YCombinator Ad Innovation Conference Keynote Breakdown

Posted by Darren on Sep 14, 2011 • (Comments)

Today’s opening keynote was given by Paul Graham, at the YCombinator Ad Innovation Conference in Mountain View.  I attended along with @tdavidson and @barryl530 to see the early stage innovation that’s happening in the ad tech space.  We were certainly impressed not just with the innovation but with the amount of great agencies in attendance such as AKQA, Goodby, Sapient, Omnicom, Cadreon, VivaKi, and Jess3 amongst others.  We were in good company, to say the least.

Paul admitted he wasn’t an advertising guy, but knows technology enough to understand how tech will influence advertising in the next few years.  The data he used to back his claims were based on the thousands of applications YCombinator receives and is able to forecast and see trends in where innovation is happening.

Here is a summation of the 9 trends that’s pushing advertising, per Paul, but I tend to agree as well.

1. Tablets are important and might call for their own unique advertising platforms to take advantage of the user interface.  Apple and Android will dominate the market and Apple will dictate the ad formats.   Tablets are genuinely a big deal and we aint seen nothing yet.  My take:  Yes, he’s spot on.  Tablets penetrate and are both a content consumption device but increasingly, a content creation device, as long as we can innovate and create good input devices.

2.  All data lives in the cloud. All data about a consumer, transaction, records, etc will live in the cloud and ostensibly, be located in one database that can be used.  What will hold this back will not be technology, but will be government and policy.  My take:  Totally.  We’re seeing this today.  I’m all about data.

3.  More stuff happens peer 2 peer.  Paul used an analogy that I don’t know if I agree with, but he claims that hotels exist because consumers couldn’t find any other way of staying in a remote city or town, so hotels were built to meet this demand.  Now with services like airbnb, hotels could cease to exist as we know them.  My take:  I like what he’s trying to say, but don’t know if I buy the entire analogy.  Not everyone wants to stay in someone else’s home.

4.  There are going to be a lot more startups.   I liked where Paul went with this.  He basically said that engineers had 2 choices after college:  go to graduate school or join a big company.  Now, they have 3.  The third oppty is to create a startup.  Paul threw out the 1% number which was how many developers/engineers start companies… and if this increases 10%, then that’s 10x the amount of startups in the ecosystem.  Again, we aint seen nothing yet with the volume of startups out there… there are going to be many.

5.  Facebook is already a big deal.   Paul said that the $1.6bln from Facebook is quick and simple money and they haven’t really began monetizing yet.  They are focused on growth and even have a Facebook Growth Group, which is one of the most powerful groups in Facebook.  He thinks that when they start monetizing, they can seriously move into markets and kill competitors such as PayPal or Wepay.  My take:  I agree with Paul, but they have to be careful in how they approach this as to not alienate developers and users.  I don’t want Facebook to be 100% of the services I use as a consumer.

6.  Software eating the world.  Don’t be an advertising company that does software.  Be a software company that does ads.  Having this mentality is obviously valley-driven, but allows you to scale a business and think more product focused, which theoretically, should have better outcomes.

7. Target Ads Precisely.  Google could target their ads much more precise but they don’t have to yet, as the market isn’t necessarily requiring it or does it make economic sense for Google to do it until they must.  Paul said a great quote:  ”Assume you can read someone’s mind, what ad would you give them.”  My take:  This is one of our investment thesis at kbs+p Ventures – application of data to drive advertising decisioning.

8.  More things will be done by numbers.  If an investor had to place a bet on quantitative measurement/analytics of creative, bets should be placed on measurement.  Numbers will/can/do drive decisioning and with ROI driven world, we need to quantify it.  My take:  Spot on, another investment thesis of kbs+p Ventures as well as what we apply at VMM and The Media Kitchen.  Couldn’t agree more.  I even treat my fantasy football teams this way.. and I want 2-1 this past weekend!

9.  Creative.  Creative will begin to become “generated.”  Paul essentially argued that the best creative in the “future” world will have to be generated because of all the varieties that are needed.  My take:  I think he’s onto something if we’re able to deliver the right creative to the right person at the right time.

I loved Paul’s opening.  This wasn’t 100% of everything, but was a lot of it.  My friend Roger of IA Venturesc also talks about similar trends on his blog, in a post titled, changing polarity in advertising, if you want to continue being inspired…

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  • #9 Shameless plug but I totally agree that the future of creative is "generated" - it's the hard problem that we've been tackling at Adverti.se. No advertiser ever writes enough ads and as the networks progress to delivering ads for an audience of one, the ad writing function can only be delivered algorithmically.
  • #2 is a little funky, and rings my cluetrain/VRM alarm as written.  Not sure I understand the architecture of how this would work.  Couple [provisional, inchoate] thoughts...

    Certain data might be widely accessible in this manner, but little of the good stuff (customer transaction data? I don't think so).  And in my mind when we're talking about customer data, we're kind of talking about ads, but we're more talking about "CRM".  Opportunity here depends on how bullish you are on Salesforce.com et al.  Think about all the data Amazon pulls in from its customers...that is one of their most valuable assets.  They're not sharing that on some read/write database in "the cloud".  (They're not really advertising, either).  Of course, companies that do make their data available in this manner can plug into developer networks (e.g. Force platform and others similar).  Definitely a model that works but not sure of the market penetration/potential.

    Actually I think I just talked myself into doing a startup based on Salesforce ;-)

    But seriously, it's a question of timing (which I hear is important in the investing/entrepreneur game).  Maybe sometime in the future it makes sense for even uber-advanced retailers like AMZN to let third parties r/w on their customer databases, but that doesn't seem like a near-term opp for YC-type companies.  More of a hardcore BI/analytics delivered-via-the-cloud opportunity?  Either way, I'm definitely not clear on what the "B2C" [did I just use that? sigh] analog for all this is.

    Now we come to the part of my comment where I invoke VRM and say "why should vendors own all this data, it should be owned by the customers and used to communicate demand."  Then I like to something like this great post from JP Rangaswami and move on: http://confusedofcalcutta.com/...

    Although I enjoy geeking out about "unstructured data" and the like, I am always grossed out at a cultural level by marketing people who want to do war with customers ("target", "attack", "retain").  Said differently, there's a reason AMZN bought Zappos.  There's a lot of exciting stuff to be done in analytics, and there's a lot of exciting things to do to build better personal relationships with customers.  I reckon where the two meet up is where the extra huge $$$ is.

    Post script: I like #9...more content and targeting should be done at the edge.
  • I love (and live) #6. Great recap. Thanks!
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