Posts filed under 'Advertising'
Scott Karp kicked off the new year with a good post called Five Guiding Principles For The Transformation Of Media Companies. It’s a good post that needs to be read by every executive at major media companies today, and in many ways a lot of it seems like common sense to those who have been watching the transformation occur and understand what’s going on.
Specifically though I wanted to address Scott’s final principle:
Advertising must create value
Google turned search advertising into the most profitable media business on the web by following the basic principle that advertising must create value for consumers. Search advertising is so powerful because the ads are relevant and USEFUL.
The most successful new advertising models will be those that create huge value for consumers, not those that manipulate users or violate their privacy (i.e. be like Google, not Facebook)
As we browse the web today, display advertising is generally not as relevant and as useful as search advertising. Search has a big advantage in that it knows the specific direct intent of the user at that moment in time provided by a keyword. While a lot of the display ads we get are entirely untargeted and seem useless.
To be fair, there are a lot of display ads that are targeted now based on behavior, geography, and other factors that end up creating value for the user.
There is a lot of movement with technologies like Yahoo’s Smart Ads, better behavioral targeting, and other technologies that are going to continually move display advertising to be more useful and relevant to the user. As I posted recently, this should lead to higher click through rates, higher conversion rates, and lead to higher CPM rates for advertisers.
Unfortunately, part of this increased targeting technology effort needs to be focused on scale as the amount of web inventory continues to explode. User-generated content is inventory that has achieved the lowest CPM and response rates due to the engagement of users in the sites they’re on, as well as the high frequency of as impressions each user is seeing. How can improved targeting technologies and ad budgets continue to get more relevant while also scaling to meet the inventory explosion?
When that happens, advertisers, publishers, ad networks, ad exchanges, and most importantly USERS will benefit.
January 4th, 2008
Techcrunch
comments on the “Nothing but Net” report released by
JP Morgan that discusses the prospects of online powers who derive a majority of their revenue from advertising.
There are a number of interesting items in the report, but the one that hits closest to home for me is their prediction that display advertising CPM prices will rise from their bottom in 2007 of $3.31 to $3.86 by 2011 through increases each year. The question is, will this occur?
First, many publishers may be wondering right now what they need to do in order to even get that $3.31 CPM which is the lowest the average has been. Publishers working solely with ad networks probably aren’t even seeing CPMs at that high a rate. Well, that’s why you need to get your site to the point where it’s quality and traffic allow you to sell ads directly or work with a high quality representation firm that can actually sell your site specifically. That’s when you start to see CPM rates that hit $3+ and up. Also, the largest publishers on the web such as Yahoo!, MSN, AOL, etc. sell a lot of their inventory at very high rates. Since these sites have a ton of inventory, it means the average moves up.
So, will this rise occur? The natural arguments for the rise to occur are:
1. Technology and optimization is improving.
Ad exchanges, behavorial targeting, improved optimization, advertisers monitoring ROI better, and other advancements in technology should allow publishers to earn higher rates.
2. More advertising dollars are moving online.
As brands and agencies begin to pull away more from TV, newspapers, radio, and magazines to online advertising that money should help CPMs rise.
Those seem like two pretty compelling arguments right?
Well, there’s a big counterargument as well.
1. The amount of available inventory is increasing.
The rise of social networks, blogs, forums, and other ways for all of us to create content on the web has led to an explosion of available inventory. You have sites likes Myspace and Facebook, blogs being created every second, and just more of us creating web content on sites everywhere. While all this content is being created, it means ad dollars are being spread even thinner across all the content.
Therefore, the big question is if the technology advancements and increased ad budgets online can counteract the continued explosion of available inventory in which ads can be placed?
My prediction for 2008, is that it will be a stalemate.. By 2009 I think we’ll see the user-generated content explosion cool down, and ad technologies will really start to kick in gear leading to a rise in CPM. Predicting beyond 2009 just seems like guessing to me with how rapidly the advertising and web industries change.
January 3rd, 2008
Due to a number of factors my blog post frequency (and quality) has drastically deteriorated over the past few months, but that’s okay. I hope to improve it as things settle down, but I haven’t had the time to dig in and do any high quality posts. In an effort to just let everyone know what’s going on at the moment I’m going to try and increase the frequency by at least doing brief updates on what’s going on around me and the business topics I blog about.
Let’s get it started:
1. I’m in San Francisco at the Web 2.0 Summit. If you’re here and would like to meet, let me know by commenting here or emailing me.
2. I’m violating company policy by making this post from a Flickr reserved cube when I don’t work for Flickr! (See above photo)
3. I think this is the 7th Yahoo!ww office I’ve been to, and yes, the majority of them are purple and yellow.
4. It’s amazing that this is the 4th year of the Web 2.0 conference. 4 years of Web 2.0? You’d think we’d be to the next version by now.
5. I’m taking on a new role with Right Media/Yahoo!, as the head of exchange product strategy. It will be fun, challenging, and probably be more work as the scope grows from focusing on tail web publishers to the entire advertising ecosystem.
6. I’ll be back in the Bay Area early next week for the Right Media Open at the Half Moon Bay Ritz. It’s turning out to look like it will be an amazing event. Not only is Jerry Yang keynoting in a fireside chat format, but we also will be having a lively competitor panel featuring DoubleClick’s CEO David Rosenblatt, DRIVEpm’s president Scott Howe, and Yahoo!/Right Media’s founder and CEO, Michael Walrath. This panel will be moderated by John Battelle.
7. I’m tired of social networking getting so much hype, yet I do still find myself mildly participating in it. I understand the hype, but frankly think that we’re quite a ways off from extracting enough revenue to justify the valuation of Facebook and other sites right now.
8. I love Oregon Duck Football, so I’m enjoying the current season with the Ducks ranked in the top 10.
9. Mark Zuckerberg of Facebook is now having his informal chat with John Battelle at Web 2.0, and he’s answering questions extremely honesty. Pretty refreshing, and maybe that’s youth, but it’s fun to watch. He also seems to have quite a bit of that geek genius that some of the best companies have. Although, I must say I still don’t know that the revenue will be there.
10. My kids are growing up fast, and it seems like it’s just getting faster. I’m really enjoying it, but can already tell I’m missing things about when they were younger as well. There’s nothing better than being a parent though.
11. It’s amazing that I almost entirely read my news and educational content in my feed reader. I’m not sure if RSS is going mainstream as fast as people thought it would, but man do I love it.
12. It might be time for me to get a better car. My 94 Accord is wearing down a bit, and now that I’m driving my kids around in my car a bit more, I feel like it might be time for something newer and safer. Any suggestions?
13. 20% of the audience for Zuckerberg’s speech are currently building applications for Facebook. Impressive.
14. It’s fun getting perspectives from people you meet at conferences. People’s world views just aren’t the same.
15. Is the advertising world getting easier for web publishers yet? I think progress is bieng made, but is it enough?
Alright, that’s enough for now. More blogging soon…
October 17th, 2007
My employer announced today that we’ve bought Blue Lithium, one of the top five ad networks in the USA and the 2nd largest network in the UK.
This is exciting for a couple of reasons:
1. Allows one of the largest ad networks in the world to begin buying and integrating with the Right Media Exchange providing more demand and publisher supply. Adding Yahoo!’s inventory and advertiser demand to that of Blue Lithium’s and all the advertisers, publishers, and ad networks already participating is creating a vast and very liquid exchange.
2. Yahoo! is positioning itself to truly be a holistic advertising powerhouse, and is leaving no doubt who will lead the display advertising space. It’s going to be fun.
September 4th, 2007
I’ve got a proposal in the panel picker for SXSW 2008 called “Maximizing Ad Revenue for Online Publishers“. The title explains it pretty well, but if it’s voted in as one of the panels at the conference I’ll put together a panel of industry experts to go over the core methods today that publishers can maximize their ad revenue.
I think it will be educational, great for beginners, but also provide some nuggets of wisdom that even experts will benefit from.
If you’re interested in this panel idea, please go vote for it by giving it a star rating. Note: You do need to sign up for a free account to register, they promise to not spam you.
August 21st, 2007
I’ve talked a lot recently about the big dogs out there snapping up advertising companies.
However, it’s not just the huge players who are consolidating advertising companies. MediaWhiz out of New York completed their second acquisition of the year by purchasing AuctionAds.
AuctionAds is a small company started by Shoemoney in a partnership with Patrick Gavin of Text Link Ads which was the previous acquisition MediaWhiz completed earlier this year. AuctionAds is an advertising widget that allows publishers to display relevant eBay auctions in an ad format similar to YPN and Adsense. The service quickly grew to over 20,000 publishers and 300 million impressions served a day.
AuctionAds is then the latest edition to a stable of companies that includes the leader in text link advertising in Text Link Ads, blog paid review service ReviewMe, display ad network AdNet, co-registration provider CoRegistrations.com, affiliate network Filinet, customer acquisition in MonetizeIt.net, and email marketing in White Delivery.
I’m not sure what the revenues and market position of all those companies are in their respective fields, but you can see they are building a pretty comprehensive suite of services for advertisers and publishers to participate in. Is MediaWhiz looking to grow into a full-fledged advertising powerhouse? Or are they acquiring enough assets to be scooped up by a bigger fish?
July 30th, 2007
Are things getting crazy in the online ad space or what? AOL buys Tacoda a few days ago, and now Microsoft has purchased ad exchange AdECN for an undisclosed amount. I didn’t think I’d have to update my chart from my Battle of the Online Advertising Superpowers post, but perhaps I might.
Who’s next?
July 26th, 2007
As I’ve posted about before, there is a battle for online ad supremacy that’s quickly turning into a battle of superpowers. AOL just made the next move in the chess match with the acquisition of behavioral targeting display network Tacoda.
It’s definitely and interesting move as AOL already owns the largest display ad network in Advertising.com, which is also known to have behavioral targeting capabilities. This would lead me to believe that Tacoda’s behavioral targeting is superior than Advertising.com’s, or that AOL was simply after more advertisers, publishers, and people. Most likely it’s a combination of both.
This definitely takes AOL up another level in display advertising, and it was already fairly established with Advertising.com. As venture capitalist Brad Burnham says on the Union Square Ventures blog:
That said, the combination of TACODA’s seasoned management, technology, database, and experience with behavioral targeting and AOL Time Warner’s reach as a media company and (through Advertising.com) as an ad network, could become the foundation for creating the dominant display ad network on the internet.
That certainly seems to be the goal, but don’t expect Yahoo!, Google, Microsoft, WPP, News Corp, and IAC sit idly by and watch. Will we see more ad networks snapped up? Will the other independent behavioral display networks like Revenue Science be snapped up? And do advertisers and publishers have anything to fear if the industry lacks independent players?
July 24th, 2007
An experience today made it blatantly clear to me that being in the ad exchange business I take it for granted that I know what actually is an ad exchange.
I’m amazed, but it had never really occurred to me that most people think an ad exchange is more like a link exchange. Meaning that an ad exchange is a system where websites swap ads with each other. That really isn’t the case at all, but based on the words themselves and the concept of link exchanges I can see how people come up with that conclusion.
The good news is that ad exchanges are growing in number, size, and prominence. iMedia recently did a round up of ad exchanges that’s worth taking a look at. They start out by summarizing the concept, then giving the same interview questions to all the major ad exchanges that exist.
It starts out with Adbrite. First, I would probably classify Adbrite as a marketplace instead of an actual exchange, but that’s kind of semantics. Either way, it should be understood that Adbrite is a much different system then something like the Right Media Exchange. Adbrite is setup so individual advertisers choose to advertise on individual publishers on a couple of set pricing types. An actual exchange can contain many different types of companies and pricing and is a more dynamic (and some might say confusing) environment. I also must applaud Adbrite for providing actual client examples and numbers in this article. Part of the definition of “exchange” to me conveys an open environment, and as we’ll soon see some other exchanges are intending to keep things secret.
Next in the iMedia article is AdECN. AdECN is very heavy with the exchange terminology and likes to compare themselves to financial exchanges. This is great, but they didn’t disclose any customers or numbers for this article citing confidentiality. Most financial exchanges are pretty open with these things, it’s part of what makes them work by nature. It’s also interesting that AdECN used to make their transactions per second number public, but won’t disclose anymore. I also have a problem with this quote:
AdECN is the only real-time, auction-based, neutral exchange for online display advertising.
Really? I would argue that a few other exchanges all meet that criteria.
Next on the list is Contextweb’s ADSDAQ. Another one that likes the financial exchange comparisons, and that’s cool with me. Right away I have a problem with the opening line though:
Since its inception in early 2005, we have built the ADSDAQ exchange by offering a CPM AskPrice to publishers.
While Contextweb may have been operating in 2005, they didn’t launch their exchange, or at least talk about it as an exchange until quite recently. As you can see from Archive.org, the ADSDAQ website didn’t go live until May of 2007. As far as I know, this solution was still in beta in June (as seen in the signature of this forum post). So I think it’s odd to be billing your exchange as operating since early 2005, maybe I’m just being picky though.
I do like that they are releasing names of clients and data though, and it seems like an interesting system.
Next on the Exchange hit list is Datran Media’s Exchange Online. Datran’s big difference is that they focus on email advertising, which definitely puts them in a unique position today. I’m admittedly not an expert in the email advertising area, so I’m not sure I can really evaluate it well. Again though, a quote I have a problem with:
EO.com is the first exchange to support cost-per-acquisition pricing.
Maybe in email advertising this is the case, but numerous exchanges have already been offering CPA pricing. Right Media’s Exchange launched in early 2005 with CPA as one of the main pricing types.
DoubleClick’s beta exchange is the next to be looked at, but like AdECN DoubleClick doesn’t release any clients or numbers. Being that it’s still in beta and not publicly launched, I’ll cut them some slack on not feeling comfortable releasing that information yet.
Lastly is my biased favorite, the Right Media Exchange. Undoubtedly the largest and oldest of the exchanges, I feel the profile is pretty good with releasing the names of real clients, and giving out data. The big question now is how our integration with Yahoo! goes, and what the future holds for the exchange with Yahoo’s resources, talent, and relationships involved.
The exchange area is posed for more growth over the next few years, and we’ll continue to see more companies enter the space. It should be a fun ride.
July 20th, 2007
Scott Karp has an interesting post on his Publishing 2.0 blog today about how display advertising continues to lack relevancy over 10 years into it’s life.
Being in the display advertising business, you’d think I’d argue, but I won’t. He’s right, display advertising is still largely way too irrelevant and there is still a ton of improvement that can be done to help its relevancy. Yahoo! is taking steps in this direction with SmartAds, behavioral targeting helps, and as much as people get scared over companies having data due to privacy it’s a big key to helping ad relevancy.
But instead of really talking about what should be or could be done, I thought it’d be interesting to point out that even though display advertising on the whole isn’t very relevant today, it’s still amazingly profitable for both advertisers and publishers. Think about the opportunity here. If companies are making irrelevant ads profitable, what happens when display ads take the next steps in their evolution? Behavioral targeting will get better, the SmartAds concept of building ads on the fly based on user data, new technologies like Tailgate, and other advances should drive the profitability of display advertising through the roof for both publishers and advertisers.
People thought display advertising would die when contextual text ads started taking over the web, but instead it’s grown. Humans are visual, and seeing things can still drive a lot of response and interest when the eye doesn’t want to read a text ad. Perhaps pictures will be worth a thousand text ads after all?
July 16th, 2007
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