Category Archives: Advertising & Marketing

Ghostery, Google, and Privacy

A couple of months ago, I wrote up a report that talked about the marketing technology behind $35 billion in 2011 holiday e-commerce sales.  I pulled the data from Ghostery, a browser plug-in that allows users to understand what trackers and beacons are on individual websites.  After I released the report and got some initial traction, Evidon, the owners of Ghostery reached out and asked me to be a guest editor for their Global Tracker Report.  Fast forward to today, their first report is out and you should download it.  Also, the New Media Age wrote a solid piece on the report.

Why?

Not only is it a good read about the current state of privacy, advertising technology, and data, it’s a piece that both the novice and advanced marketer can understand.

Based on the data, the top 5 most prolific trackers are owned by both Google and Facebook.  Google has 3 of the top 5 including Google Analytics, Google Adsense, and Google +1.  Facebook includes both Facebook Social Plug-ins and Facebook Connect.  It’s amazing to see the dominance of Google on this list, as their Google Analytics tags are down on a disproportionate amount of websites scanned by Ghostery.

I’ve recently stated on this blog that Google is both the house & the card player (in relation to a casino).  They know the odds, the cards in the deck, in the current hand, and are playing the game.  The more and more data that Google has access to, the more they can optimize for a Google beneficial outcome.  Note however, this argument falls a bit when you realize that Google can do this short term, but will lose advertisers long-term if (Google) only optimize outcomes for themselves.

If you have a second, download the report to learn more.

Google's Dominance and Why I Will Continue To Invest in Ad Tech

There have been a couple recent announcements in the marketing and advertising technology worlds.  Salesforce/Buddy Media last week, and now this week, DoubleClick Digital Marketing Suite.  For those of you not following the DoubleClick announcement, read here and here.  This morning, Digiday came out with a an article entitled, “Is Google Running Away With Ad Tech?” which I’d like this post to generally respond to.

Google is Intent Rich
As a media buyer, one of the best performance signals we have for buying media is Intent.  Murthy Nukala, CEO of Adchemy wrote a visionary piece recently that explained a bit about Intent and you can read it here.  Intent is way far down the purchase funnel and in a last click world, it generally gets all of the credit.  Being that Google is an Intent harvesting machine, it will continue to manufacture dollars.   Most of the Intent comes from its search engine, so the biggest risk to Google’s advertising dominance is if Google remains a top search engine.  As of now, it does not look like it’s going anywhere.

Google has Vision
I have a few very smart friends who have sold companies to Google for ad tech.  They are true visionaries and have a common vision.  Inside of Google, they are harnessing that vision and leading the way with it.  Neal Mohan has one of the best jobs in the world, IMHO.  He gets to execute this vision, not just talk about it, with Susan Wojcicki and continue to build one of the largest ad tech stacks we know of as an industry.

Google’s Enemy Is Themselves
At some point, which is unknown, there is a good chance a modular home falls apart because there is a stress fracture.  With Google, they are basically building a modular home with ad tech.  They are buying fantastic companies and piecing them together.  The recent announcement about rewriting their backend onto their own platform is extremely important, but one would have to think that mixed cultures and many different technologies will eventually be a potential kink in their armor.

There size is another reason to be concerned.  Publishers are realizing (some have realized a while ago) that Google is a big threat to them.  Google is the casino and knows both the dealer and the player.  They have the data.  This data can and will (might) be used against either party when it benefits Google.  This is a serious issue, essentially as Google continues to satisfy both the demand and supply side.  If publishers pull away, this means Google has less data.  The less data Google has, the less significant they become.

Google Needs to Watch the Government
We know that Google is big.  They are big enough that they need to seriously be concerned with how they are fronting to the industry.  In many circles, the term “monopoly” comes up.  From an entrepreneurial perspective, monopoly is pretty phenomenal because it means you’ve out executed every competitor and basically have won the war.  However, we know the USA doesn’t like monopolies and there needs to be competition in our economy.  Privacy concerns are serious and Google needs to keep these in mind going forward.

Why I Will Continue to Invest in Ad Tech
We believe that Google is strong.  There is no doubt.  Using a sports analogy, they are a team that you can bet on to make the playoffs each year and have a good shot at the Finals.  However, one has to bet against them.  There needs to be competition in the space and there are many companies impacted by Google’s dominance and won’t let Google take over the entire industry.  Each one of those companies, either direct or indirect competitors of Google will be stepping up their M&A game over the next 12-36 months to build an ad stack that’s comparable or better than what Google has.  Remember, in ad tech, features are very important – and Google with their early lead may have a legacy stack fairly quickly because the features they acquired might get old and stale.   This leaves the door open for many players.

Additionally, we don’t know where the next search engine might come from.  Twitter, Facebook, Amazon, Apple, DuckDuckGo (no cookies, I know), and maybe a few other players are building this.  If Intent breeds dominance in advertising, then these players cannot be overlooked.  Either Google buys them (probably not most of them), or they could be the foundation for the next big advertising tech companies.

Some of the players I’m watching to make moves are:  Apple, IBM, Adobe, Accenture, WPP, SAS Institute, Salesforce, Microsoft, Experian, ValueClick, Amazon, eBay, Walmart, Akamai, SAP and Oracle.

Friday Ad & Marketing Technology Insights

I thought I’d write a post before the weekend set in.  This weekend is going to be a special one as my brother, whom some of you might know, is getting married tomorrow night to an awesome bride.  I could not be any more happier for him.

Back to the post…

Some interesting insights that I’ve been uncovering and/or thinking about over the past few months:

1.  Large publishers are becoming increasingly wary of Google.  I’ve spoken to two major publishers in the past 7 days as I’ve been doing some diligence for startups we’re looking at and they are increasingly becoming wary of Google’s power in the marketplace.  “Monopolistic” is a term that I keep hearing about Google and it’s one that I think holds some ground.  One of the main reasons why pubs are increasingly becoming worried about Google is the amount of both demand/supply side data that Google has… if they were playing cards in a casino, they would be the player and the dealer.  It’s a ridiculously powerful position to be in.

2.  Amazon.  I’ve bought dozens of books from them over the years, but now, I’m starting to buy a lot of advertising from them.  And quite a few other agencies and brands are as well.  Amazon is becoming a quiet power in the advertising marketplace.  Why? Intent.  I wrote a whole post on this in March 2012.  Amazon has a search engine which it acquired and has millions of people with real intent coming to their platform.  Intent data married to advertising can yield very positive results.  A big reason why we invested in Yieldbot (not currently in relationship with Amazon).

3.  Social Media Monitoring.  We see a new platform in the social media monitoring space every other week or so.  We’ve not invested in this space because we feel that these platforms are becoming commoditized and are table stakes.  Yes, there has been some value created (i.e. acquisition of Radian6) but that’s few and far between.  In order for a platform to generate real value for shareholders, it needs significant market share at a fair price point.  I’ve not seen any significant breakout companies yet.

4.  Where are the $30-100MM ad tech and marketing technology companies?  Many companies I’ve seen lately are all $1-10MM organizations.  There is nothing wrong with that, but I’d like to see more ad tech companies maturing their business.  Randall Rothenberg has a hyperbolic quote in a Forbes interview he did with John Battelle that offers one reason why, but as many people point out, VC’s don’t force exits generally.

Battelle: What are the biggest obstacles in our industry?

Rothenberg: Venture capitalists. They create new businesses, but they incentivize companies toward short-term cash-out potential, not long-term growth. So if I were a marketer, my worst problem is chaos–not knowing what will make a difference. Venture capital has supported and financed a bunch of chaos.

5.  The next 12 months are going to drive returns to shareholders (including entrepreneurs) and continued investing will occur.  I’ve had first hand conversations with many companies who are sniffing around the marketing & advertising technology industries who are looking to acquire.  We recently saw this with Salesforce/Buddy Media ($800MM-$1bln +), SAS Institute/Ai Match, etc.  I think there is going to be another 3-4 deals by the time 2012 is over.

Just some food for thought going into this weekend.

Entrepreneurs are Idealists and Agencies are Realists

So far this year, I’ve probably met with over 100 unique start-ups,  inclusive of mentorship, investing, and media buying activities.  Since I’ve met with a high volume of companies, I’m starting to see a pattern.    Most entrepreneurs in the advertising and technology space are pitching an idealistic vision.  Unfortunately though, we do not live in an idealistic world so in my mind, I need to take their vision and transform it into something that’s much more tangible.

The Addressable Market

Advertising agencies are looking for solutions that solve today and tomorrow’s problems and we need companies who can help us do it with flawless execution.  Many early stage organizations are far from flawless not because they are terrible, which they are not, but they are early stage and building out their product and team while trying to satisfy the demands of a large agency and a global fortune 500 marketer.  It’s hard to do both.  The early stage organizations who can do this are the ones who accelerate revenue fastest.

Additionally, because entrepreneurs tend to be idealistic, only a portion of their product vision can be bought off today.  It’s rare, though not impossible, that we as an agency can buy a total offering from an early stage company. Agencies are trying to get their clients key performance indicators satisfied and surpassed and sometimes much of the entrepreneurial product is not relevant to do so.

So, what’s the net/net?

As an agency, be very specific with what you need from an early stage company and make sure you understand the ins/outs of working with a startup.  It’s one of the most rewarding experiences to work with an early stage company but it’s also one of the most painful.  Back in May of 2011, I released this document thru The Media Kitchen about lessons we’ve learned working with startups.  Read it.  For the record, I am pro-startup and working with as many early stage companies as possible.

As an investor, try and understand what the market is ready to buy today.  While you are ultimately investing in a vision for the future, as well as a solid team, the market rewards current acceleration.  Also, product changes and pivots are common, so make sure to understand what media buyers are looking for.  We’ve all heard Wayne Gretzky’s quote, “skate to where the puck is going to be, not where it has been” and that’s also relevant here, just don’t go too far up the ice or you’ll be waiting for your portfolio company to be generating revenue.

As an entrepreneur, understand that not everything you are selling might be bought off today.  Build a product that can be serviced today but has enough visionary legs to pull it into the future.  Your product you are selling should be relevant for today’s needs.  Meet with agencies to understand exactly what those are.  There are some great people you should connect with to take the temperatures of agencies.  Here are just a few of them:  Brandon Berger, Ian Schafer, David Berkowitz, and Mark Silva (sorry if I forgot to mention you).

** The graphic from this post was something I drew after being inspired by Hugh Macleod.  Hope you enjoy.

Two Steps Forward and One Big Step Back: GRP

I receive different newsletters each morning from digital media industry sites & blogs.  The headline in today’s MediaPost was “Nielsen to Industry Analysts:  We’ve Created a ‘Currency,” says GroupM to Guarantee Ad Buys.”  This caught my attention as I’ve been fairly public about my stance about shifting away from proxy based measurement into hard metrics for marketing and advertising*.

It seems like much of the industry is getting behind GRP’s within the digital world.  I continue to think this is a mistake.    Here are some of my reasons why:

  1. GRP’s are used for understanding how often you are reaching your targeted audience (reach + frequency).  This measurement is not a business moving KPI.  This becomes a business moving measurement when you can tie GRP levels to store/e-com sales.
  2. There is inherent waste in GRP’s.  These points are calculated on an audience, but we all know that your target audience is not the only audience that is buying your product**.
  3. Infrastructure exists to measure beyond GRP’s, yet many folks are in denial about it.   While a large bundle of media dollars are in television advertising and that’s measured by GRP’s today, television is becoming video (not the other way around) and should be measured on actions, rather than reach.   TV measurement should migrate to digital media measurement as televisions become more like computers.

It is easy to understand why people are talking about GRP’s.  I meet with at least 5 startups a week who are going after brand dollars and those brand dollars are measured by GRP’s.  Nielsen, comScore, and others are releasing products that measure the online equivalent to the offline GRP.  As I said above and I’ll continue to say again and again, measuring your marketing by GRP’s is dumb.   Hey public company CMO, on your next earnings call with Wall Street, are you going to tell the Street that you reached your audience and bought 250 points per week and don’t know why they didn’t convert?

Measure.  Optimize.  Repeat.  Go beyond the GRP.

I’m on a bit of a rant this morning.  Just wait until you hear my rant for start-ups going after “brand dollars.”

* Barry Lowenthal’s piece on GRP’s Is a Lazy Metric

** See my piece I wrote for a 4A’s conference in 2010 on a concept called “de-averaging: changing the media planning paradigm

Native Advertising Opportunities & Native Monetization for Publishers

Fact:  for the foreseeable future, brands are going to continue to spend dollars to reach consumers to try and convince them at some point to purchase their product or service.  Brands do this by using tactics to drive conversion or boost purchase funnel favorability (across different stages).

There’s been a recent meme, conversation, trend, topic, or whatever you want to call it around Native Monetization opportunities.  I’ve spoken about the opportunity publicly a few times including in a conversation started by Buzzfeed’s Jon Steinberg on Branch and most recently today in a Digiday article.

But what is Native Advertising?  According to iMediaConnection, native advertising is defined as, “advertising unit designed to integrate seamlessly with a user’s consumption experience.”

I believe that for most of the Internet, we’ve not found our native ad units.  Note however, a unanimous native ad unit across the Internet is a idealistic dream.  On TV, the unanimous unit is the “spot” and the equivalent of that in digital is the banner.  Note, these units are not native.

Recently, Tumblr announced Radar, Outbrain is gaining steam, Buzzfeed is showing strong Viral Lift, Sharethrough is penning a piece on TechCrunch about native monetization and Silicon Valley, and Facebook announced new native units.  The “native advertising” space is heating up.

Advertising is content and content is generally designed for consumers.  This means that advertising is essentially consumer centric, but is it.. in reality?  While creative might borderline consumer centric by the time it gets thru legal and business affairs of marketers, the actual media unit it’s being placed within might make the entire campaign fail.  All the hard work by the strategy agency, creative agency, production agency, planning agency all gone down the tubes because the placement of the media got it virtually unrecognized.    Yikes.  Many people believe that banner ads are dead and this is why*.

Native advertising as defined above are integrated within the user’s consumption experience.  It could be the holy grail of advertising.  When done correctly, it performs extremely well.  We’ve done it here at the agency and I continue to beat my drum about it.

However, native advertising is not without it’s limitations and issues.

  1. The biggest issue is that you need to work with every single publisher on a media plan independently, at least for now, because there is little to no scalability across pubs.  This takes a lot of time and has cost implications.
  2. Additionally, each publisher will require their own creative, produced in formats that might be unique to only one particular publisher.  This has production budget (non-working media) implications because these budgets are not infinite.  In one of the latest GM/Facebook articles, GM released that they had spent $30MM on non-working media and $10MM on Facebook ads.  The $30MM was on support and infrastructure to make that $10MM more effective.  While I think this number is grossly out of proportion, I do think in a more cleverly planned approach it is a reality.

These are two of many limitations.  Again, native monetization is not new.  Classifieds in newspapers are native.  TV Guide advertising is native.  Paid search is native. With all the new platforms emerging in the digital space, we’re going to see similar native models come to life.  I’m excited for those – and those agencies and marketers who can get thru the limitations will reap the benefits.  I’m excited about this as it’s going to keep me busy planning and investing.

If you are an entrepreneur who is building a platform or solution to address native monetization, we at kbs+ Ventures would like to meet you.

* I do not believe banner ads are dead.  I actually believe they are going thru a renaissance.

Going Upstream & Downstream as a Point Solution

I’ve been thinking about point solutions recently because much of the innovation we are seeing in the advertising and marketing technology space starts out this way.  It’s also not uncommon in the advertising world when agencies are first started:  they start out as a point solution servicing a certain trend such as “social media” and because of this, they become well known specialists.

When point solutions emerge, they tend to be the deepest in knowledge in that particular area.  It’s usually a founding team that recognized the opportunity while working somewhere larger and wanted to create a very specialist company dealing with this new space.  We are seeing examples of this today within the spaces around Pinterest, Path, YouTube, and mobile amongst other areas.

There is a problem with point solutions.  Once your customers get comfortable on your platform, they will ultimately will want more.  They will want service a bit above and below your solution and as a company, you need to make a decision whether or not you want to service this business or someone else (competitor) will come in and service this need.

In the advertising agency world, I see this all the time.  It was especially prevalent with the initial social media boutiques which popped up.  Their clients are now asking them for paid media, creative, and offline work.  Very quickly, these social media boutiques become less “boutique-y” and more like full service agencies.  And overnight, the social media agency is no more and it’s back to being a fully integrated agency.

Pros of being a point solution:

  • You’re a specialist and you’re genuinely good at what you are doing
  • Free from distractions surrounding the areas around your product

Cons of being a point solution:

  • You are looked at less strategically and more tactically in many cases (not all)
  • You might get commoditized quickly by larger entrants who will give away your portion of whatever “stack” you are playing in

It’s OK to be a point solution and if you are taking investment dollars from venture-type investors, make sure to keep the capitalization low (and valuation), in order to drive meaningful outcomes for your shareholders.  We’ve been seeing a flurry of acquihires of point solutions and no real big exits.

Recapping our TMK Digital Media Venture Capital Conference

This past Wednesday, April 11, we hosted our 5th annual TMK Digital Media Venture Capital Conference for our agency staffers, our clients, and our friends.  I was particularly excited to host the event this year because we had an all-star lineup of speakers including but not limited to Dan Porter (OMGPOP), Albert Wenger (Union Square Ventures) and Terrence Kawaja (LUMA Partners).  I alluded to this event earlier in the week via this post.

The overarching topic of the event was “mobile” and most of the presentations paid this off.

Tweets were active around the event hashtag, #tmkvcc so check here to read the tweets to get an idea of the event.  I love going back thru these as many of the insights that the speakers mentioned were captured here.  AdExchanger also wrote a nice piece on the opening keynote.

Here are a few of my favorite:

  • TV dollars won’t come online. Rather, the web will become TV @benfoxgo #tmkvcc
  • “Location may be one of the biggest indicators of intent since search.” Duncan McCall @PlaceIQ #tmkvcc
  • People spend money to rid themselves of ads in the mobile ecosystem via @albertwenger #tmkvcc
  • ‘Google has made advertising ugly.’ – @simonkhalaf at #TMKVCC
  • “Good advertising is a feature, not a bug.” @albertwenger at #tmkvcc
  • In Silicon Valley, we get the idea right. Decade wrong. Simon Khalaf, Flurry. #tmkvcc
  • Draw Something does 3000 drawings per second. Wow. #tmkvcc

There was a nice tension between the speakers ar0und interruptive vs. native advertising opportunities and that’s something that I envision spending a lot more time on in 2012.

One thing was absolutely certain from this event:  mobile is a platform that is going to dominate and change industries in ways we haven’t even imagined.

One of my favorite days of the year: TMK Digital Media Venture Capital Conference

The Media Kitchen logoOn Wednesday, April 11, The Media Kitchen is hosting our 5th annual Digital Media Venture Capital Conference.  Here is the writeup from 2008, our first one we ever held.  It’s one of my favorite days of the year because it’s packed with inspiration from some of the greatest minds in venture capital, technology, and entrepreneurship.  For five hours on Wednesday, executives from Union Square Ventures, First Round Capital, LUMA Partners, OMGPOP, Adconion Media Group, PlaceIQ, Flurry, and Advertising Age are going to be taking our stage and talking about marketing, disruption, and mobile.  It’s going to be exciting.

I have one extra spot I’m holding for a reader of my blog.  If you’d be interested in attending, please contact me and let me know why you’d like to attend.  It’s from 8:30am-1pm in Tribeca (NYC) and you’d be expected to stay the whole time to maximize the opportunity.

Here are some of the topics of the talks:

The 2012 Industry Landscape—Challenges and Opportunities

Mention “the slide” to any industry vet and she’ll immediately know that you’re talking about Terry Kawaja’s famous “LUMAscapes”—the maps of how the different pieces of the digital marketing business fit together. Whether it’s how trading desks like Cadreon relate to DSPs like Turn in the display ecosystem, how Tremor feeds into Akamai in video and other companies across social, e-commerce, mobile, search and more, the LUMAscapes are, in the words of Google’s Neal Mohan, “the clear industry standard when it comes to understanding the digital media economy.” Today, we’re pleased to welcome LUMA Partners CEO Terence Kawaja as he outlines the most significant challenges and opportunities to companies trying to succeed in these rapidly evolving and inter-related ecosystems. Don’t miss this exciting keynote address!  Terence Kawaja, CEO & Founder, LUMA Partners LLC

The Past, Present and Future of Online Advertising

Can’t see the forest from the trees? Here’s a chainsaw. This presentation cuts through the complexity of the advertising industry by looking at its evolution over time. From the creation of the first billboard to the Exchanges, DSP’s, and Trading Desks of today, Ben Fox takes a comprehensive look at where the industry started and where it will go next. He exposes the forces that will drive change and takes a deep look at the technology systems that will be the foundation of the new online advertising ecosystem. Finally, he provides agencies, advertisers, ad networks, and publishers a roadmap to navigate the future space.  Ben Fox,  Adconion Media Group

Trends and Opportunities in Venture Capital and Mobile

First Round Capital has been one of the most active investors in NYC and across the country over the last several years, and one of the earliest to focus on seed stage investing.   Managing Partner Chris Fralic will discuss the forces driving the startup landscape, and where First Round is innovating and adding value.    He’ll also give an overview of some of the most important trends in Mobile, with real-world examples and insight, and what it means for brands and marketers.  Chris Fralic, First Round Capital

Zero to $200 Million in 30 days

OMGPOP CEO Dan Porter interviewed by Chris Fralic.   It took AOL 9 years to hit 1 million users.  It took Facebook 9 months.   Draw Something by OMGPOP took 9 days.   Dan Porter is the CEO of NYC’s OMGPOP who has literally taken the mobile gaming world by storm, and in under a month launched one of the most successful games ever and were acquired by Zynga for over $200 million dollars.    This is no overnight success story, though – Dan and the team worked for years developing other games and learning what worked and didn’t.  Find out how they did it, and what brands and marketers can learn, from virality, to game theory, and working your way on to and up the app store leaderboards. Dan Porter, CEO OMGPOP & Chris Fralic, First Round Capital

Inside the Trillion Dollar Media Revolution

Everyday, mobile applications appear to be disrupting multi-billion dollar industries raging from gaming and entertainment to transportation and logistics. In this session, Flurry will discuss the impact mobile applications are having on traditional media, the web and television and will also share insights on how mobile advertising is changing the way consumers are engaging with advertisers.  Simon Kalaf, CEO Flurry

The Future is Location Aware

“Location may be the biggest indicator of intent since search…” so the saying goes and we are out to prove it. In mobile advertising PlaceIQ is pushing the boundaries of privacy friendly audience targeting using the context of location as the key. We’ll discuss how, and show some specific customer examples. Plus discuss how the future is truly ‘location aware’ and what this means for the digital media industry.  Duncan McCall, CEO PlaceIQ

Why Everything You Know About Advertising Is Wrong

Well, maybe not *everything*. But if you think the future is about interruptive advertising, then yes, Union Square Ventures partner Albert Wenger thinks you’re mostly wrong, and maybe about to become obsolete. Technology is changing how humans interact with each other and if brands want to be part of that conversation they need to figure out how to add value in a way that’s “native to the user flow.” Advertising Age digital editor Michael Learmonth talks to Wenger about what that looks like and how the next generation of brands can thrive in the social web.  Michael Learmonth, Sr. Editor, Advertising Age with Albert Wenger, Partner, Union Square Ventures