Category Archives: Advertising & Marketing

Mobile Display Networks & DSPs

At both The Media Kitchen and Ventures, we’ve been watching the mobile display networks and DSP space evolve.  At The Media Kitchen, we’ve been testing and running with about a dozen mobile display companies and at Ventures, we’ve been talking to many of the mobile DSP’s over the past year or so trying to figure out how the market will evolve.

A buddy of mine, Ryan Griffin of Digitas had a great quote in Crains this week talking about how mobile display networks are unfolding very similar to how web desktop display networks did in the late 90s and early 2000s.

“A year and a half ago, we were at the stage of where we were in desktop [Web advertising] in 1998,” said Ryan Griffin, group director of media and mobile at Digitas. “It’s now feeling like 2004.”

I’ve been following that party line as well as things are very, very similar.

If we look to the early desktop display networks to predict the future of the mobile display folks, we know that there will be plenty of mobile players, some early exits and some mobile display companies remaining strong independent companies (potentially even going public themselves).  It’s played out this way… Quattro, Admob, Greystripe, and others have already been acquired by strategics and there are plenty of independent mobile companies still in the mix including but not limited to Gradient X, SessionM, Fiksu, mdotm, StrikeAd, inMobi, Adelphic, and dozens of others.

Some open questions I have for the ecosystem:

  1. Will desktop based DSP’s or networks merge or acquire (or be acquired by) mobile DSPs or networks?
  2. Will desktop based DSP’s build their own mobile components? Similar to DataXu.
  3. How are current mobile networks and DSP’s tackling the measurement and attribution issue?  The UDID ban has really put a dent into the measurement space so wondering who will tackle this.

#3 above is important.  The reason why it’s so important is because if you are a vendor on a media plan and can measure/track your performance, then it’s much easier to substantiate yourself on a plan and have a higher chance of getting extra media budget.

Areas that I’d stay away from in the mobile media ecosystem:

  1. Rich Media – if we look at desktop display, rich media CPM’s used to be in the $1-3/cpm range but now, we’re down in the $0.20-0.80/cpm range. The CPM’s have fallen dramatically and I expect to see this within mobile.
  2. Network – if the DSPs succeed and mobile inventory flows to exchanges, then networks have a much smaller role in the evolution of his new media marketplace.

Just some thoughts on the mobile media ecosystem.  Would love to hear yours, leave them in the comments.

 

We Are Going to See Many Independent Agencies

Jack Marshall recently typed a piece about how there are very few independent agencies left after Razorfish, Digitas, Schematic, Blast Radius, AKQA, and Huge have all been acquired by Big Four ad holding companies (WPP, Publicis, IPG, and Omnicom).  The piece was titled “End of the Indies” and I wanted to respond to it with this blog post as its right in my passion wheelhouse.

For the most part, the advertising world innovates and acts similar to it did way back when.  There is not much foundational change.  Sure, there are pockets of brilliance (I’d like to think we’re doing very interesting things) but as a whole, the industry is working on a model that existed a long time ago.     Many people accuse this old model of being “bad” but then again, isn’t salt sold the same way it was bought by our ancestors thousands of years ago?

I think we are in the early days of the rise of the independent agency.   In fact, a whole wave of these indies.  In a couple of years, it will be the perfect time to start an agency.  There are a few reasons for this and I’d like to explain them:

People:  One can argue that the world is not becoming any more creative, but creativity now has a democratized platform to be distributed.  The new entrants in to the workforce never knew a world without a keyboard and mouse, ever-present connectivity, and digital cameras.  The DNA of this new breed has technological understanding as part of creativity.

This is very different than when I grew up; fewer rather than larger numbers of kids gravitated towards computers and it was typically known as a specialty.  I was known as a nerd, even while I was just playing games on my Mac IIe or LC (remember Stunt Copter?)

With this newly trained workforce, creativity is now at everyone’s fingertips which will unfold itself not just in better client strategies, media planning & buying, creative execution, but in organizational re-engineering, organizational behavior, and talent management.  The whole way we think about the advertising and marketing business is going to be impacted by this currently young group of people and they will be ready to start running businesses in the next few years.

Economy:  While I do not pretend to be an economist, it’s hard to debate that our economy is not overly stable right now.  Hearing stories of recent college graduates trying to find jobs to no avail is a commonplace.  Expect to see many of the recent graduates either create their own companies (made easier thanks to the Jobs Act) or go and work for a friends startup.  Just by the laws of large numbers, we should expect to see many new agencies created by people who have no other opportunity than to start their own company.

Technology:  While the workforce certainly understands technology such as how to use a mobile device  or download apps to tablets, technology is going to move to the center of the new independent agency.  And this will happen from Day 1, not retrofitted like many currently large (non) independent agencies.  Because it will be there from Day 1, we’ll see increased efficiencies and effectiveness, plus an open armed approach to welcoming new ways to leverage this technology.  Data will be part of all decisions including those in creative and the art of advertising will emerge in leveraging many of the sciences to derive insights that inform strategies.  The independent agency should be able to deliver on this vision.

Insurgents Become Incumbents:  I gave a pre-read of this post to a colleague of mine who reminded me of Clay Shirkey’s quote in a Wired article.    There are plenty of insurgents today who have become the incumbents, many named above and with the notion of the incumbents being much slower than an insurgent, plenty of talent is probably ready to jump ship and start all over again.  We see this happen all too much and expect it to happen again here.

I think there are significant opportunities for that emerging independent agency.  Plenty of them.  I’m curious to see if Adobe, Oracle, SAS, SalesForce, Facebook, Twitter, Apple, Microsoft, Google, and Yahoo! start to fund some of these agencies with both capital and technology.  I think that could be a really interesting model or eventually, where the insurgent goes to become an incumbent.

 

 

Golden Age of Ad and Marketing Technology

On AdExchanger yesterday, Terrence Kawaja talked about how Ad Tech was going through a potential Golden Age.  There have been some recent acquisitions/mergers that have helped validate some of this thinking.  But why?  And why now?

List of recent ad tech acquisitions or mergers, not complete:  33across/Tynt, SAS/aiMatch, DG/Peer39, OpenX/LiftDNA, Pubmatic/MobiPrimo, Rubicon Project/Mobsmith and Syncapse/Clickable, Google/Admeld, Google/Meebo, Yahoo/Interclick, ValueClick/Greystripe, Adobe/Efficient Frontier, Oracle/Virtrue, Salesforce/Buddy Media, IBM/Core Metrics

I was talking to a potential client yesterday and we were discussing advertising technology.  We talked about how media is transitioning into the paid, owned, and earned landscape and more importantly, the rent vs. own (audience) scenario.  In a world that’s becoming increasingly digital and platforms can help harness the audiences who engage with you (and your brand), then having marketing technology platforms will help you not only harness this audience, but it’ll allow you to segment, target, engage, and draw insights amongst many other things.

Gone are the days where we continually rent audiences from media companies and pay them significant dollars time and time again.  We should not have to do that continuously if we have platforms that allow us to engage with audiences, have them opt-in to participate with us (as a brand) and interact with them over time.  I’m not saying there is not a role for paid media as there certainly is a role for renting audiences to help us refresh out funnels.

Why this is so important for marketing and advertising technology is because most brands (and their respective agencies) are new to this.  An ad-server is not enough anymore.  Over the past few years with increased velocity, we are re-writing what it means to be a marketer from a technology perspective and using this technology to make ourselves more effective and efficient, which in turn, benefits the consumer.

The Golden Age might be here because many forward thinking strategic companies see the future and need to button and scale up their infrastructure.  The world is their oyster right now and we’ll continue to see additional acquisitions and mergers.

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.