Mike On Ads

One of the things that boggles my mind is how massively fragmented and confusing the display world still is. It’s been over three years since the first ad-exchange launched yet the world hasn’t significantly changed. What makes matters more confusing is that there is no consistent terminology to describe what a company does. It seems everybody describes themselves as either a platform, marketplace or exchange — so what’s the difference?

A company can call itself a publisher, an agency, a network, a broker, a marketplace, an exchange, an optimizer — what does it all mean? What’s the difference between Right Media and Contextweb? Admeld and Rubicon? That’s really the problem — today’s commonly used labels are useless.

Instead of evaluating a company based on labels, evaluate it based on the services it provides, technology it has, the partners it works with, the revenue model and the media revenue it facilitates. Note — below I focus entirely on companies that in some shape or form touch an *impression* — either as a technology provider, buyer or seller. There are peripheral companies that provide a whole world of supporting services, but I’m leaving those out for now to avoid confusion.

Services

Each company provides certain core services to partners, customers and vendors. These primarily center around the relationship the company has with the media that flows through it.

Technologies

There are certain core technologies that define what a company does. Note that you will find technologies such as dynamic creative optimization, behavioral classification and contextualization missing from the below list as they are differentiators — they don’t define what a company does but provide a competitive advantage over the competition.

Size Matters

Last but not least, the size and the partnerships of a company matters. I’ve written before about the perils of building technology in a void. You can have the most amazing platform that provides great services, but if you’re only running a few thousand dollars a month it’s all moot in the grand scheme of things.

Size can be measured either in impressions or revenue, the latter being far more telling. Getting a billion impressions of traffic a day isn’t hard these days — between Facebook and Myspace alone you probably have close to fifteen billion impressions of traffic running daily.

There’s a huge difference between a partnership and a media relationship. If you’re willing to foot the minimum monthly bill, anybody can buy Yahoo’s inventory through the Right Media platform. That doesn’t say much about who you are as a company. A partnership is different — it might be deep API integrations tying two platforms together or co-selling and marketing a joint solution.

What does it all mean?

Phew… that was a long list, so what does it all mean? Well, the above provides a slightly less fuzzy framework than the classical “ad-network”, “marketplace” or “exchange” commonly used labels to describe a company. Let’s look at a few examples:

Rubicon Project provides publisher representation services through it’s network optimization platform, arbitrages inventory through it’s internal sales team has both an internal and has an externally available adserver (one for the sales team and one for publishers) and is rumored to be working on real time buying APIs. That’s a hell of a lot more descriptive than “publisher aggregator” or “network optimizer”. The one thing I always find confusing about rubicon is that it their incentives seem to be fundamentally misaligned. How can you both arbitrage inventory and serve as a publisher representative? Updated (5/3/09 @ 8pm EST) — I seem to be misinformed. Per comments, Rubicon does not sell inventory directly to agencies.

Compare this to AdMeld which provides publisher representation services through it’s network optimization platform — an externally available adserver — and provides buying APIs (currently via passback). So what’s the difference with Rubicon? Well, one has an internal ad-network and the other doesn’t — different incentives. Publishers are starting to treat Rubicon as another ad-network in the daisy chain whereas AdMeld sells all remnant inventory as a trusted partner.

ContextWeb has an internal adserver (with a self-service interface… I don’t count that as external), they arbitrage inventory, and provide buying APIs. Compare this to Right Media which has an externally available adserver, buying and selling APIs, internal trading, data aggregation and arbitrages media (through BlueLithium/Yahoo Network). Both are “exchanges”, but clearly there is a pretty big difference between the two!

Of course if you get to Google your mind starts to explode just a little bit — as they do everything. Seriously. They buy & sell, have multiple adservers, provide buying APIs, internal trading, data aggregation…

Final Thoughts

I hope this post has given you some ways to start thinking about companies in the online ad space. I’d love to hear your feedback in the comments — what core services & technologies am I missing?

Now — next time someone says — “I’m an exchange”, why not ask — “Ok, that’s great, but what do you really do.”

If you haven’t already, you must read this post by Fred Wilson which summarizes a recent Comscore whitepaper Whiter The Click?.

I’m not going to re-summarize the paper as Fred’s post already does that. The findings are clear — display has a significant impact on consumers which is often not shown by clicks alone. Check out the graph:

This means that if you aren’t tracking (and billing!) on this behavior on performance based campaigns you are leaving some serious money on the table!

Question of the day — who’s got a good technology to track this?

This is a fairly well known problem in the industry — you target a keyword, say ‘travel’, thinking that you will end up on searches & sites relating to travel. Next thing you know you end up next to a New York Times article talking about the recent plane crash in Lima and how it’s limiting travel to South America — oops

Well — the same thing happened to my blog today and good old Mr. John McCain. Although I guess it shouldn’t be too surprising, I found it slightly ironic that John McCain was advertising next my blog post criticizing his advertisements. See the bottom left on the following screenshot:

And the landing page:

Now first off — these ads look much better than before — maybe they read my earlier post? Now I am incredibly curious whether or not these ads are ROI positive in that they bring in more money in donations than is being spent on media. Anybody know??

Saw this John McCain ad on a random blog this evening:

Reminds me greatly of the giveaways you normally see on myspace… seems they forgot to leave out the “get a free lecture on public policy!!”.

Landing pages even look the same — a simple form with a ZIP & email. I wonder if they’ll sell my email address for $2.00 and use my Zip for later retargeting later.

What’s interesting though is that it looks like the McCain campaign is doing some serious remarketing on “clickers”. There are pixels there for the Right Media Exchange, Ad.com’s Leadback and Atlas!

I was just browsing on my gender test blog post and noticed the following ad:

So normally you’d say — so what mike, it’s just an ad for senseo! Well this ad is special because I was just searching for Senseo coffee pods earlyt his morning (both via Google & Amazon.com). I find it highly unlikely that this is a pure coincidence. Here’s the clickstream (broken into multiple lines and shortened for legibility):

http://pagead2.googlesyndication.com/pagead/adclick?sa=L&ai=BSrzSV[...]
http://www.sharesenseo.com/index.jsp?q=a-googlewomen

Funny that there is a nice “q=a-googlewomen” inserted into the landing page — I swear the gender test showed me to be a man!! So this is all purely speculative of course, but if this is indeed true then we suddenly have the world’s best behavioral display network to compete with.

A few weeks ago I wrote a post about the difficult times that tech startups are having in the industry today. Reading through the post, I realized there was a key point that I forgot to make. Whether or not your company is a services business, a technology play or a media company:

If you aren’t generating revenue, it’s time to re-evaluate your business.

There is so much VC money out there these days (although word on the street is it’s drying up!), that it’s easy to forgo initial revenue and start building & scaling a business in a void without having hard cash paying customers. Here’s the thing — you should be able to prove your technology quickly and with minimal investment… if you can’t, you’re overthinking either your product or overestimating the requirements of your clients. In fact, with the right contacts you can probably sell a 20-line PHP script as a “pixel server” — at least to a network or agency that desperately needs to have “behavioral technology” for the next big agency deal.

Of course the script won’t scale, and it probably won’t work as a standalone product for multiple customers which means you’ll have to rewrite it and hire some real engineering talent to turn it into a packageable product. But if you have an idea — build a POC quickly, get yourself a customer, prove there’s interest and start generating revenue! Doesn’t matter if it’s adserver, behavioral tracking, a new media network — each idea has a revenue-generating “quick win” you can close to prove the business works. Right Media was a profitable for over a year before it launched the exchange. A single good CPA deal with AOL funded most of the first year of the company!

And it’s not just about the revenue. Real customers provide real data, real feedback and real stats about scalability & performance — invaluable feedback & information that will help you build a better and ultimately more competitive final product and/or service offering.

I’m not saying you have to be profitable (although if you’re a pure media company you better have a damn good reason not to be). There is definitely an argument to be made that investing in engineering today will pay off in revenues later, but that does not give you an excuse to develop in a void hoping that your product will be a smash hit.

If you’re not making money now, chances are you won’t make any later either.

I stumbled across an interesting post written by Ian Thomas from Microsoft — Online Advertising Business 101, Part I – The Online Advertising Value Chain. It’s a great basic read for anyone who wants to start with the basics of who does what in our industry.

I will point out that Ian is clearly on the tech side of the fence though — he draws the industry as a flow of impressions from publishers to advertisers, whereas most media focused folks will think of the reverse — money flowing from the advertiser to the publisher. If you have no clue what I”m talking about, check out my old post: Business or Tech.

No, this isn’t another “OMG, the facebook API IS AWESOME” post. I mean, it is, it’s pretty damn cool, I’ve played with it a bit this month. The real revolution with the facebook API are the server-side requests.

Traditionally widgets & plugins interfaced with social networks by placing snippets of HTML on profile pages. In the Facebook world no content can show up on a user’s profile without passing through Facebook’s servers first. Even your actual application pages must either be within an IFRAME or pass through Facebook. This process provides Facebook with an extraordinary level of control over what can and cannot be displayed on a user’s page. FB can perform a virus scan on all content and analyze any scripts for vulnerabilities or exploits. By directly serving content Facebook also eliminates cookie access — making it far more difficult to track or distribute data about their users.

Yet, the approach has it’s limitations for application developers. I tried briefly to build a “stalker tracker” application which using cookies would tell the user how many people regularly checkout their profile page. No matter what I tried, I couldn’t get access to the cookie without somehow initiating a click — rendering my application completely useless.

Why should you care? Well — advertising isn’t that much different from a traditional social networking widget — both are delivered via a snippet of HTML. Online ads have also been plagued by security issues this past year and I wouldn’t be surprised if the bigger players (Myspace, Yahoo, MSN, etc.) start to ask for server-side ad-requests soon. Server-side requests are the only way that a seller can technically guarantee the safety of third-party ads. Of course this will open up a world of technical challenges — server-side cookies storage, strict global latency requirements and a need for increased capacity to only name a few.

A security firm, SecureWorks, has identified ads spreading trojans. Apparently the ads have specifically targeted job sites. Sadly they haven’t posted any details on the actual advertisement that is causing the trouble — I have sent them an email requesting some more details and hopefully they’ll respond and I’ll post the details of the ads here.

I find it kind of funny that the most interactive form of advertising has the worst reputation of all. Take this comment on my post about cookies:

your perspective on the ads seems very strange/scary to me. so a company gathers data about my surfing habits and whatever actions i do, and what do _I_ get in return? Longer load times, ugly flash clips, and bloody kilobytes of useless javascripts in every page.

Admittedly this is somewhat of an extreme reaction, but most consumers do have a very strong aversion to ads. And we as an indsutry are entirely to blame for this.

First and foremost we are often too lax with standards and create ads that can be highly annoying to end-users. Although premium publishers such as Yahoo or AOL are generally very careful about their ad quality many publishers and ad-networks allow highly distracting or even those “seizure inducing” ads that can be incredibly annoying. Yet even the best can be tricked, both AOL and Microsoft have been caught by the Errorsafe scam, which Sandi has documented here for MSN and here for AOL.

It’s not just “bad ads” that have caused this overly negative reaction to online advertising. This slashdot post complains about the latency of ads, a very valid concern when it comes to placing third-party content on a website. It is slightly ironic though that people will complain about waiting a couple seconds for ads to load when on tv we spent almost a quarter of our tv time being forced to watch ads. The thing is, even in a tech-savvy forum such as Slashdot, not a single person points out that all the services and content that they consume for free is paid for by advertising.

Of course consumers often may not even know who they have to blame for the ads that they are seeing. Take this rather typical request for help about “unwanted popups from yieldmanager.com”. For those of you that don’t know, yieldmanager.com is the serving domain that Right Media uses. This poor user thinks that his machine has been infected with spyware whereas what is far more likely is that the websites that this user visits intermittently show popup ads. Popups are of course closely associated with spyware/adware and tend to elicit a very strong negative reaction — it really is kind of ironic of course that popups often result in 10x the CPMs compared to traditional banner ads.

Last, but not least we have to talk about those terribly evil cookies. ClickZ covered this rather well in this article. Every “anti-spyware” program removes cookies and some flag them as “dangerous”. Of course there are privacy concerns, and perhaps adserving companies AND websites should be more open with what they track and how to “opt-out”, but cookies aren’t DANGEROUS, they just track what ads you’ve seen and what website you like. Here’s the little known fact — publishers are often the ones sharing the information and showing those popups, but the adserving companies end up getting all the flak. Instead of launching initiatives such as banning firefox publishers should keep an open dialog with their users about why they have advertisements and how they help to pay for all this free content.

If ads continue to have the reputation that they do we’ll just see a larger and larger increase in the # of users that use ad-blocking technologies. I think that Google is taking some good steps here with their recent blog announcement on their adserving tests. Unlike most companies, Google is very open and honest in their privacy policy about exactly what data they are tracking in their cookies and how they will use it. I suggest all privacy councils take a queue from them when writing their next privacy policy!

Education about what’s in a cookie is only the first step. Websites need to be more honest about the information that they pass along to third-parties and how that is used. Sites should also aim to educate their users that the reason they can consume content for free is because of ads.