong.  However, I also know that the majority of advertisers don’t have the time or knowledge to do this themselves as effectively as an automated system.  Advertisers are people, which means they get busy, or they have biases that may cause them to do funny things when manually adjusting bids.

As an advertiser, if you could see that a handful of sites are providing most of the return on your investment but you are not getting all of their traffic, wouldn’t you want to re-allocate the dollars you are spending on low performing sites and pay a slightly higher rate to ensure you are maximizing the high performing placements?

Paying more to get all of a publisher’s traffic isn’t necessarily a good idea.  It could work well, but increasing the frequency of your ads on their site might not lead to the same ROI you’re currently getting.  As you spend more and more, you may get less ROI out of each impression.  Regarding spending money on low-performing sites, because of the way Yield Manager works sites that don’t perform don’t earn much because they aren’t performing.  This means advertisers are not spending a lot of money to get volume on these sites, if they end up still serving to those sites at all.

Finally, the network diversifies its risk by running a higher number of more profitable campaigns instead of relying on a handful of advertisers to make up 90% of their revenue.

I don’t see the direct relationship between allowing advertisers to manually adjust their bids per site to a higher number of more profitable campaigns showing up.  I think that’s an assumption that advertisers would just come out of the woodwork if the model was changed.

The problem is that at the end of the day, a CPM deal offers almost as much risk without the upside of a CPA deal though. If the traffic is not converting, the advertiser will cancel and most of the time its with 24 or 48 hours. If you want to retain them as an advertiser, you will have to provide some sort of make good, lower the rate, or possibly even switch to a CPA model. In any event, the advertiser now has the negotiating leverage.

The dynamic CPM pricing type advertisers can use in Yield Manager solves this problem well.  The upside for the publisher still exists, if their traffic converts well advertisers will automatically bid higher to get access to their inventory.  It also mitigates their risk, because they aren’t giving away all their volume to CPA campaigns hoping that they’ll convert at some point.  Mr. Katz says that in a CPM or CPC model the advertiser ends up with the leverage.  However, I”d argue that in a CPA model, they also have the leverage as they have no risk.

In summary, by taking on a higher quantity of advertisers and matching the best performing ads with the best performing sites in an open market on a pay for performance basis, the network achieves three results. First, publishers make more because the advertiser allocates more money to the quality sites to ensure more traffic.

A good auction system does that automatically.  Advertiser money IS allocated more towards quality sites.

Secondly, the advertiser maximizes the utilization and efficiency of its spend because it is paying more to high performing publishers who will now allocate more impressions on a macro level to the network and on a micro level to that advertiser.

Again, this already happens.  In a good auction marketplace, the advertiser does pay more to higher performing publishers.

Lastly, the network diversifies its risk and builds relationships with advertisers and publisher by showing it is committed to providing the best and most efficient results possible.

This could be accomplished just as easily by just saying a network should take on more advertisers.  An auction marketplace is committed to providing efficiency and the best results possible.

I like open markets, I’d like to see more auction marketplaces go that direction.  I’m just not sure pay for performance only is the solution, or that auction markets need to be bashed to promote the idea of an open market.  And why can’t an auction marketplace be open as well?

Posted in: Ad Networks, Advertising, Random, Right Media

Study Says Contextual Ads Get More Clicks

March 23, 2006 7:23 am / Leave a Comment / Pat McCarthy

I found this report from Synovate Media for Vendare’s Traffic Marketplace a bit strange.  I don’t really disagree with the results much, it makes sense to me that contextual ads get more clicks than ads targeted by behavior, geography, or demographics.  However, it appears that they asked consumers what type of ad they’d respond to.

How is that really a good study?  Shouldn’t the study compare what people actually DO respond to, instead of just asking them?  Imagine if you asked someone what they’d do if someone was hurt and saving their life meant they’d die.  I bet a lot of people you’d ask would say they would save the other person’s life.  However, if they were really in that situation, I would think many more people would turn to self-preservation in reality.

Usability experts are well-versed in understanding that what users say and what they do can be very, very different.

Posted in: Ad Networks, Advertising, Random

Here Comes the Niche Social Networks

March 21, 2006 3:28 am / 17 Comments / Pat McCarthy

A strange pair in Nike and Google have teamed up to launch a soccer social network called Joga.com.  As I’ve talked about in previous posts, I think people will get tired of the vastness and general theme of Myspace and move more towards vertical or niche social networks that will be built to serve their passions and interests.

Even if they don’t tire of Myspace, I see an opportunity for entrepreneurs who create social networking sites or platforms for topics that they know and love.  Myspace allows you to do some things, but obviously a social networking site built on soccer will be more attractive to soccer lovers, as there will be built in features that fit soccer along with knowing that everyone involved is interested in the same core subject.

What remains to be seen is that if this particular case will work.  There are large corporate interests behind Joga.com in Nike and Google, so will users feel like it’s authentic and real?  If it succeeds, won’t we see Nike/Google social networks in other areas?  Soccer was a naturally first choice for it’s world interest, but it seems like the same formula could work for basketball, football, and whatever other sport Nike feels like starting a site in.

It’s still an open question in my mind if this particular site will succeed, but I’m pretty sure a well-done soccer site started that was very authetic and real would work.  It’s possible that some will be turned off by Nike’s involvement.  For example, if Myspace was started by a large music label would it have worked to this extent?

Either way, expect a lot more niche social networks.

Posted in: Random, Social Networks, Startups

The Dangers of Using One Case To Make a Point

March 18, 2006 12:52 pm / 1 Comment / Pat McCarthy

I think this kind of blog post is dangerous. Maybe it’s because I work for an advertising technology company, but using one specific example is not really an accurate way to make a point.

Shmuly Tennenhaus points to JPost.com who is using an ad network to fulfill their unsold ad inventory and points out an ad that isn’t really professional enough for their site and audience.

These ads tend to exist in most ad networks. Publishers generally don’t like them, but the obnoxious ads are often the best at driving conversions for advertisers. And you’d be surprised how many publishers actually do like these ads to be on their sites.

What Shmuly neglects to point out, is that almost every ad network provides creative control that can keep these types of ads from showing up on your website. So, is this mistake an example of the “dangers of ad networks”, or is it an example of a publisher not banning the ads they don’t want?

In a perfect world, publishers wouldn’t have to be responsible for banning the types of ads they don’t want, but it’s also very hard for a network to just predict what ads will be acceptable on a publisher by publisher basis.

What ad networks need to work towards is improving banning control and creative auditing on the network side so that it’s not a cumbersome process and ends up doing the job. I know we’re working on this daily at Right Media, and I hope other ad networks are doing the same.

Posted in: Ad Networks, Advertising, Right Media

iMedia Ad Network Crib Sheet

March 17, 2006 3:29 am / Leave a Comment / Pat McCarthy

IMedia Connection released their second ad network crib sheet.  This is a follow up to the first one released back in January, but this one is more interesting to me since it contains my employer Right Media as well as two Yield Manager platform partners, Adtegrity and Icon Ad Solutions.
There are numerous other Yield Manager platform partners that are large enough to be mentioned in these crib sheets, but it’s good to see that some are on this second crib sheet.  Partners CPX Interactive and Adtegrity both also were in OMMA Magazine’s list of top ad networks based on monthly volume last month.

It’s good to see more industry media focus on what Yield Manager is doing for networks, as there are quite a few networks getting great benefits from being part of our auction marketplace.  Expect to see more focus being put on publishers and advertisers gaining benefits over the next year.

Posted in: Ad Networks, Advertising, Random, Right Media

Ad Networks Getting More Funding: Tacoda and FM Publishing

March 15, 2006 3:05 pm / Leave a Comment / Pat McCarthy

The ad network space is remaining hot as two ad networks with different approaches announced more funding this week.

John Battelle’s FM Publishing announced they completed their Series A financing with Panorama Capital as well as many of their original investors taking part in the round. The amount of financing was not announced.

Tacoda also announced a $12M round with Rho Ventures leading the way along with Union Square Ventures in order to fuel more growth and expansion. They mention hardware and other expenses as being a need for investment. Tacoda has some impressive growth stats on their release, but there are some aspects of behavioral targeting and networks which I think are troubling. Definitely a big opportunity there though.
Congrats to these two companies, it looks like investors still have a lot of faith in the ad network business model, even though FM and Tacoda are going about being an ad network in entirely different ways. It’s amazing how many different ad network models exist, and I highly doubt we’re done seeing the variations yet.

Posted in: Ad Networks, Advertising

DoubleClick to Acquire Falk

March 15, 2006 2:33 pm / Leave a Comment / Pat McCarthy

We’ve got some consolidation in the ad serving world as it’s now been reported that DoubleClick will acquire Falk eSolutions. Falk is very strong in the European market and has a number of large clients in the United States as well, but the move is probably a play by DoubleClick gain more market share in Europe.

The next question is if Falk is going to remain as a separate product or just get swallowed up by DoubleClick’s Dart ad server.

Posted in: Advertising

Performancing Metrics is in Free Beta

March 14, 2006 11:37 am / Leave a Comment / Pat McCarthy

Performancing has moved their Performancing Metrics blog analytics package into free open beta status. Roughtly translated, go sign up now for free to try it out.

Sign up is easy, putting one line of code in your blog is easy, and it looks promising so far.

I’ll be putting up a review soon.

Posted in: Blogging, Web Analytics

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