Category Archives: Advertising & Marketing

Ad Network Platforms vs. Demand Platforms

Lets define before we begin.

Ad Network Platforms:  platforms being built by current ad networks to service agencies and brands directly
Demand Platforms:  meta platforms that sit on top of multiple inventory sources

There seems to be a battle brewing between ad network platforms vs. demand platforms.  The trend I’ve spoken about on this blog for a while now and is now picking up at a faster pace are the ad networks we’ve all known to love (or hate) that are creating their own “platform” for brands and agencies to pull the levers instead of the people in their services group.

There are three types of ad network platforms that are being built out and non of them are mutually exclusive to the other:

  • Platform for buying audience segments & data
  • Platform for buying media
  • Platform for creative optimization

In theory and at first glance, these seem directionally right to where the industry needs to go.  Why wouldn’t brands or agencies adopt an ad network platform for their own use in their VMM/VivaKi/Cadreon/Adnetik/B3/ATOM group?  This is the major question and note, I can only speak for myself (VMM), but because this blog is of personal nature, I am voicing my own views, not the views of my employer (disclaimer).

The macro hypothesis that is being tested is:  agencies or specialist agency groups want to bypass the managed services part of ad networks and build the capacity for audience selection/procurement, optimization, and insights/analytics internally under the umbrella of whatever holding company they are employed at.

This post does not go into the reasons as to why this may or may not be smart but rather talks about why ad networks should not focus on building their own platform.

If you agree or can assume the hypothesis above, then continue reading.

The first iteration of ad network platforms (not to be named, but if you want a list, contact me) still are a closed loop system.  The reason why you would use a demand platform unit on the buy-side is that you want access to as much inventory as possible in order to make the smartest decisions for your clients (open).  By using one or even four different ad network powered platforms, you are making the job of inventory & data procurement and optimization harder than it needs to be.

Multiple platforms means multiple log-ins.  Apples to apples comparisons are not easy to make as each platform is slightly different.  Universal cookies are tough to pull off.  Biforcating data.  Duplication of bidding leads to artificially inflated pricing.

There needs to be a layer that plugs into the networks – i.e. a meta platform that can plug into as many inventory sources (networks, exchanges, sites direct, etc) as possible in order to aggregate as much data and media inventory.  I do not foresee a company like AudienceScience allowing X+1 to plug into it or vice versa in the near future.   That 3rd party layer is going to be crucial and that’s where the buy-side demand platforms sit.

I do not foresee agencies using multiple ad network powered platforms in the long run which means there is a forthcoming (and current) land grab to be the agency side demand platform of choice.

My friend Fred Wilson who blogs over at AVC likes to post entries on his blog that have his “wants” and hopes that people take note and action them.  I’m going to borrow that idea from him and try this here.  This is what I want within the demand platform and ad network platform space:

  • Ad networks to scrub their data and make it available for purchase without the media attached
  • Ad networks to plug into as many demand side platforms as possible (i.e. Invite Media, Media Math, Turn, etc)
  • Figure out the issues around appending cookies visa vi multiple vendors (universal cookie?)
  • Data should not have ‘minimums,’ if it works, we’ll buy more, if not, we’ll be back again to test another data set
  • Let the market price media and data as the real value will rise to the right buyer
  • Regulation/restriction/firewalls between the same company who sells/licenses/rents data and whom sells media

Anything else I’m missing?

ContextWeb Agency Demand Platforms Panel

Key parts of our talk on Agency Demand Platforms

  • What and why are agency demand platforms being created
  • Business models emerging
  • Impression level valuation

If you are interested in any of the above topics, take 20 minutes and watch the video.  Top agency holding company (and agency) execs chatting during Advertising Week.  Participants include Razorfish, Cadreon (IPG), VivaKi (Publicis), Adnetik (Havas), and me over at Varick Media Management (MDC Partners).

Check out the blog post over on ContextWeb.

Rational Expectations

When I was a doctoral student in economics at the Massachusetts Institute of Technology, a powerful theory known as rational expectations suggested that it was difficult to profit from widely anticipated, or predictable, events, since rational actors would already have taken the action necessary to arbitrage any such opportunities.  When I become a student of management, I assumed that an extension of rational expectations would apply in business; that is, any straightforward profit-enhancing opportunity in competitive markets would already be exploited and hence unavailable at the margin.

Well, thank goodness for me and the shareholders of Harrah’s Entertainment, Inc. that rational expectations is far from complete characterization of management behavior.  In short, opportunities abound to employ simple analytic methods to marginally or substantially increase profitability, especially in large businesses such as mine where a single insight can ring the cash register literally thousands or millions of times. - Gary Loveman, Chairman of the Board, President and Chief Executive Officer, Harrah’s Entertainment

I just wanted to share this passage as it’s written well and taken from the book, Competing on Analytics, The New Science of Winning by Harvard Business School Press (Thomas H. Davenport & Jeanne G. Harris).

Expect more quotes from this book in the coming days/weeks as I finish it.

Digital Marketing Tidbits: Social Media, CPM, Ad Serving, and RTB

I have not been updating the blog as much as I’d like and have a few long-form posts I’d like to write, but based on my schedule right now, that’s a long-shot.  I’m going to condense the posts into a paragraph each and if people want me to expand on them, please comment or reach out to me and I’ll spend more time writing.

Social Media Strategy – your social media strategy should be part of your marketing and communications strategy.  I do not believe that social media should live in it’s own silo.  A solid marketing department or agency will understand social media at its  core and will work to involve the benefits into the overall strategy.  It’s only a matter of time until the many opportunistic social media shops will either be weeded-out or acquired into larger entities.

Let’s Not Kill the CPMOver on TechCrunch, Shelby Bonnie, former CEO of CNET, talks about wanting to kill the CPM.  His usage of CPM is incorrect and is misinformed.  Additionally, since many people think that CPM is a digital media term, there was additional pickup across other blogs and the tech industry started to drink their own juice.   First off, CPM is a planning metric in which marketers are able to put a cost to 1 thousand impressions.  While CPM is a metric that can be used for cost-basis, it is NOT a metric for performance.  Marketers who are optimizing to the CPM without overlaying other engagement stats as KPIs are the ones who should re-work their strategy.   CPM also is used in offline mediums such as Print.  This allows for an apples-apples comparison for rate basis.  To Shelby’s credit, I do believe he was trying to illustrate something different (and valid) but “killing the CPM” is something that’s a hyperbolic title.

Ad Serving Systems – Current ad serving systems such as Google DART or Msft Atlas must change their positioning or they may be toast as the industry evolves.  The current ad serving systems must provide real-time bidding engines within the next few years or they will be defunct as new players (i.e. Invite Media, Dataxu) start to eat their cake.  How much success will Goog/MSFT have with re-engineering their legacy systems?  Time will tell.

Real-Time Bidding – Today, this does not impact the majority of agencies, advertisers, and publishers, but within the next 3 years, the media landscape will be at a tipping point.  I do not know why I picked 3 years, but it seems reasonable.  Imagine a world where you can value every single impression in real-time based on the amount of data you have and the models that you put together… starts to sound like Wall Street… and yes, that’s the insight I am trying to illustrate.  Quantitative analysis is coming to advertising beyond where it is today (it’s already here in most major media shops) and the technologies needed to service RTB will start to emerge.  I’m fascinated with this space from the agency side, client side, and tech side.  If you are building something here and we’ve not spoken, I’d love to hear from you.  Additional:  My comments on the Google Advertising Exchange.

Advertising Week in NYC – Time to Navel Gaze

It’s that time of year again, Advertising Week in New York.  I’ve been invited to speak on the main stage and on a few panels at various events.  I’m going to list the events below and if you are attending the conferences, certainly reach out to say hello.

You can follow Advertising Week on Twitter.  The official hashtag is #adwk

Monday – OMMA Global // 4pm – Marketers Ask – Is Paid Advertising In Social Media Dead? // http://bit.ly/14r8sa

Tuesday – AAAAs Jay Chiat Awards // 12-4pm Main Stage Speaker – Provoke:  De-Averaging // http://bit.ly/k1ywh

Tuesday – IAB Mixx Awards // 6pm // http://bit.ly/okIU0

Friday – Advertising Week // 11AM – Agency Demand Platforms, Is Everyone a Media Trader? // http://bit.ly/mCGgi

Other than the IAB Mixx Awards on Tuesday evening, I do not plan on attending after hours events.

POV: Viral Videos For Brands

I wanted to name this post, Viral Video Crap, but that wouldn’t be on DH brand.

While reading Peter Kafka’s column, MediaMemo on AllThingsD this evening about Microsoft Word and it’s impending verdict, he linked to a video of a gentleman in a wet suit who rides down a slip-n-slide and launches into a kiddie pool.  This video was posted to YouTube and has over 1.3MM views as of writing this.  As it turns out, Microsoft Germany created (or had created) the video and it links back to Microsoft Project (www.megawoosh.com).

I do not get it.  The video is cool and the SFX are pretty sweet, but how is this on brand for Microsoft and do I feel any more love for Microsoft Project than before?  No.

I hear all the time from brands that they want to create a “viral video.”  First of all, no one creates a viral video – consumers decide what becomes viral or not.  Secondly, most videos that become viral are not on brand for most clients.  The video, while most times laughable, does nothing for brand recall or even lift in brand attributes.

Just because a video achieves 10MM views, does it mean it does anything for the brand?  I’d love to see some research to prove me wrong.

Recap of Fashion2.0 Meetup Event

fashion20I’m not going to recap the entire event play by play, but do want to highlight some of the interesting tidbits.  The hashtag (twitter) for the event was #fashion20, so you can follow the tweets here.

Of the 5 companies presenting, I found 3 of them interesting – they just happened to be the B2C plays.  There were 2 B2B plays, but since I’m not a fashion designer or retailer, it didn’t strike me as interesting (but I sure can see their value proposition).

In no particular order:

Pier Eleven:  These guys are trying to merge art and fashion by releasing t-shirts with artists designs on them.  I think that this is interesting if they are limited edition and the artists are of fame.  Pier Eleven is applying dynamic pricing which is novel, in the sense that the price rises for each additional t-shirt sold.  If you are looking to get access to PierEleven.com, the access code is “Whoareyouwearing?”

iStyle Media:  I think these guys have a lot of promise, but they didn’t talk about their company the right way which led to many of the “investor” panel to ask “wrong” questions.  I can’t stress how important it is to position a company the right way and these guys missed the boat.  Anyway, iStyle Media is a Facebook application that allows people to tag pictures based on the clothing they are wearing and find other people who are wearing similar clothing and learn about different styles.  iStyle Media can help consumers in fashiondiscovery phases and also, recommendations.

ProperCloth:  I was looking forward to meeting these guys as I am on a MEconomy kick and custom shirts are part of that.  These guys have a very intuitive and easy to use online interface where people can order custom shirts.  What I like about this is that if you have a shirt that fits really well from a major manufacturer such as Theory or Hugo Boss, ProperCloth can match the same sizing specifications.  These guys also provide some great finishing details as well.

All in all, it was a great meetup.   More people that I expected and some great conversations post.

@yuliz and @mikepratt did a fantastic job organizing.

What Do Mobile and Games Have in Common? Business Implications

I am about shoulders deep in the mobile space due to some cutting edge work we’re doing at work for some of our clients.  We’ve had some great success that has even landed our work on CNBC of all places.  Since 1998, we’ve been hearing “this is mobile’s breakout year.”  If I were to make a prediction, if the economy strengthens a bit, I’d say 2010 is going to be a big year for the mobile advertising industry.  Time and time again, I see mobile as part of our media plans and the subject of many of my after work cocktail conversations with both investors and corporate development types.

What I’m particularly excited about is the confluence of game theory and the mobile world.  To those who want a definition of game theory (taken off Wikipedia):

Game theory is a branch of applied mathematics that is used in the social sciences (most notably economics), biology, engineering, political science, international relations, computer science, and philosophy. Game theory attempts to mathematically capture behavior in strategic situations, in which an individual’s success in making choices depends on the choices of others. While initially developed to analyze competitions in which one individual does better at another’s expense (zero sum games), it has been expanded to treat a wide class of interactions, which are classified according to several criteria. Today, “game theory is a sort of umbrella or ‘unified field’ theory for the rational side of social science, where ‘social’ is interpreted broadly, to include human as well as non-human players (computers, animals, plants)” (Aumann 1987).

When Dodgeball first emerged, it was well before it’s time.  However amazing the Dodgeball idea was, the adoption was limited by the device and consumer knowledge.  Later, my iPhone came and I installed Loopt, which is Apple’s half-assed attempt (so far, IMHO) to promote location based services and social networks which had similar DNA to Dodgeball.   Both of these apps had great vision, but never were realized (Dodgeball did have a loyal following pre-Google’s acquisition).

foursquaremayor

Last month, I was sitting with an investor and he asked me about FourSquare.  I didn’t know about it.  He told me to check out their website and within 24 hours, I was up and running and “playing.”  Naveen and Dennis (former founder of Dodgeball) are onto something.  What I love about FourSquare is adoption of Game Theory into this application.   The introduction of Game Theory creates a “sticky” nature which is competitive for players and keeps people coming back.  Whether you are trying to be competitive or not, it’s a great hook to this game.  Charlie O’Donnell wrote a great post summing up FourSquare.

FourSquare is interesting and I’m speculating some investment into the company in the near future.   I think that their application of Game Theory is solid and we’re going to see many more mobile folks apply this soon, if not already done so.  I’m sure there are plenty of people who have, just not on my radar screen.

FourSquare has real business implications.   Anytime you having a conversation with consumers both online and off, you have the ability to blur lines and route people around.   Business impact by applications like FourSquare are not to be underestimated and cannot be measured right now.  Right now, the early adopters are in adoption phase, but over time, as these apps penetrate the masses, ability to route large groups of people could be a common place.

Advertisers have always wrestled with tying online with offline.  The simple way to route online with offline is coupons and promotions, but you’d be shocked how many retailers are not setup to handle this both from an in-store infrastructure or a P&L standpoint.

Talking about routing groups applying Game Theory;  look at Gilte Group.  Every morning I receive an email with the day’s latest sales and if I’m not logged in by 12:15, chances are that I miss the top products.  There are a few me-too players similar to Gilt like Haute Look, but these types of services provide Game Theory to boost sales.  Not mobile, so I digress.

Anyway, lots of opportunity and I’m certainly watching it closely.  Anyone else?

Agency Demand Platforms

My friend Jay Sears (@jaysears) sent me an invite to the AdClub/ContextWeb event on Agency Demand Platforms a few weeks ago and was impressed to see the high caliber speakers but was bummed out that MDC/VMM was not asked to participate as well, as, my friends at Havas.

The event was packed – almost every seat taken in the beautiful NY Times Center and quickly got underway by a speech by Carl Fremont about the Digital Action program of the AdClub.  Digital Action is actually really cool – publishers donate inventory and the AdClub gets to sell it and keep the money to provide scholarships for their students.  We’re working on a deal which should hopefully provide some dollars to the AdClub so I was excited to see Carl speak about it.

Bant Breen (Initiative), Sloan Broderick (Mediacom Interaction), Greg Green (VivaKi), Matt Spiegel (Omnicom), Ross Sandler (RBC), and Wenda Harris Millard (MediaLink) all participated on the panel and had a healthy discussion that to industry outsiders may have been fascinating, but to industry insiders, was much of the same fodder we hear each day.  For those interested in reading the play by play of the event, AdExchanger has a fantastic writeup and I recommend checking it out.

I want to use this blog post to talk about a few of the issues/hurdles that affect Agency Demand Platforms and their roll-out to advertising agency holding companies such as IPG, WPP, Omnicom, Publicis, Havas, and MDC Partners.  Many of these thoughts come out at lunches or dinners I have with my peers at other demand platforms but I thought that publishing them online may spark a larger conversation with all industry constituents:  investors, agency execs, media folks, technologists, startups, PR, etc.

What is a Demand Platform?   This term is thrown around with increasing frequency but I’ve not seen a solid definition around it.  AdAge wrote a piece on all of our agency platforms that we are building and this comes closest to what I define as a Demand Platform:  a technology solution with a front-end interface where agencies (media, creative) have access to procurement, optimization, warehousing, and analytics.  All of us are building something within this vein but each of us has our own cupcake with different sprinkles.

I do not think that Demand Platforms have to be limited to single supply sources such as advertising exchanges.  It seemed as if the majority of the AdClub/ContextWeb event was based around exchanges, but supply sources can be various.  Currently, we are seeing typical ad networks, publisher exchanges (i.e. FimServe), reservation systems such as Apt, broad exchanges (e.g. RMX, AdX) and sites direct are able to plug into Demand Platforms.  Personally, I look forward to the day when inventory goes beyond OLA into search, mobile, print, radio, television, and OOH.

Hurdles

Agencies vs. Technology Companies: Agencies have always adopted technologies tactically, but if they are to roll-out a Demand Platform, to be successful, it must be strategic.  Most agencies are not staffed up with technologists (broad term for many different types of technology people) and most management in agencies are not trained in running technology companies.   Technology companies also invest in R&D and top talent, as what they build has scaling capabilities and they can recoup these dollars.  Agencies are a staffed differently and generally never hire beyond revenue.  Depending on the agency, holding company, and timing of the financial markets, agencies wanting to become a technology company may be a far dream (if building their own tech).

I predict most agency holding companies are going to work with strategic partners to roll-out their Demand Platforms as for the aforementioned reasons.  There are a few partners in the market today that are getting some nice publicity and traction such as MediaMath, Invite Media, Triggit, AdChemy, X+1, DataXu, Brilig, and others.  The question is whether to go exclusive or remain independent and this is a major question for many of us.   The partners above service the ad-serving & algorithmic optimization space but there is also data warehousing, data aggregation, and creative optimization that plays within here too and there is a whole host of other partners to deal with there.

Changing Media Culture:  Media planners and buyers have applied the human element to optimization for the past 15 years or so and are used to buying sites as a proxy for audience.  Most of our Demand Platforms focus on buying “audiences,” which is fundamentally different than purchasing sites in themselves, so re-educating the entire media planning and buying world about this new paradigm will have to occur.  Technology is going to strategically penetrate agencies if this happens and the education process is going to take a while and not only are we going to have to educate internally to our agency staff, but also, to our clients.  As always, there are going to be conservative clients/agencies and progressive which means that most people will fall in the middle.  I can’t stress enough how much of a barrier this is for the industry.  Changing culture is not easy and the visionaries will have to be in place in the agencies and clients must remain open minded, as the way they have purchased digital media in the past will change.

I am not stressing that media planners and buyers are going to be out of a job, as one can read the above paragraph and deduce that.  I hypothesize that we are going to have a something like a performance display group and an integrated team.  All IAB/OPA standard units will run through the performance group through a Demand Platform while the media/creative staff’s time will be freed up to create big brand experiences.   For publishers, read my “Goodbye Media Sales Execs” post.

Business Terms/Pricing:  I’m going to attack this dead-on as all too often, this question gets avoided.  In the USA, agencies typically do not take posession of media (unlike Europe) and sell back to their clients, but rather make a scaling commission on all of the media that is purchased on behalf of clients.   With Demand Platforms and the ability to purchase on Advertising Exchanges, there are similar models to SEM (search engine marketing) emerging:

  • Cost Plus – this model takes into account of the cost of the media plus a standard consistent markup for the “secret sauce” (optimization, data, research, analytics, etc)
  • Blended/Arb – this model is where the agency takes posession of the media and prices it back to the client at their discretion
  • Pass Through – media agencies will just take their typical media buying or success comission/compensation for OLA planning

Most of the players including VivaKi, Cadreon, B3, Adnetik, VMM do not publicly disclose their business models and that’s valid and fair.  I’d assume however that most models are based on one or multiples of the three scenarios above.  If there is another scenario that I’ve missed, I’d love to know about it.

Note:  as explained above, agencies in the USA cannot take positions on media and sell back to clients.  This is why seperate companies have been set up to provide church/state seperation.

Real vs. Near-Real vs. Non-Real-Time:  I don’t know how this is a hurdle, but I want to point out that saying “real-time” is the “cool” thing to say right now but there is almost no substance behind it to the trained eye.  There are less than a half dozen exchanges who can support real-time, and of those real-time exchanges, they are dwarfed in scale from the big guys.  There is no doubt that real-time is going to be interesting in the future, but as of July 14, 2009, this is purely an ego play.

The Agency Demand Platform Ecosystem

While working on the Agency Demand Platform project, an entire ecosystem is impacted and innovated upon.  The following business areas are affected by these new Platforms (depending on the particular platform of course):

  • Dynamic creative
  • Analytics (insight)
  • Data warehousing
  • Decisioning and processing
  • Visualization
  • Algorithmic development
  • Yield management
  • Ad operations (trafficking, pixel implementation)
  • Data privacy
  • Media planning & buying (communications planning)

Want to share your viewpoint?   Did I miss something?  Feel free to leave a comment or tweet me at @dherman76

Some Brief Updates – Jobs, Events, Thoughts, and My Son

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AdClub / ContextWeb Event
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I’m heading to the AdClub/ContextWeb event tomorrow at the NY Times building.  Should be a great event but not sure why they are only highlighting IPG, WPP, Omnicom, and Publicis.  MDC Partners (our holding company) and Havas are also doing some really interesting things in the Agency Demand Platforms space and are not participating.  We will be in the audience though and I’ll probably be taking some notes and tweeting (@dherman76).

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Posterous
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With many people talking about Posterous, I thought I’d give it a try.  Check out darrenherman.posterous.com.  I haven’t figured out where this fits in my thought stream, but I do like how easy it is to use.  I still have my Tumblr page which I used frequently for about six months, but have not updated it in a while.

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Varick Media Management
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We’re currently hiring at Varick Media Management.  For those who are interested in learning more about what we do, reference the NY Times article that came out about a month ago.

  • New Business Director – looking for someone mid-level to senior-level who wants to take the reigns on new business and own the revenue targets.  Looking for someone with experience with ad networks and exchanges, but not sell against an ad network model.  We’ve learned that this is a consultative sale with some ad operations knowledge a major plus.
  • Platform Manager – we are currently in the process of specing out our platform and are looking for someone who wants to strategically and tactically contribute.  Involves working with over a dozen data partners, multiple optimization organizations and design/development shops to build out our vision.

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My Man – David Matthew Herman (8 Months)
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David and Darren

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Secondary Markets (e.g. purchase shares of private companies)
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I’m personally fascinated with secondary markets but do not know much about them.  I’ve been playing around with SharesPost for the past few hours but would love to dive deep into it and other platforms like it.   If you know this space well or are building out interesting platforms, feel free to reach out.