Emerging media, ad tech, and culture

Posts in category Ad Tech

Why are digital ads so aggressively traded?

Jun18
2011 Leave a Comment Written by admin

Why do some goods end up on secondary markets, derivative markets, etc. and others don’t? Why, for instance, do we have a healthy market for futures on pork bellies and not on chicken legs?

I ask the question in relation to this blog because we have seen a healthy market emerge trading digital ad inventory. I get why it works this way in practice, but I am more interested in the theory here. From an economic point of view, why do we have DSPs, SSPs, Exchanges, etc? Theoretically, why has the complex display ad ecosystem emerged? Is it here to stay like pork belly futures, or is it simply the product of a confused market, limited by technology, but unbounded by optimism in the short term?

To me, it seems too complex to be sustainable. But that’s why I want to understand the theory a little bit better. What do you think?

Posted in Business

SAY Media’s Troy Young on the Future of Online Advertising

May10
2011 Leave a Comment Written by admin

SAY Media’s Troy Young on the future of online advertising.  Brand APIs, Conversation Management Platforms, and Content Delivery Engines.

Posted in Business, Culture, New Media, Publishing

Why Groupon is Overvalued: Low Barriers to Entry

Jan24
2011 2 Comments Written by admin

Groupon has exploded over the past year resulting in a reported $6 billion Google acquisition bid a few weeks ago and rumors of an imminent IPO.  But I don’t get it.

To me, it just seems like these guys are just delivering a new kind of coupon that wasn’t possible before crowd-sourcing was contemplated.  In other words, they are first to market.  I’m not saying this is an insignificant accomplishment by any means.  But I really do believe that it won’t be tough for new entrants (more local, more segmented networks) to compete in a few months.  These new entrants will quickly eat into Groupon’s margins and reach.

I think that all the hype for Groupon is based on revenue growth and margins.  I must admit that this is refreshing to see because so many of these internet startups are valued so expensively before they make any real money.  But I just don’t see their hockey stick growth curve continuing too much longer.  Unlike Facebook, for instance, they haven’t built anything that can’t easily be replicated.

And it’s my gut feeling, there’s nothing special about Groupon in the long term.

Posted in Business

Goals of Ad Tech: Relevancy and Integration

Jan16
2011 4 Comments Written by admin

I’m glad that I live in a world with advertising.  It funds almost all media I consume with the exception of music and movies.  There is no way that we would be able to afford to consume such an array of content on the internet and television without the support of advertising.  Further, advertising connects businesses with the public thereby making the economy go round.

However, advertising has a lot of enemies.  People insult it all the time.  “I hate this commercial,” “This pop up is so annoying,” and “This site looks so trashy with all of these belly fat and teeth whitening banners.”  These are all valid concerns that advertising technology hopes to appease by delivering a higher degree of (1) ad relevancy and (2) ad/content integration.

Relevancy

Hulu.com has developed a great method of seeking greater relevancy:

By allowing the viewer to decide whether or not the ad is relevant is a surprisingly innovative way of accomplishing relevancy.  A lot of ad tech tries to target ads to consumers by algorithmically predicting their interests and behaviors.  But people are fickle and unpredictable, and maybe Hulu is onto something with this simple and elegant model.  And it politely requests the viewer to think twice about the ad and interact with it which seems like a much more valuable ad space than an ad on television.

Further, new types of media like Twitter and Facebook open a lot of possibilities for superior ad relevancy.  Never before have people been revealing so much information about themselves “publicly,” which–in theory at least–dramatically increases the odds of advertisers delivering consumers relevant advertising.

Integration

A pop up would be an example of an ad with terrible content integration.  A few emerging advertising technologies which I believe accomplish a greater degree of ad/content integration include Vibrant and Image Space Media.

Vibrant (and a few other companies) serves in text advertising:

When you scroll over a word of interest, an ad will pop up relevant to that word.  I agree that this can be a little annoying if you aren’t expecting it.  But now that I am used to seeing these ads around the web, I only scroll over terms that interest me.  Like Hulu’s model, I think this is a pretty elegant way of allowing the reader to choose the type of ads he or she would like to see.

Image Space Media has a similar technology that it applies to images:

When you scroll over an image of interest, you will see an ad relevant to the image.  I think this is awesome technology because it doesn’t cover up any text and because images seem like they would draw greater interest than text.  The only problem with this technology is that it seems to cause pages to load slower (most online display advertising does this to some degree).

In Conclusion

Much of ad spend on traditional media goes to waste.  Most commercials we see on TV are totally irrelevant to us.  And oftentimes we change the channel when commercials come on because they have terrible integration with content.  Greater degrees of relevancy and ad/content integration means a better experience for media consumers.  What it means for the advertising industry is more valuable advertising space.  With annual US ad spend of at least $100 Billion, we are talking about a huge opportunity for advertising technologists.

Posted in Business, New Media

January Means Christmas for Ad Yield Optimizers

Jan08
2011 2 Comments Written by admin

Just about everyone I’ve talked to in the online ad business has seen a dramatic drop in direct ad campaigns since the first of the year.  The reason is obvious, the holidays are over and advertisers aren’t pushing as many products.  What we are also seeing, however, is a boost in internet traffic.  Everyone is back from vacation, back to work, and spending a lot more time online.  More internet traffic means more ad inventory (ad inventory means the number of square and rectangle ad zones multiplied by the number of website page views).

Big online publishers fill their ad inventory a couple different ways.  First and foremost, they sell it directly to advertisers.  Direct sales generally deliver the highest CPM rates, the highest margins, and the most relevant ad/content pairings.  A good example of a direct sale would be Nike buying 10 Million ad impressions on ESPN.com through an ESPN.com sales rep for a $10 CPM rate (a $100,000 buy).  Because ad inventory levels are unpredictable, however (because they fluctuate with traffic levels), most websites work with some type of ad yield optimizer to fill the rest of it not taken up by direct sales.

The job of a yield optimizer is to maximize the return from a website. And that means using sophisticated algorithms to retrieve and serve the highest paying, most relevant ads available each time a page loads.  It’s easy to do this in the Nike/ESPN example.  But when looking at the scale and value of remnant ad inventory on the internet, it isn’t economical to hand pick campaigns for specific sites.  Ad optimizers and their emerging technologies (such as RTB and behavioral targeting) are required to do this job on a massive scale pairing hundreds of different advertisers with hundreds of thousands of different websites.

The economic situation that I described in the first paragraph (few direct sales + a lot of ad inventory) means that ad optimizers are seeing a lot more business this month.  And in an industry with so many players, in a period of such hyper change and growth, this is the optimizers’ time to shine.

Who will step up to the plate and deliver the best performance?  I have a couple ideas, and I will be interested to see who is still around next January.  But in any case, in the online display advertising business, December is the month of the salespeople while January is the month of the technologists.

Posted in Business, Publishing

Display Ad Performance: CPM and Fill Rate

Dec29
2010 Leave a Comment Written by admin

CPM is probably the most popular term used in the online display advertising industry. “Cost per thousand ad impressions” is what CPM means. But most publishers think of things in terms of page views and an ad impression doesn’t necessarily occur every time a page is viewed. Because of this, it is nearly impossible to calculate your ad revenue looking at CPM rates and page views alone. The piece of data that is missing in the calculation is the “fill rate.”

The fill rate is the percentage of the time an ad is displayed. And fill rate is most often not 100%. A publisher might hear that an ad opportunity is worth $2 CPM. But if fill rate is left out of the conversation, this figure doesn’t mean anything. If the $2 ad only fills 10% of the time a page is viewed, the publisher is going to make only $0.20 per thousand page views (10% of $2.00).

Most often, a particular ad space is populated with multiple ads that rotate in and out all at different CPM rates. A lower CPM rate usually means a higher fill rate, and vice versa. Efficient online advertisers rotate the ads in and out to insure maximum possible effective (average) fill rates and CPMs per ad space on a website. Effective fill rate x effective CPM over a period of time equals revenue of a particular ad space on a website. Managing/balancing these rates can be very challenging and burdensome for an individual publisher lacking in time and resources. That’s why it’s a good idea for smaller publishers to work with ad optimizers or for larger publisher to have their own ad operations team.

If you are a small publisher without an ad operations team, choosing an appropriate ad network or optimizer is an important thing to consider. There are many variables that factor into ad performance, and some content simply monetizes better than other content. Usually, it is good idea to run a test with any new advertising provider before locking yourself into any contracts.

In conclusion, asking about CPM rates when evaluating an advertising opportunity on your site isn’t a very good question by itself. In order to actually project the performance of a particular advertisement, there are a lot of variables at play, most notably CPM and fill rate.

Posted in Performance, Publishing

Display Ad Tech Landscape

Dec28
2010 1 Comment Written by admin

The above graphic from Terence Kawaja at Luma Partners represents the vast universe of players in the display advertising market. In one way or another, every company in this image is vying for a piece of the current $60 Billion annual ad spend, and trying to bring more online.

I’m not sure how many logos are on the slide, but I’m pretty sure that it’s too many.  Many of the smaller, less focused companies are being propped up by ambitious and idealistic venture money.  And many of the best small companies will likely soon be gobbled up by the bigger names on the chart.

It’s clear that the industry needs a number of players between the advertiser and the media.  These players most definitely include creatives and ad serving technology.  These players might also include media buying companies, aggregators, optimizers, and many of the other buzz words you see grouping these logos above.  These players probably don’t include companies without a technical advantage, advertiser relationship, or publisher relationship.  In other words, the players on the left are the creatives and agencies–they have the strongest advertiser relationships.  The players on the right do the ad serving themselves and they have the strongest publisher relationships.  Everyone else in the middle is fighting to produce superior technology to scale and get a piece of the ad spend flowing from left to right.  It’s a really interesting graphic and it will be even more interesting to see it as the months go by.

Thanks for reading.

Posted in Business, New Media

Behavioral Versus Social Targeting

Dec27
2010 Leave a Comment Written by admin

Media6Degrees CEO Tom Phillips explains the difference between behavioral targeting and social targeting in online advertising.  Really interesting perspective from one of the industry leaders.

The video loads very slowly for some reason, so it may be easier to pause it for a while before viewing in full.

Posted in New Media

Ad Tech and Emerging Media

Dec23
2010 Leave a Comment Written by admin

The world’s advertising inventory was relatively finite and quantifiable 20 years ago. By adding up all the billboards, radio and TV time, magazine, and newspaper space, you could figure out how much advertising space was out there in the world. This created a relatively efficient and fair market for advertising. The price of a billboard is set at X because X many people drive by in any given hour.

But emerging media has totally changed the game. Internet traffic is far more variable than real world traffic and available ad inventory ebs and flows with internet traffic volumes. This formula makes the pricing of ad space as much of a trading game as the market for gold futures. And now ads have eyes of their own. Online advertising today actually goes beyond pairing itself with relevant content; it has the ability to differentiate itself to each consumer of content with behavioral targeting technologies. Technology now exists that will allow Nike to show a 25 year old female a different ad than a 60 year old male on the same website. No other advertising medium has such a level of targeting ability. In theory, this makes online media much more valuable advertising real estate.

But online ad spend is still only 15% of total US advertising spend despite these new technologies and the fact that more and more time is being spent consuming media online. The vast majority of ad spend is still on radio and television. Privacy concerns and advertising transparency weigh on the switch to online. But the switch is inevitable. As traditional media loses its stranglehold on people’s attention, online ad revenues are bound to catch up too.

Two things will capture this new money: superior content and superior technology. These are the things that I am really excited to discuss at Mediapop. How can ads be integrated with content without being too intrusive? Which content monetizes better than other content? How does that ad spend and content creation relate to our culture? How does emerging technology allow for new methods of producing content? How can a business model fit it? Just a few things that come to mind that I want to discuss. Thanks for reading.

Posted in Culture, New Media, Uncategorized