Inventory is being sold and resold which results in deals that do not deliver or retain latency in the ads actually showing up on the page. On the positive side, in their quest to differentiate their offerings, ad networks introduced principles of data modeling long understood in the direct response world to online. After all, there is only so much contextual inventory to go around and since advertisers have to pay a premium to get it, ad networks created a value out of all the rest. They’re even responsible for some great new terminology around what they are doing: Some are calling their business “The Second Channel” or “Non-Guaranteed Inventory.” It’s better than “remnant” but not much.

Ad networks have put their principles to the test by creating elaborate profiles through their cookies – and since the publishers have for so long provided the sugar –gazumped them of their audiences. Questions abound about who owns a Wall Street Journal user once they are not on the Journal. But since that data is out there, the Journal can argue to the IAB task force on data ownership as long as they want with little result. The data exists and the networks that have that profile aren’t going to suddenly, completely and finitely turn it over. Publishers should be especially wary of all of the free tools for measurement that have been introduced over the past two years: read data usage policies carefully whenever adding a company’s cookies to help measure a site. Those cookies are veritable Trojan horses that can and are being used to build behavioral profiles that those companies are then selling themselves.

Premium publishers should get into the game themselves and model to their advertisers’ content, thus creating value for their non-contextual inventory. After all, they have audiences advertisers value, and can guarantee the transparency marketers seek. Many of the top publishers effectively use behavioral targeting tools like Platform A, Tacoda and Audience Science to do just this. Some media conglomerates are pooling all their “remnant” cross company and have started elite audience networks (e.g. Time Inc., Forbes, Martha Stewart – in October, a group of magazines announced their own network). There is no magic to building a network. With ad exchanges and products like Google’sNetwork Builder tool for publishers, anyone can pool and sell inventory.

Online is probably unique in having early on determined that what was most saleable like home pages and contextual placements was “premium” to be sold through direct sales forces, and everything else was “remnant”: Cinderella pre-makeover to be dumped on an ad network who would do the “bibbety boppity” thing they didn’t have time for. It’s often cited that 80% of online advertising is remnant (latest example, MediaPost 10/7/09 article on the Rubicon company). Google’s Q3 earnings report noted that a much more modest 25% of their network display went unsold. This practice – and even the nomenclature – has held the medium back.

Think of how inventory valuation works in other media. In TV the most premium is sponsorship with an ad package around an event: in effect flat rate inventory with a premium paid for association with something like the SuperBowl or the Academy Awards. Next comes primetime. Then day, late night, and fringe. Yes, the inventory is tiered for pricing purposes, but they’re selling the various values of these audiences. They don’t call Craig Ferguson: “Remnant.” The same holds true for print: advertisers pay premiums for certain positions and there are volume discounts but they are essentially buying one audience for each publication: there is very little “remnant” involved.

Now because networks and the behavioral targeting companies that also built networks have been so good at turning “remnant” into the hot chick who can make an appearance at the ball – they are in effect delivering to mass advertisers exactly what they have always wanted: an implied demographic bucket or contextual relevance on a broader scale at a better price.

Q2 ’09 data on overall media spend has been the jaw-dropping Armageddon of our worst nightmares at -15%.  But even in this horrific situation, online posed glimmers:  Nielsen reported display down 1% YOY for the first half while TNS reported it actually grew 6.5%. This of course set off another firestorm of navel gazing in the online world (“Online Ad Spending Estimates are Bogus, Some Say,” ClickZ, 9/25/09).  Media researchers know that spending data is a highly variable science (and not a science at all) in ANY medium.  In TV and print, it’s politely considered “directional” and whenever anyone hears the term “rate card value” they take it for what it is. Online is more complex to capture this kind of data for due to the number of formats and technologies involved – and the basic fact that nobody really tells what they pay for anything. It should be said, however, that there is one very simple explanation for why TNS and Nielsen numbers would be headed to the opposite ends of the street: TNS’s methodology does include deals that are performance based, Nielsen’s does not.  In a recession, there’s less demand and thus more content providers willing to sell based on performance. The IAB’s first half 2009 Ad Revenue Report noted that performance deals gained 4 share points YOY to encompass 58% of all online revenue.  TNS is dealing with a broader data set and reflects a piece of the market that has grown over the past year.

A closer look at Q2 reveals some of the very same misconceptions that contributed to the “death of display” notion that was prevalent early in the year. The IAB released Q2 online advertising spend data (which is self-reported based on top properties) on October 6.  The headlines of most pick-up, including those in MediaPost and Paid Content focused on the overall negative number. Various journalists and those in the media industry did not make it past the first paragraph.  “Online display” is typically used interchangeably with “online advertising.”  It was not online display that was down, but classified that shrunk from 14% of the online total to 10%. But once again, display, the bastard stepchild of the industry got slammed. Display actually increased its share of online revenue by 1 point (from 21 to 22% of total in Q2 YOY). Digital video also showed a 1 point share gain and search increased 3 points. If you look at the IAB data broken into component categories it shows that a 32% YOU drop in classified is responsible for the overall online spend drop. Display was stable and growing in some categories.  Craigslist can be blamed not only for destroying print newspaper revenue but for cutting into that revenue online as well.

Nielsen AdRelevance Q2 YOY numbers showed a cataclysmic drop in volume (25%) but a very strong revenue growth story (in categories like B2B, Consumer Goods and Entertainment +25, 20 and 28% respectively). When queried about how volumes in their system could have dropped so strongly when other reports were indicating stability, they noted that it was completely due to the fact that Yahoo had dropped the majority of their “compound image text ads”:  a text link with a 20 x20 pixel image associated with it that often appeared on Yahoo Mail pages.  This page clean-up process began in Q3 of 2008.  This speaks to a couple of interesting industry trends:  Yahoo still generates a ton of inventory, and when one company like this decides to alter their ad inventory strategy (reduction of clutter was a strong trend early in the year) it can impact an entire data set. When these compound text ads are taken out, the impression numbers trend much more positive: +11.7% in spend and +1.5% in impressions.

On other positive notes, by the end of Q2, even some of the greatest skeptics in the online display world issued upbeat quasi-retractions. Nick Denton, the always colorful wizard of Gawker, noted that YOY ad revenues for first half ’09 were +35% (Paid Content, July 9, 2009) and two days prior, Henry Blodget, who had been eager to dis’ display,  noted: “Hey, display ads don’t suck after all”– and he begrudgingly acknowledged that his own display-supported business wasn’t half bad.  Jaguar ads rotated with Land Rover ones on that page of content.  Paid Content reported on July 1 that women’s centric sites had 4.7 billion ad impressions in April vs. 2.2 on auto, 1.7 on travel – clearly Consumer Goods advertisers had jumped on the online bandwagon. For Google, display Q2 revenue grew 3 percent to $5.5 billion. McClatchy’s Q2 earnings report noted that online ad revenues slipped 2.9 percent, mostly due to falling help wanteds.  But, “if job ads were excluded, online ad revs would have been up 24.7 percent.” 

So much for the death of display. Come to DPAC4 on 10/27 to hear the whole story. All registrants get a free whitepaper on the State of Display2. www.dpaconference.com/agenda

Mobile Marketing Comes into Its Own

Smartphones, the rise of 3G connections and unlimited data plans are the tipping points for both marketers and consumers in terms of mobile as a medium.  With consumer penetration now higher than that of the Internet and a diverse advertiser base, mobile marketing has become mainstream rather than experimental.

Mobile marketing excels at reaching consumer groups tough to reach through other media:  teens, moms, affluents and urban audiences. Due to its personal nature, mobile can be a highly engaging medium for marketers looking to reach consumers in a focused mindset.

In an era of economic instability, the mobile device has become the one must-have product. Marketers must now work to connect with consumers through a device that offers not only communication but always-with-them entertainment and information.

Smartphones – especially iPhones – are not the whole picture:  Smartphones accounted for 13% of the mobile device market in the US in July ’09 according to comScore. Of that number, 21% are iPhones – a market share matched by Microsoft and dwarfed by the RIM BlackBerry (41%).  For marketers, permission-based SMS (the mobile equivalent of email marketing) can be a more efficient way to reach a broad spectrum of the mobile population.

Mobile advertiser mix has become more like that of any other media:  Advertising on mobile phones is being embraced by traditional brand marketers – not just marketers of cell phone applications like ringtones and games.  Broadcast & Cable is currently the top category in mobile advertising according to comScore.  Among the top 20 advertisers in June ’09 as captured by Nielsen, half are Fortune 500 companies.  The mobile ad market is extremely dynamic, with 30% of comScore’s top advertiser list in June ‘09 not appearing on the list during the same period in ’08.

Mobile is being used for both awareness and direct response:  Advertisers are using the medium not only for direct response, but especially in the case of entertainment, personal care, technology-related products and health, as an awareness driver and a way to appeal to elusive audiences.

Mobile has high performance rates relative to other interactive media:  At this stage in the evolution of mobile marketing, its relative lack of clutter and low cost makes it greatly appealing for marketers troubled by the increasing  CPCs of search and the jumble of ads on web pages. Click-through rates vary by category and by creative type and intent, but are typically at least four times that of online display.  Branding studies from both Dynamic Logic and InsightExpress show that mobile ads achieve higher aided and unaided awareness, brand favorability and purchase intent than online display – even as compared to early online display or video norms.

Devices impact consumer behavior – and advertiser response:  Device functionality – especially the interface and the web browsing experience – changes the way consumers use and interact with marketing on their phones. The iPhone, and its companion non-phone wireless device the iTouch, generate the highest number of ad impressions – which equates to media consumption – even though the iPhone is NOT the top-selling phone in the US.  Apple devices also generate the highest direct response rates (a 35 point lift over average click rates), according to Quattro Wireless.

At this stage in the evolution of mobile marketing, marketers should pay close attention to the demographics of various handsets.  Device  targeting is an efficient way to reach specific audiences: Sidekicks are popular with teens, the BlackBerry Curve is the hot device among women 35 – 44, while the iPhone rules with men 25-34.

Ad types also impact response – but should be measured appropriately: According to Quattro Wireless Q2 ’09 impression data, animated ads (sequential GIFs) offer on average a 61 point click-through rate lift over static banners.  Expanding ads, which are designed to engage the consumer within the unit, have less than average click rates (index of 98) and should be measured by time spent and number of pageviews consumed.

Mobile Apps are hot – but increasingly complex for marketers:  Now that Apple has competition in the app market – and the Apple app store is overwhelmed with titles, a branded app strategy can be a costly and complex process. Apps now have to be developed separately for Apple, RIM, Android and Palm platforms. There are also so many apps that if a marketer chooses to develop their own, they need to market that app to ensure usage. A simpler app strategy can be to advertise within or sponsor existing ad-supported apps based on audience and content synergy to the brand.

“Mobility” offers greatest marketing potential:  Mobile, the only medium where the advertising travels and typically stays with the consumer, offers unique opportunities for geo-targeted and point-of-sale promotions and marketing. Accordingly, some of the most innovative approaches to mobile are coming from packaged goods marketers who are transitioning couponing business to mobile from print and are experimenting with apps (and their geo-location abilities) as a way of increasing consumer engagement.

As someone who has worked in both TV and online, while I agree that reach & frequency and GRPs are a useful bridge to “traditional planning” some of their strongest proponents for using them online believe that they are some sort of magic fix for the revenue challenges of content sites. If we were to implement a GRP buy system for all of online, content sites would lose out due to their ability to only add incremental reach to a multi-platform buy. Online ad networks and exchanges that aggregate mass inventory — context be damned — are the ones who would win in this equation. Online content sites are most equated to how print is bought: on audience composition and context more so than reach at cheap CPMs. Yes, online is becoming a reach medium due to the vast amount of usage, but to harnass that reach, you need audience aggregators (for both video content and static types of content). As we have seen, ad networks tend to commoditize inventory and reduce CPMs. It should also be noted that low consideration product categories are notorious at pushing for the lowest possible TV CPMs primarily because they don’t really need context and they buy in such mass. One of the things that I think is really interesting is that packaged goods companies like P & G and SC Johnson have begun to buy cable on a DR basis and use very specific TRPs as the proof point. In a scenario with dare I say it too many media options, more advertisers online and off will be pushing for DR — yes, it will hasten the death of a lot of media or at least move to more of a paid content model.

The great thing is that we gave attendees some solid examples of how they should increase the sophistication of their analysis.
read the whitepaper at:
www.primaryimpact.com/stateofdisplay.html

The “madnum” opus of the past three months is being published 5/12 as a part of the DPAC III conference. The session will be lively — here are the key findings of the whitepaper:

Online Display Advertising Shows Signs of Strength/Revitalization in Challenging Economy

DPAC III Conference panel and accompanying industry whitepaper
based on data from comScore, Dynamic Logic, Google,
Microsoft Atlas and Nielsen Online
reveal continued areas of

growth and effectiveness for online graphic ads

New York, NY – The third semi-annual Digital Publishing & Advertising Conference (DPAC III) will reveal signs of growth and strength for display advertising even in a continually challenging economy.  A panel focused on the State of Digital Display will be comprised of executives from companies each with over a decade of data on the usage, changing nature and effectiveness of digital display. The panel begins at 11:45 AM at the event venue, the W New York Hotel, 541 Lexington Avenue.  Included among the panel are:  Lynn Bolger, EVP Advertiser Services, comScore; Ken Mallon, SVP, Custom Solutions & Ad Effectiveness Consulting, Dynamic Logic; Ari Paparo, Group Product Manager, Advertiser Products, Google; John Chandler-Pepelnjak, Director, Atlas Institute, Microsoft Advertising; Jon Gibs, VP Media Analytics, Nielsen Online; Kyle Johnson, Director of Media Products, Compete. Key findings to be discussed include:

• Online display is going through yet another transitional stage in ad spend, formats and measurement, much as it did in the last recession.
  • The big spending shifts in 2001-2003 involved big-budget early dot-coms dropping out of the market to be replaced by Fortune 500 advertisers who have had a gradual increase in spend over the past five years according to Nielsen Online data.
  • Online ad formats have gotten larger over time and they continue to evolve in terms of functionality and interactive capabilities
• Decreases over the past few quarters in volume are due more to the economy and reduction of clutter (there was 5 % drop in adviews but an 11% drop in the number of ads per page from Febuary ’08 to February ’09 – comScore) than they are ineffectiveness or abandonment of the format according to data from comScore, Nielsen Online and Dynamic Logic
  • Due to the economy, auto, finance and retail ad volumes are down dramatically in the past two quarters, but five year trends show strong growth curve as online becomes more intensely involved in the purchase process for consumers
  • Health and consumer goods spending are picking up in Q1 ‘09; these heavy spending categories shifting dollars to online display bodes well for its future
• Creative is the greatest variable for online display performance; placement/context is highly category specific according to Dynamic Logic.
• Brand impact of online display in terms of ad awareness and brand favorability have remained stable over the past three years.  Purchase intent was also stable but in the finance category dipped along with the economy before stabilizing.
• New measurement techniques that go beyond click throughs, such as measuring exposure and post impression activity, are a better gauge of online display performance, but are often not used to their full capacity according to both Microsoft/Atlas and comScore.
• Recent studies, discussed as a part of the panel and in the whitepaper, are showing that display can improve the performance of search (Microsoft/Atlas and comScore) and that that display ads on the Google Content Network can be an effective way to gain additional conversions beyond those you get via search (Google).
• comScore is now able to show lift in offline sales that result from online ad impressions.

*  *  *

It’s been my perception that the business media has grossly oversimplified what is going on in online advertising and this paper — which is fueled by so many data sources — provides a broader outlook on trends plus best practices info for publishers and advertisers. Hope you find it useful.

This could be developed as a program by the IAB and run through Google/DoubleClick systems. An agency can create templates using one of the Google rich media tools, sites can pick them up and customize them to their media brand and run them in remnant inventory that they are getting pennies on from ad networks. It would also serve as a benefit to the advertiser. Perhaps each site chooses an advertiser of the day that they want to celebrate. What advertiser would not want to be associated with a big media brand?

The IAB could run an adjunct site that the ads click through to that make the case for advertising online and the connection to all that great free content. The site can also serve as an info resource demystifying cookies and other online ad factors that seem to get consumers all hot and bothered.

Interestingly Gawker has just said no to ad networks and runs banners created by artists in its remnant space – this is just a twist on that and one that has a greater benefit to the industry.

There is another target that would benefit from this kind of campaign: Washington and the FTC committee that continues to discuss behavioral targeting. I wish they would just focus on the direct marketing industry and credit card companies with how they use data, but they’re a little too focused on the data soup used for ad targeting. We cannot limit this medium’s revenue potential, especially if there is no actual PII.

Make sense?

If you look under the hood at the two studies noted above, you can see the flaws in the argument: in the first, people were put in isolation and told to watch a half hour show without the ability to change the channel or get up and eat or go to the bathroom; similar lack of other stimuli existed for the print portion of the experiment. Stranger still, the online ads in the study got 1% click through rates. How realistic is that? In the MPA study, MRI media consumption recall data was matched with more recall data from a Deloitte survey where consumers were asked to rank media that impact on their purchase decisions. A nice, not exactly transparent exercise, that is hardly useful for buying media. Sure we get it, there’s a whole lot of print that connects with consumers so well that the ads become as powerful to the consumer as the content is. Online has a similar connection in areas like travel and automotive. TV still gives advertisers a great standard wedge of time to tell a powerful story with sight, sound and motion. Online can do the same – with a much lower clutter factor – but the usage is so dispersed – at least for now — that it cannot gain effective reach for an advertiser.

“Big media” is all suffering from a superiority complex entirely naïve in the current media environment. Media is all about change – albeit some of it painful – and to stand in the face of it is to face extinction. In case no one at the associations and publishers was noticing, there is an enormous recession on that is impacting millions of Americans – just because a lot of print journalists are out of work doesn’t mean their situation is any more profound than that of an auto worker – or even an aerospace engineer in the mid ‘70s to use a more far ranging analogy. In times like these, I challenge trade associations and media companies to get out of the “we deserve to win” mentality. It’s just not useful for marketers and for the health of the advertising industry content producers depend upon.

Advertisers want to reach consumers, and in the US, for the most part, media is ad supported. Consumers are voting with their phones, their wi-fi routers and their DVRs. As marketers, our challenge is to be-dazzle them with great pitches that fit whatever way a consumer decides to get information and communicate. Have we found the definitive way to engage consumers through online advertising? No, but chances are that the more we understand how consumers use various aspects of the Internet and all of media, the better able we will be to create messages that resonate and find placements that reinforce the value exchange in ad supported media.

I’ve yet to see a “media neutral” research study that was of any use to a marketer trying to make sense of all their disparate media options. The questions we should be answering are about how distinct media (and by this I mean everything from short form video to newspapers to social media) fit into the larger media mix by product type, and by product lifecycle. Why not resurrect studies like the IAB’s XMOS, which helped to put online display on the map in the minds of brand marketers. This time, let’s go into it without the obvious results. Perhaps I am living in a fantasy world, but shouldn’t the MPA, the IAB, the CAB, the NAB and any other media trade association interested get their members to collectively fund media mix modeling studies that incorporate inputs from all dimensions of this radically changing media world?

We are in a media ecosystem as Randall Rothenberg of the IAB so rightly noted, now why can’t we act like it?

IAB Director of Research Joe Laszlo called them “Confusing.”  To Nielsen President Jim O’Hara they are an ”Enigma.”  Mediasmith CEO Dave Smith called them “Inadequate,” while Marketing Evolution CEO Rex Briggs said they were “Disconnected.” Talk about scaring off your audience.

At the 2001 AAAAs, online was fighting for a seat at the table and was still called “emerging media.”  We merited one lousy panel that generated less excitement than the exhibition hall. Now we’ve got center stage (at both this conference and in consumer usage) and we air our dirty laundry.

My question remains: why are we still discussing this issue? Has everyone in online stopped to consider that metrics is basically a NON-issue in other media.  Sure Nielsen finally acknowledged delayed viewing umpteen years after the introduction of the VCR but marketers clearly don’t care. They continue to buy reach and use GRP models that still relatively accurately predict offline sales. (The promise of set top box data is so exciting, but at what point will agencies be equipped — or even want to — deal with the ramifications of all that data? Plus, can they handle the challenge of producing enough creative to appeal to the segments?) We must see all data — be it on traditional panel based or cookie based data — as merely directional and just get on with it.

We’ve got a data mess on our hands of our own making and the only way out of it is through the creation of a neutral third party — set up as an industry consortium — whose end goal is a planning product through which any data set, be it Google, Microsoft, Comscore or Nielsen can flow.  Demographic data needs to be appended to the ad serving data so we stop talking cookies and bowsers and start talking reach of people.  Just because we can capture all this data to do such finite targeting, does it really serve the purpose of advertising which is to pursuade an ever larger group of consumers to take some action?  Behavioral targeting in my mind is a DR technique for souping up random inventory (like all those email page placements) the networks are awash in.  It’s not the basis for a media plan.

Anyone remember ink-jetting in the early ’90s which was going to be the salvation of magazines? In an example that I worked on involving data matching to a subscriber list of scotch drinkers, guess what, it was damn expensive, consumers thought it was creepy, and why only talk to your proven audience?

As a DoubleClick alumnus — and someone who worked in print and TV — I feel qualified to say that online has the smartest minds in the business.  But as someone from the TV realm once said, “TV is a C+ business” and yet it thrives and is no one is crying out that the :30 is dead.  A recent profile in the NYT (http://www.nytimes.com/2009/03/01/business/01marissa.html?_r=1&scp=1&sq=Google%20female%20executive&st=cse) of a top Google exec revealed that they actually do sit around a table when considering hires, assess SATs and GPAs and and ding unfortunate individuals who got less than stellar grades in macro economics. All that intelligence may be better suited to NASA — or the Obama administration — what we need are media professionals who stop overthinking the problem and start realizing that if we do not create post buy reporting based on demographics and reach and a universal platform to buy and plan online display from, we’re nowhere.

A simple plan: each company with a dog in this fight sends its best and brightest, takes away their iPhones and BlackBerries and locks them in the Newark Airport Marriott with no access to media or transportation. They get 5 days to come up with a simplification plan or are sentenced to another 5 days at the Newark Airport Marriott. They must issue a set of guidelines for buying, planning and measuring online display or they must agree to permanently move into the Newark Airport Marriott.

So Keep it Simple, Stupid or Bang, Bang, display is dead…and along with it a host of content that is extraordinarily valuable to consumers and our business economy.