Category Archives: Internet & Web X.0

The Marketplace Appreciates Obfuscation in Pricing

OpenPricingPricing is defined as the property of having material worth. Pricing though does not dictate individual value, but rather the value of a good for the average.  Let me illustrate by an example:

Sherri walks into CVS to purchase some shampoo for the Herman household.  She sees Pantene for $6.45/bottle or Sunsilk for $9.99/bottle (totally made up numbers).  Sherri has a specific price in mind she wants to pay for Shampoo based on her proprietary valuation system (special needs, bottle shape, accessibility, etc) and based on this specific value, she is able to decide between Pantene and Sunsilk.

Pantene and Sunsilk are offering (pricing) their products at these price levels because they have done a comprehensive supply/demand curve and have optimized where they should price their product for the optimal (not always most) amount of buyers.  This is done through market and competitive research as well, as, historical sales scenario planning data.

In this scenario, the marketplace appreciates pricing obfuscation:  it’s simple for the consumer and it’s simple for the business.  The consumer never sees the profit margins (unless they are purchasing from a public company and even then, how many consumers read financial reports) and the business never knows how much the consumer was really willing to pay (potentially more).  There is not really a tension here – if a product’s price is not adequate for a consumer, they will move onto the next product on their list.

It’s simple.

For the media/advertising world, things are changing.  A once very opaque industry is changing.  Agencies and brands are becoming much more quantitative and are understanding how to value inventory for the first time (I took liberty for “first time”).  Most publishers do not appreciate this – and the obfuscation/opaqueness that once existed that provided healthy margins is dissipating.

Let me reprhase the last sentence:

Most publishers do not appreciate this in the short-term.  Historical obfuscation of pricing/valuation has lead to healthy margins that have existed for years (why do we have 3 Martini lunches? Why are media teams making custom nike sneakers with reps?) for the sell side.  The long-term opportunity is tremendous, if the sell side could get over the initial short-term shock.

Some say that the bigger they are, the harder they fall.  The problem with this is that the major media companies such as Conde Nast (Advance Publications), Hearst Corp, and Tribune are all very large private companies and are potentially going to fall very, very hard.  Note:  I’m not saying that they cannot get back up again… They can.  But they are going to have to fall first.

If/when major media buyers (marketers, agencies grouped together) have the ability to buy on value, not price en mass, this will be a major market shift.  Some of us are here today but when even more of us are here tomorrow, the sell side will become much more comfortable as more dollars move into the industry to satiate cash flow statements.

Since however the market appreciates obfuscation in pricing (it’s just plain simple!) we may never get to this efficient place, but it would help the actual buyers and sellers reap much longer term benefit that short-term margins.

Please comment below to continue the conversation or tweet @dherman76 with replies

iPad Review: thumbs, screen, interface

iPad I’m probably a few weeks late for this review but thought I’d toss one out into cyberspace anyway.  Let me start out by saying that I absolutely love the vision of Apple and this product has the potential to create a new usage occasion.

To keep it short and brief, here are my thoughts:

Dislikes:  the typing experience.  I think the keyboard on the iPhone is much easier to use then the iPad in terms of spatial portions.  When in portrait mode or even landscape, it just doesn’t feel right when you type.  Not a fan.  Additionally, I think I should have waited until either the 3G version hits the stores or until there is ubiquitous wifi.   The iPad works perfectly in the office (b/c of wifi) but once I take it outside, the functionality becomes limited.

Example:  I have been bringing the iPad onto the train in the morning and evenings during my commute and have been catching up on RSS Feeds.  I haven’t done this in over a year!  While I am excited that I can read the feeds in transit on a great screen, I cannot comment on them nor read anyone else’s comments.  The lack of connectivity gives this iPad more of an iPod Touch feel.

Likes:  ability to take the web with me wherever I want without the hassle of having a laptop.  I’m thinking that if this had a better typing experience, this would be the ideal travel computer for airplanes.  If you do not have a Netbook and are trying to use a full size laptop on airplanes these days, it’s tough because of limited space.  The iPad is a perfect solve for that… but typing again, is a pain.

Overall, I love the experience and the product.  I think the 3G version probably is a better product due to mobility outside of Wifi zones for the person who wants to stay connected.

New Piece of Art in the Herman Household

As many of you know, I went down to SXSW this year to check out the Interactive sessions and while walking through the exhibit hall, I saw that one of my favorite artists, Hugh Macleod of Gapingvoid fame had a booth and was selling some of his original art.  I’ve been a fan of his art for years and have always thought about owning some for the home office.  Well, now I do.

Below is the original that I acquired:

Why I selected this piece over others was because I think it’s really relevant to me.  While I’m not on the Venture Capital or large Angel side of the business (i.e. the guy on the left – in red), I have been known to start and fund companies and always love figuring out a business model.   This piece gives me a chuckle each time I read it and it’s relevant to the first and second dot com bubble I’ve lived through.

I also feel right now, this is very relevant to many of the companies being funded.

To RTB or Not RTB, That is the Question

This is an unbaked opinion piece.  Please comment to keep the conversation going as this will certainly provoke some commentary.

I’ve been participating in many conversations (conferences, panels, articles, journals, meetings, etc) about Real Time Bidding and it’s potential affect on digital media.  There are very few true real-time-bidding inventory sources today and only a few Real-Time Ad Platforms (i.e. AdNexus).    Without revealing too much information from our day to day in the office, we see that less than 25% of our inventory is coming through Real-Time Bidding.  According to conversations with our peers, this is fairly consistent with the industry.

The big question is not whether RTB is coming (or here), but rather if you (as a marketer) need to harness it.

Demand side platforms (DSP) build/buy/partner with RTB-enabled platforms
If the big agency holding companies have their way (note: I’m part of MDC Partners), then the majority of standardized display will be running through these platforms.  If these platforms and capabilities are RTB enabled and the processes and procedures are in place to run in Real-Time, then there can be a very large demand (liquidity) for RTB enabled inventory.  This means that the Supply Side Platforms need to on-board enough inventory to be sold in Real-Time.  I include data (& audience) within the “inventory” label.  1st, 2nd, and 3rd party data (& audience) needs to be RTB enabled as well.

You need both the Demand Side and Supply Side to be real-time enabled to make this happen.

This theoretically seems easy, but how many “big-name” publishers are real-time-transaction enabled?  The majority of RTB inventory is long-tail today… and this needs to change to really attract the significant dollars to this space.  The Supply Side will either aggregate at large exchanges or use Supply Side technology to make this happen.

If you do not buy in real-time, can you exist in the future? Simple:  yes.

I know people in the marketing space (including myself) are trying to draw parallels to the financial markets and I’ll continue to do so here.  There are many financial brokerages that have access to transact very quickly and they do.  But other brokerages and buyers are able to transact (with significant dollars) in near-real-time (or less than near-real-time) and still be in solid financial positions and the ability to move markets.

Speed does not guarantee success in markets: finance or marketing.  The art of orchestrating the sciences is where the men are going to be separated from the boys. You can give me access to AdNexus tomorrow morning and just because it’s fully RTB enabled, does not mean I’ll be any better than buying site direct or thru a non-RTB network.

Unless the algorithms and the “view” of real-time inventory is exactly the same, no two RTB platforms will perform exactly the same.

Have I convinced you that you do not need real-time bidding to be successful today?

Now the contrary:  The faster an RTB platform can operate (in milliseconds today), the more inventory it has access to.  This is a big deal.  If you are building models to predict the future, then you want to see as many impressions as possible to have access to pick from.  Some say buying clout does not matter but does it?  A question to ponder.

The net/net:  RTB is a buzz word today and many people are talking about this space.  I believe that where there is smoke there is fire, thus, there is something to take note about RTB.  With the opportunity to value individual impressions and data with the ability to go the last mile and action it, potentially ahead of competitors, RTB does have an edge to those who can use it.

I believe that the long term winners in this category will not be the scientists, but rather the artists who know how to apply the processes, procedures, and strategies for their clients.

Please comment to keep the conversation flowing.  Would love to hear your perspective.

New White Paper: Getting Real

Some of my friends over at DeSilva+Phillips a boutique investment bank (also known as MediaBankers) have just released a white paper (links to the PDF) entitled Getting Real.  I am always skeptical about investment bank led white papers (unless they are presentations by Mary Meeker which I love) but these guys pulled off a pretty solid document.

The goal of the paper was to talk about the marketplace of ad exchanges, RTB (real time bidding), and the future of online advertising.  I would say that the paper does a good job of setting up the history and current ecosystem that surrounds ad exchanges but lacks anything tangible about the future of online advertising other than saying that many media channels will become digital so a digital infrastructure today is required to service them, which I’m a big proponent of.

There is about $430MM invested in this ecosystem over the past 3 years which has attracted lots of attention from the press, marketing services companies, and of course, investors.  Figuring a venture capital fund wants to see some sort of liquidity within a funds lifespan (~10 years), the next 5-7 years are going to potentially be very “acquisitive.”  Thus probably the impetus for DeSilva+Phillips to release this document to establish themselves as leaders in this space.

Some of the main highlights of the paper:

  • A nice breakdown of what “ad exchanges” actually are including the great Online Advertising Ecosystem graphic from Matthew S. Goldstein that has been circling around some inner circles.
  • Discussions around Right Media’s decision to focus only on premium inventory
  • A solid definition around DSPs without over-hyping them
  • Accenture, which is not normally considered a player in this space is potentially moving in and could open up a new business within the space (has AdChemy partnership, owns a search bid management platform)
  • “Real-Time Bidding is the glue for melding display-ad marketing and search marketing”
  • Talk about SSP (supply-side platforms)
  • Yahoo vs. Google and the ultimate threat of Google (it is scary)
  • Neutrality around ad exchanges and how it’s not a long or even mid-term option (though I’d argue that is what this industry needs)
  • Adding two more acronyms to the vocabulary:  DBO (Dynamic Media Buying Optimization) and ARM (Audience Relationship Management)

You can download the paper here.

ResumeGal Deal Hunt at SXSWi powered by Stickybits

For those who are unfamiliar, my wife runs the website, ResumeGal.com.  ResumeGal was created when she left the corporate HR world and decided to stay home to take care of our child and wanted to still consult with people who needed resume/HR help and coaching.

I’m trying an experiment down here in Austin to post 5 Stickybits around the SXSW convention center to:

  1. Check out how many people actually scan these stickers
  2. How many people scan vs. how many people contact ResumeGal
  3. Conversion rates

We’ll be giving away 20-40% off any package on ResumeGal.com if you use the secret word/phrase located on the Stickybits.

Happy hunting!

P.S. and by “powered by stickybits,” we mean that it’s using their sticker technology, they are not publicly endorsing this to my knowledge (but are more than welcome!)

SXSW Opening Morning Thoughts

I’m writing this post about 2.5 hours before the first panel/session kicks off for SXSW 2010.  For those who are not familiar with SXSW, it’s a conference split into three areas: Interactive, Film, and Music.  I’m only down for the first few days of Interactive but in previous years, I’ve participated in the music portion as both the youngest speaker ever (at the time, 2002) for SXSW and was an exhibitor.

The energy was high even before leaving Newark Airport.  @sparkle201 (wife) and I were on a direct flight down to Austin and I’d say of the 144 people on the plane, 50% were heading to the conference.  I ran into Foursquare’s @naveen in the airport who is celebrating their First Birthday at the conference- Foursquare was born a year ago and is now over 500k strong loyal fans.  Happy Birthday guys.

Four hours later, I ran into friend and colleague @jstylman while checking in to the conference and picking up my credentials.  For the first time in a LONG time, I’m not speaking on a panel or keynoting, so I’m flying totally under the radar screen as a listener.  I’ve been longing for this day to just sit back, relax, and soak everything in.

After getting back to the hotel, I digested all that was in the schwag bag and there was a consistent theme:  stickers, QR codes, and most important and utilitarian to me:  cellphone/computer/ipad/kindle screen fiber wipes.  Genius- thank you AOL and Newegg.

bibleThe SXSWi bible is thick.  It lists all the panels/sessions and speakers as well as everything else that is going on.  What stands out immediately is the use of QR codes on every single page.  The company providing the codes is QMCodes and they are exhibiting – I’ll stop by their booth to further my education around them.  I’ve used QR codes in previous ad campaigns but the adoption in the US was rather weak a few years ago.  Can the use of QR codes in the US break out this year?   My immediate thought is that print publishers need to push these hard and how many print publishers are down here at SXSW?

There is even a twitter account setup to help people with QR codes here at SXSW:  @sxswqr

An instant favorite of mine are the products of stickybits.  For those unfamiliar (I was previously) with stickybits, it’s a simple barcode sticker that you can append any type of information to (pics, text, video, etc).  You stick them wherever you want and if people find them, they use their iPod or Android stickybits app to see what’s been virtually appended to it.  A nice way to augment reality.  Downside:  you need the stickybits app – and this may be a serious downside for the company.  I’d love to see a Verizon or AT&T snap up this company and instantly build this reader into the phone’s capabilities.

Looking forward to what starts unfolding over the next week or so – come and follow me on the adventure @dherman76

SXSWi 2010

I’m heading down to SXSWi on Thursday and am excited to go.  It seems as though most of the NYC entrepreneurial scene will be down there so it’ll be the same faces in a different setting (way better BBQ, sorry @lazerow re: Hill Country).

I created my initial schedule and have made it public – so if anyone has any comments of insights, I’d love to hear them.

I’m trying to do less “entrepreneurial” sessions and more about marketing, culture, advertising, media, and technology.  For me and my stage in life right now, these are much more relevant.  I’m also not speaking at the conference this year, so it’ll be nice to be a regular attendee and blend in with the crowd.

If you are down there and want to say hi – leave a comment on this blog or ping me on twitter (@dherman76).

Will probably post from Austin- see you down there.

An Analog 72 Hours

For the past 72 hours, I’ve been forced offline due to the powerful storm that ripped across the Northeast.   For those who are writing this off as just another snow storm, it might have been in your neck of the woods but where my family is located, we were hit with over 30″ of snow, down trees in our yard, and powerlines down on both sides of our street which prohibited us from leaving our home until they were fixed and deemed safe.

It all started on Thursday afternoon when I was in my office in Manhattan and received a call from my wife who said that the power had flickered a few times as the snow was falling.  Thinking that this was typical of what happens by us during any significant storm, I wrote it off.

Without going into too much detail, the storm took our power at around 8:45pm on Thursday evening, right as I was in my office at home working on some documents (unluckily for me, I can’t retrieve them).  Without power doesn’t just mean no computer usage, but also no recharging of electronics.  Big issue.

Over the next 18 hours, we were literally stranded in our own home because we couldn’t leave our development due to down powerlines and trees.  Our village that we live in was called into a State of Emergency and all roads were closed.  Yes, this really happened.

I went on a reconnaissance mission using our SUV and was able to clear out a path to actually leave the area so I onboarded the wife & kid and we headed out to my folks a few towns over (20 mins away) for the past 36 hours and luckily, they had power.

The snow was so deep, that making snow forts was easy and abundant!

A few things that stuck out:

  • We rely so heavily on electronics (computers, iPhones, Blackberrys, Kindles, Nook’s, etc).  At times when there is no connectivity, how are we supposed to recharge?
  • Even if computers are charged up, unless there is cellular or carrier driven wifi, how are we supposed to get online?
  • Facebook became the AM Radio for us.  We realized that we didn’t have an AM radio in the house but while my wife’s Blackberry still had power, she was able to log into Facebook and get updates from friends of ours from around the area.  She had a mini storm-network setup.
  • ConEd had a nice outage location map but their “report a problem” area didn’t work properly

Anyway, it’s nice to be back online with our power restored.

Time to catch up on work while the US  hockey team takes on Team Canada.  Go USA!