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Google Max Bid For DoubleClick… or Insurance Policy? April 28, 2007

Posted by Bill in Ad Serving, Auction-based media, Google, Microsoft, MSN Search, Online Advertising, online marketing.
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It has been rumored that Microsoft bid right around the rumored $2 billion for DoubleClick. So the question remains, “Why did Google pay $3.1 billion?”. I have some thoughts; some serious, some just for giggles:

1. With AdWords, “max bid” represents the most an advertiser is willing to pay for a click for a particular keyword or group of keywords. The ACTUAL price the marketer pays is one penny more than the next highest bidder (on an effective CPM basis, which takes into account CTR/ quality score). Meaning, a marketer can bid $50 a click, but may only end up paying $0.50 for the click if that’s what it takes to win the auction. My theory is that Google thought the $3.1 billion was its MAX BID, and insiders say the Google executives were astonished when they didn’t win the auction for $2,000,000.01!!!!!!!!!!!!!!!!

2. This one is serious… PATENTS! While DoubleClick may claim to be the “central nervous system” to online advertising in their new marketing campaign, they really were the pioneers of online advertising the 90’s, and have really, really, really valuable patents that Google just couldn’t afford Microsoft to get their hands on. After all, they need to protect their 149 BILLION MARKET CAP… an extra billion to ensure it is seemingly a decent insurance policy. Thanks to an awesome write-up at SEO by the Sea below are a list of the patents DoubleClick has.

3. Last, the ability for Google to publicly beat Microsoft yet again was worth a little premium. Dr. Eric Schmidt spent decades at Novell and Sun getting beat up by Microsoft… Time for some pay-back from the Google CEO, who now also sits on the Apple board of directors.

WIPO Patents Assigned to Doubleclick

1. Method and System for Sharing Anonymous User Information
(WO 2002/035314)

Published May 2, 2002
Doubleclick, Inc.

A method and system for sharing online user information in an anonymous manner. The system associates an identifier (100) with anonymized information of the user, and sends the anonymized user information to a receiving party (130). In one embodiment, the system receives a temporary id with personally identifiable information from a Web site, uses the personally identifiable information as a key to obtain the anonymized information from a data source, and sends the temporary id with the anonymized information to the receiving party. the receiving party uses the temporary id, previously received by the Web site, as a key to obtain the anonymized information of the user. In another embodiment, the system receives a temporary id from a Web sit…

2. Automated Online Sweepstakes System and Method
(WO 2001/059656)

Published August 16, 2001
Doubleclick, Inc.

An automated process of conducting an online sweepstakes and marketing to sweepstakes entrants. The software system enables a non-technical individual (e.g., sweepstakes manager, marketer, etc.) to create a sweepstakes entry form that is integrated with back-end data processing systems (figure 2, item 210). The entry form and entry form processing system are kept consistent with sweepstakes rules chosen by the non-technical individual and automatically generated by the system. The system enforces compliance with applicable laws with integrated tools to pick winners, to determine eligibility and to collect winner affidavits. A back-end database is integrated directly with a sweepstakes entry form. Online tools permit a marketer to view entra…

3. Network for Distribution of Re-targeted Advertising
(WO 2000/008802)

Published February 17, 2000
Doubleclick, Inc.

A computer system for automatic replacement of advertisements includes an advertising server for selecting an advertisement based on criteria related to the individual viewer. In particular, advertisements are selected for a given user, based on the past behavior of that specific given user. Advertiser web sites on the network are configured to anonymously report back user activity such as visit dates, purchases, specific product pages visited and the like. Alternative reporting embodiments include email, file transfer protocol and spotlight tags. User activity lists are processed to select candidates for re-targeting. Candidates for re-targeted advertisements are identified based on their own individual past activity, and stored in a list …

4. Method and Apparatus for Automatic Placement of Advertising
(WO 1998/058334)

Published December 23, 1998
Doubleclick, Inc.

A computer system for automatic replacement of direct advertisements in scarce media includes an advertising server for selecting a direct advertisement based on certain criteria. Transaction results of the direct advertisement placement are reported back to the advertising server, and an associated accounting system. In one embodiment, the direct advertiser’s server reports transactions back to the advertising server by email. In a second embodiment, a direct proxy server brokers the user’s session (or interaction) with the direct advertiser’s server, including transaction processing and the direct proxy server reports the results of transactions back to the advertising server and its associated accounting system. A direct proxy provides a…

5. System and method for analyzing website activity
Invented by Jonathan Marc Heller, James Christopher Kim, Dwight Allen Merriman, Andrew Joel Erlichson, Benjamin Chien-wen Lee
Assigned to Doubleclick, Inc.
United States Patent 7,085,682
Granted August 1, 2006
Filed: September 18, 2002

Abstract

A method and system for analyzing website activity. According to an example embodiment, the system receives event-level data representing visitor session activity on a client website; attributes characteristic information of the event-level data associated with each visitor’s session to at least one of a plurality of visitor segments, stores results of the attributed information aggregated according to visitor segment prior to a client-requested analysis of the event-level data, and provides online reports based on the resultant data in response to a client-requested analysis of the event-level data.

6. Method and apparatus for automatic placement of advertising
Invented by Dwight A. Merriman and Kevin O’Connor
Assigned to Doubleclick, Inc.
United States Patent 7,039,599
Granted May 2, 2006
Filed: June 15, 1998

Abstract

A computer system for automatic replacement of direct advertisements in scarce media includes an advertising server for selecting a direct advertisement based on certain criteria. Transaction results of the direct advertisement placement are reported back to the advertising server, and an associated accounting system. In one embodiment, the direct advertiser’s server reports transactions back to the advertising server by email. In a second embodiment, a direct proxy server brokers the user’s session (or interaction) with the direct advertiser’s server, including transaction processing and the direct proxy server reports the results of transactions back to the advertising server and its associated accounting system. A direct proxy provides an independent audit of transactions at a remote direct advertiser’s web site. The feedback of the results of direct advertisement transactions provides an efficient utilization of direct advertising space by way of an automated computer system with a predictive model for selection and distribution of direct advertising.

7. Method of delivery, targeting, and measuring advertising over networks
Invented by Dwight Allen Merriman and Kevin Joseph O’Connor
US Patent Application 20050038702
Published February 17, 2005
Filed: September 10, 2004

(There are 5 versions of this patent application on file at the USPTO)

Abstract

Methods and apparatuses for targeting the delivery of advertisements over a network such as the Internet are disclosed. Statistics are compiled on individual users and networks and the use of the advertisements is tracked to permit targeting of the advertisements of individual users. In response to requests from affiliated sites, an advertising server transmits to people accessing the page of a site an appropriate one of the advertisement based upon profiling of users and networks.

8. Network for distribution of re-targeted advertising
Invented by Dwight A. Merriman and Kevin J. O’Connor
US Patent Application 20020082923
Published June 27, 2002
Filed: February 26, 2002

Abstract

A computer system for automatic replacement of advertisements includes an advertising server for selecting an advertisement based on criteria related to the individual viewer. In particular, advertisements are selected for a given user, based on the past behavior of that specific given user. Advertiser web sites on the network are configured to anonymously report back user activity such as visit dates, purchases, specific product pages visited and the like. Alternative reporting embodiments include email, file transfer protocol and spotlight tags. User activity lists are processed to select candidates for re-targeting. Candidates for re-targeted advertisements are identified based on their own individual past activity, and stored in a list of candidate user ID’s. When a candidate on the re-targeted list is identified at any network affiliate web site, a re-targeted advertisement is delivered to the candidate user.

The Bubble Bath December 28, 2006

Posted by Bill in Google, MSN Search, online marketing, Search Marketing, traditional advertising, Yahoo Search Marketing.
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For SEMs and online advertisers, 2006 was a bubble bath. The tone was set at the end of 2005, when Google paid $1 billion for a 5% stake in AOL. That put AOL’s total value at $20 billion, or $1,000 per subscriber. Later this year, Google paid $1.65 billion in its well-publicized acquisition of YouTube, a company with sixty-five employees, no profit model, and a bevy of illegally copied material (complete with litigious owners waiting in the wings). But perhaps the biggest of them all, the granddaddy of all bubbles, is Google’s stock price itself, which at press time was hovering at a 57.85 P/E ratio. Indeed, analysts are also finally starting to catch on to Google’s hugely overvalued stock. Into this mess splashed an acquisition that finally made business sense: the Publicis Groupe’s plan to buy Digitas.

True, Publicis did offer Digitas shareholders a 25% premium over the closing price when the deal was announced, but this reflects actual upside, rather than perceived upside. As search marketers we’ve seen firsthand for years how advertisers have shifted their spend from offline into search and other online media. As the general public has spent more time consuming media online, advertisers have realized that the accountability of an online campaign greatly surpasses that of a traditional campaign. Overall advertising is growing at 4-5% per year, while digital advertising is growing at 30%. That statistic alone justifies the 25% premium that Publicis paid for Digitas.

The next step for advertisers is applying the highly touted accountability of online media to their offline campaigns. This requires the keen analytics and robust technology typically found in digital agencies, and notably absent from traditional agencies. These capabilities include measuring spikes in search behavior and traffic in response to TV, print, and outdoor ads. An agency that specializes in all media, both online and off, will be able to execute on initiatives like boosting bids on keywords mentioned in TV commercials, and building microsites as landing pages where consumers can easily read more info and purchase the product they saw on TV. This integration poses another huge advantage for Publicis’ clients, as they will not have to coordinate between two separate agencies. These factors further justify the 25% premium.

It’s always risky to speculate on the future, but there are certain outcomes that almost certainly will occur in some form or other. “Convergence” has been a hot buzzword in the industry, the idea being that users will take control of their TVs in the same way that they’ve taken control of online content. This, in theory will enable advertisers to target video ads behaviorally, demographically, and by keyword. But this theory presumes that TV will still be the only device used to consume video. In reality, perhaps “divergence” is a better word, because media will be consumed not just on TV, but on computers, mobile phones, mobile e-mail devices, MP3 players, and in cars.

Keeping track of and optimizing each ad’s performance, across a diverse user base with a diverse media-consumption device base, all while deploying targeting options and other optimization techniques, will require an even more advanced technology and even sharper analytics. A digital advertising firm is far better positioned to deliver these assets to clients than an offline media firm. This is perhaps the most insightful element of Publicis’s move, and even further justifies that extra 25%.

Much has been made of Digitas’ client relationships having real value, but in reality, the Publicis Groupe and the other offline advertising giants don’t need to buy client relationships. They’ve had clients’ trust for years. What they need are the technology and analytics to deliver a full suite of advertising options to all of their clients, with greater accountability and the ability to scale as technology advances. That’s the real value that Digitas brings to the table.

Holding companies should not be focused on buying aQuantive or paying a premium for client relationships. Rather, they need to focus on acquiring smaller, privately held companies that have built leading-edge technology platforms, embraced a culture where the statistician is just as important as the creative director, and with whom they can bring their pre-existing customers to the digital upsell.

What a refreshing note to the end of 2006. Just when we all thought the bubbles were rising over the rim of the tub, here’s a move that will allow all parties to soak in real, not imagined, value.

Will E-Media Make It? November 20, 2006

Posted by Bill in Broadcast, Google, MSN Search, Online Auction Tips, online marketing, Search Marketing, traditional advertising, Yahoo Search Marketing.
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Last week, advertisers got their first glimpse of the e-Media Exchange, the auction-based TV (and other traditional media) ad-buying exchange initiated by blue-chip advertisers like Wal-Mart, and powered by e-Bay. The Exchange is said to be ready to roll in Q2 ‘07; the advertisers involved got their first sneak preview last week. And as I’ve said many times before, the Exchange is a revolution whose time has clearly come.

But at the same time, it still isn’t clear whether the e-Media Exchange will actually thrive. That’a an open question; there are forces acting both against and in favor of the Exchange’s long-term survival.

Let’s start with the forces against. To begin with, the networks don’t like the Exchange very much; and if the networks themselves don’t go along, the Exchange won’t work (it’s the networks’ inventory that the Exchange is selling). The networks’ reaction isn’t surprising, as the Exchange was created out of advertiser suspicion of network double-dealing when it comes to ad pricing: auctions, the Exchange members feel, are a more accountable and transparent way to buy media. Meanwhile, something else the networks have a strong reason to dislike is the fact that an auction would wrest pricing controls out of the hands of the networks, placing it in the hands of advertisers.

Then there’s institutional culture. The Exchange is an attempt to replace the traditional networks’ culture of lavish upfronts and martini lunches during ad buys. But while martini lunches might not foster transparent pricing, they’re an important aspect of networks’ tradition and corporate culture–and old traditions die hard. That’s especially true amongst large corporations, and the traditional networks happen to be large corporations (or pieces of large corporations).

Of course, martini lunches really do serve a valuable purpose. Television advertisers are spending enormous sums of money; and there’s a strong argument that large purchases are best done face-to-face. Even in the search world, the engines have reps who handle ad spend for larger clients, despite the fact that the actual ad purchases are made via online auction. And if there’s a need for a human interaction in the online auction of search, there’s no reason the same wouldn’t be true of online TV ad buys.

Finally, those behind the Exchange may have made a tactical mistake in declaring that they’ll start the Exchange as a place to buy remnant inventory. That makes sense politically, as the networks would never have agreed to let the Exchange start out by managing anything bigger that remnant. But the move also ignores a basic principle of how auctions work, and that’s a problem. To paraphrase what I’ve said many times, auctions are competitions over specific items–and to create a viable arena for those competitions, you have to offer something that people are interested in fighting over. But remnant inventory is definitionally the inventory that nobody wants; that’s not the kind of stuff that creates bidding wars, and so it’s not the stuff that makes for viable auction marketplaces.

OK, now why should the e-Media Exchange work? Because the auction networks have a record of creating clear and fair pricing. That kind of environment for buying TV spots would be an attractive change for advertisers who crave greater transparency in their ad buys. And if the advertisers are willing to fight hard enough for it, there’s definitely a chance that the networks will go along with the advertisers’ wish.

Meanwhile, the Exchange has made a smart move in deciding to start the program on cable TV. Cable TV is subscriber-based, which means that cable networks have demographic, geographic, and/or psychographic information that the standard networks don’t. That kind of data creates opportunities for the networks to slice and dice ad inventory in ways that clearly showcase each slot’s value. That, in turn, allows networks to charge more for the given slot, which is good for them; and it will also be able to drive more bidding wars over any given slot, which is good for the longevity of the Exchange, which is good for the advertisers. And initial success in a cable TV run will make the Exchange an easier sell to the larger networks, too.

One final note here: There’s no reason to assume that the Exchange is a guaranteed home run, just because it provides auctioned ad buys. Google and Yahoo have clearly shown that auction-based advertising can be a highly viable ad model; but there are plenty of auction media outlets that you haven’t heard of, simply because they died along the way. And whether the Exchange will become TV’s Google, or the next cutting-edge idea that lost because it was too ahead of its time, remains to be seen.

How Microhoo Could Beat Google November 7, 2006

Posted by Bill in Google, MSN Search, Online Advertising, Search Marketing, Yahoo Search Marketing.
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LAST WEEK, MERRILL LYNCH ANALYST Justin Post revived a suggestion that he had first brought up in June: Microsoft, Post argued, ought to buy Yahoo. Post pointed to reasons why Yahoo might be worth more than its current so-so earnings suggest; he also observed that a Yahoo purchase would let Microsoft gain serious search revenue, even before MSN AdCenter gets up to speed in growing its advertiser base. Obviously, the proposed Microhoo would be a threat to Google. Part of the reason is the major share of search that the new entity would gobble up. According to comScore numbers released in May, MSN and Yahoo hold a combined 41% of all search traffic, which is just shy of Google’s 43%. But the threat from Microhoo would only partially come from search. The real threat to Google would be in Microhoo’s ability to adapt to a continuously-converging media world–a world that MSN and Yahoo are ready for, but that Google still might not be as ready for as it needs to be. All of this goes back to each business’s core focus. For Google, everything is search; Yahoo and MSN, by contrast, work in many channels at once and look to integrate them. And because MSN and Yahoo are already thinking about integration now, they’ll be far better prepared when integration really get underway.

You can see that philosophical divergence in the way each entity picks up search traffic. Google’s name is synonymous with search, and it’s the search engine itself that drives the bulk of Google’s search traffic base. Yahoo also gets plenty of direct-to-search visitors; but an awful lot of Yahoo search traffic arrives off of search bars on Yahoo’s enormous publisher network. The same is true for MSN and its publisher network-and MSN searchers even arrive via help buttons on Microsoft software. Google is popular for search in its own right; Yahoo and MSN Search owe much of their popularity to the way each business draws users from its enormous, diverse universe of user interfaces.

The different philosophies also come out in how each business applies search thinking to non-search channels. To take one example, consider search-influenced solutions for content/publisher sites. Google’s big accomplishment here is AdSense, which syndicates actual search ads onto content pages. Yahoo’s Publisher Network isn’t so different from AdSense; but Yahoo has also bought into the Right Media Exchange–which will let the Yahoo publisher network sell display ads by auction, just as Yahoo already does for search ads. Meanwhile, MSN’s publisher network is beginning to offer targeting on a level that’s clearly inspired by the thinking behind AdCenter, MSN’s super-targeted search platform.

These are very different approaches to how search might help publishers and content sites. Google’s AdSense effectively recreates the world in the image of search. MSN and Yahoo, by contrast, truly integrate very different models, combining elements of text-based search advertising with image-based publisher advertising to make something new.

Which approach–Google’s search-centric approach or MSN/Yahoo’s integrative one–is better? A snapshot of today’s online market would give a resounding win to Google, which pulls in roughly 25% of all online ad revenue, the vast majority of which comes from search. Google’s win is strengthened by Yahoo’s poor Q3 performance, especially given the fact that analysts agree that it’s Yahoo publisher network, not its search network, that’s giving Yahoo trouble.

But a present-day snapshot is misleading. That’s because the information world of today is siloed in a way that tomorrow’s world won’t be. Full-length TV content that lives online, and iTunes for your cell phone, are just the beginning of the new convergence–and as channels continue to converge, the ability to work in many universes at once will be increasingly critical. Which is why the multichannel model, and not the search-only model, might just be the long-term winner.

There’s even some indication that the tide’s already turning. That indication comes from online video, which is effectively the merger of the Internet and TV. Just two days after the YouTube acquisition, an Oct. 11 Businessweek article ranked Google Video as the fifth-most popular video destination on the Web–with MSN Video as No. 4, and Yahoo Video at No. 1. Online video is the merger of different media models, and it’s the integrators, not the dominators in search, who took the lead.

Of course, Google may have solved its video problems by purchasing YouTube. But if Google’s video problems come from too narrow a focus on search, then one needs to wonder how many billion-dollar fixes Google can buy just to stay on top as the landscape shifts. Which is why if Google can’t develop a more convergence-minded view of the world, it could face real trouble from a new Microhoo that’s convergence-minded enough, and large enough, to win in Web 3.0.