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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.

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Yahoo’s “Right” Decision October 23, 2006

Posted by Bill in Online Advertising, Search Marketing, Yahoo Search Marketing.
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A few weeks back, I discussed Yahoo’s disappointing earnings release, and suggested that the solution to Yahoo’s troubles lies in a better integration of its approaches to search within its media arm. Yahoo, after all, is the #2 search engine and the #1 portal; combining the successful components of each would leave Yahoo a nearly unstoppable force in Internet media. And last week, with its 20% purchase of Right Media, Yahoo took a major first step towards making that integration a reality.  

 

As I said already, Yahoo has the second-largest search engine; that engine is funded almost entirely by auction-based advertising. Yahoo is also the Internet’s largest portal, and therefore one of the world’s largest publisher networks. But until now, the two sides of the business lived very different lives: the successful search side monetizes through auction-based advertising, while the publisher side has monetized through far more traditional models for network buys. With its purchase of Right Media, Yahoo can now bring its publisher monetization in line with its search business for all of Yahoo’s remnant space—and that’s key to effective yield management to complement online brand buys. That’s so because Right Media’s primary offering, the Right Media Exchange, enables publishers to offer auction-based purchases of display ad inventory. Yahoo plans to apply the Right Media Exchange technology to sell Yahoo’s own remnant graphical display inventory—within its own publisher network—in an auction.

 

That’s good news for Yahoo, because advertisers are steadily seeking more opportunities for auction-based advertising beyond search. The auction model means increased transparency; and, because each unit goes for a unique price, it fosters an environment that allows for better metrics. A promising—if anecdotal—sign that auction media may be particularly useful for Yahoo is Lexus’s quickness to join the e-Media Exchange, an online auction marketplace for traditional ad spots, that was initiated by advertisers disgruntled with the non-transparency of traditional ad networks. Yahoo blamed its below Q3 expectations on troubles from the automotive sector; perhaps auction-based display ads can help Yahoo woo Lexus and its fellow automotive advertisers back into the fold in a more material way.

 

But the value of the Right Media investment is more than just a way to fix the Yahoo portal’s monetization model. It’s an opportunity for Yahoo to capitalize on its strengths and come into its own in the online world, and out from beneath Google’s long shadow. And it manages to do all this while delivering a wonderful strategic counter to GoogTube, which will undeniably expand Google’s reach well beyond search, and far into content.

 

After all, despite Yahoo’s Q3 disappointment, Yahoo’s publisher side is still both enormous and hugely popular. Google is the #1 search engine; but Yahoo is the #1 online destination overall—due largely to the popularity of its publisher network. Yahoo clearly knows something about the world of online visuals, as well, whether you’re talking about the display ads and image and video content it offers on its portal; Yahoo video search, which predates Google Video by roughly two years; or its farsighted purchase of photosharing site Flickr, which Yahoo bought when YouTube was only a few weeks old. Yahoo clearly understands the worlds of content and online graphical display, and the investment in Right Media and the placement of the auction media model within the Yahoo portal means that Yahoo can now unlock a huge potential that it’s been sitting on for a long time, and truly begin to monetize its greatest strengths. By making that move on the heels of GoogTube, Yahoo has been able to show the world that Yahoo is still the leader in media in the content/publisher model; and that now it’s able to monetize—and help advertisers monetize—in a way that Google currently isn’t able to.

 

That’s a lot to offer—with or without GoogTube in the picture. And that’s why I predict a new online world order, coming soon. Yahoo, funded by the monetization through auction-based display ads and its large display network, will be able to solidify its lead in both content and graphical ads. It will become for content and graphical display what Google is for search and text links. How crucial will this change be in online history? Mike Walrath, CEO of Right Media, said it perfectly in an e-mail he sent me while I was working on this article; so I’ll leave the final word to him:

“Search has been the center of attention in our industry over the last few years.  It’s a huge piece of the online marketing puzzle, but it’s not the entire puzzle; and Google is still behind when it comes to display and branded advertising.  Yahoo and others have a substantial lead, and that’s going to be important as it becomes clearer that what’s happening isn’t a competition for dominance in search, but all of interactive advertising.”

 

Your Customers Want More Than Just Keyword Bids October 12, 2006

Posted by Bill in Online Advertising, Search Marketing.
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logo_searchinsider_sm.gifLAST WEEK ALLURENT, A rich media provider for e-commerce, came out with a study finding that 83 percent of Web users would purchase more online, if online retailers just “added more interactive and interesting ways to display and purchase products.” In other words, it’s not enough to just drive customers to your site. If you want them to buy, you have to give customers the right experience once they’ve arrived, and to continue providing that excellent experience all the way to the point of conversion. And in a separate news item last week, a Harris Interactive study, conducted for mobile marketing firm Enpocket, found that 78 percent of mobile users would be “happy to receive” targeted mobile advertising. Sixty-four percent of those interested in targeted ads, the study continues, would volunteer personal information to enable that targeting.

Now put the two points together, and you come to a very powerful picture of today’s new-media customer. These are people who are seeking the perfect, perfectly targeted marketing; and the perfect, perfectly targeted customer experience. And they want to achieve those things from beginning to end of the buy-cycle.

That’s great news for search, because search is uniquely positioned to fulfill the demands of new-media customers. Search, after all, has unparalleled targeting, and it enables you to make use of that targeting at a very wide array of touchpoints. Keywords tell you a customer’s intent. Higher-level analytics tell you where your searchers are located, the time of day your best search prospects are out there, the browsers they’re using, and a lot more. And because of that level of targeting, you can know which keywords to buy, when to deliver ads, what ads to deliver, and what landing page experiences you need to create for each customer. Meanwhile, behavioral retargeting lets you use search data to pinpoint your best customers, and to follow them across the Internet with targeted display ads–which means that search targeting can make your multichannel efforts more powerful, too.

Given that search enables such a powerful end-to-end customer experience–the very kind of experience that customers want–I’m left with a very basic question about a common decision in marketing departments. My question is this: Why, I’d like to know, are so many marketers fixated on keyword bid management?

I’m referring to the wide array of search methodologies, ranging from the very simple to the complex, that view search as a process of building the right keywords list, and then managing bids on those keywords to meet a budget. That’s certainly an absolutely crucial part of winning in search, but it doesn’t provide the targeting and touchpoint management that, as I’ve already argued, is also absolutely crucial to winning.

To be fair, some marketers are fixated on keyword bid management because it’s all that they can only afford, because it’s what the simpler search management tools and less sophisticated search management agencies have to offer. But that doesn’t explain why many otherwise savvy marketers from blue-chip organizations are stuck on keyword bid management, too.

For those otherwise-savvy marketers, my only explanation is that they’re either unaware of the full array of what search has to offer; or that they don’t realize the degree to which customers are seeking far more than just a well-positioned search ad. And because of that lack of awareness, they’re stuck in a search methodology that’s years behind the times. And so some very major organizations are leaving a lot on the table in search.

That’s a huge potential loss for those organizations, and a gain for their competitors. Meanwhile, the customers have clearly spoken; and the behind-the-times marketers will have to start listening to customers more carefully, and targeting to customers more carefully, if they’re to pull ahead.

For Better Click Fraud Defense, Target Your Customers October 5, 2006

Posted by Bill in Click fraud, Online Advertising, Search Marketing.
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One conclusion I’ve reached on the click fraud problem–the dark side of online advertising,” as last week’s Business Week aptly dubbed it–is that the key to fighting click fraud lies in knowing how to target your customers.

I say this because click fraud is really just a subset of a much larger problem: the problem of the non-converting searcher. And whether non-converting searchers are malicious  click-frauders, or innocent searchers who’ve just decided that your site’s not relevant, they all wreak the same havoc: they leave you with a click cost, but offer you nothing in return. And the first step to avoiding non-converting searchers is to know who your best prospects are, and to target only to those best prospects.

After all, if you target only to conversion-likely searchers, then the searchers who aren’t likely to convert–for whatever reason–will inevitably get weeded out.

I’ll give you an example. Let’s say you’ve found that your best conversions come from the Northeastern U.S., between 12 and 2 p.m. on weekdays. Now let’s say that at 3 a.m. on a Sunday, someone from Nepal searches on your keyword. Based on your target-customer profile, you’ll know that the Nepali searcher isn’t a likely prospect, and so you won’t advertise to him.

Is that Nepali searcher a would-be click frauder, hired as part of a “click farm” to damage your campaign? Or is he an innocent searcher who just happens to lie outside of your target customer group? It’s impossible for you to know. And what’s more, it doesn’t matter. Either way, it’s unlikely that he would convert for you; and by not advertising to him, you’ve prevented any damage he might have caused.

Of course, the example of the Nepali searcher is a fairly obvious case. And while many poor prospects are just as easily noticeable as that one is, many other cases are a lot more ambiguous. Searchers from one zip code might be great prospects, while poor prospects live just one zip code over; a Yahoo searcher might behave very differently from a Google searcher; and a Mozilla Firefox user might convert differently than an Internet Explorer user would. In other words, there are a lot of parameters that can go into identifying your target customer; and because of that, it often takes very subtle analytics to flesh out who your poor prospects are, and who will convert best.

Which is to say that if you want to avoid click fraud, you need a search firm with the analytics capability to pinpoint your best customers.

And it’s useful to keep in mind that, if you do become a click-fraud victim and seek a refund from the engines, you’ll need that same analytics capability to prove your case. “Proving your case” means explaining to the engines why a given searcher is so erratic, that it’s reasonable to assume that something’s afoul. And the better picture you have of your standard searcher, the easier it will be to make the case that your suspected click-frauder is outside of the norm. Again, your ability to profile your searchers is key to doing that, and your ability to profile is only as good as your analytics are.

Of course, profiling isn’t the only defense against click fraud, and it isn’t even the only one that matters. You need a system that acts quickly enough to respond to new click-frauders that appear out of the blue. You need proactive campaign management that’s vigilant for any problems, and that knows how to present a solid case to the engines. You need strategists and technology who are smart enough to weigh all the factors–to know when not to deliver an ad at all, and when to keep an ad up but just lower your bid; and who can tell the difference between a click fraud problem and a landing page problem that looks like a click fraud problem to an unskilled analyst.

If all of this sounds complicated to you, that’s because it is. Which is why my other piece of advice is this: if you want to avoid click fraud, your best bet is working with the smartest people. Which is good advice for any issue in search marketing that you might face.

How Behavioral Retargeting Could Save Yahoo September 25, 2006

Posted by Bill in Online Advertising, Search Marketing, Yahoo Search Marketing.
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So what happened to Yahoo? Last week, the online giant announced slow ad sales; Wall Street responded by forcing Yahoo stock down 11.2 percent. There’s been a flurry of speculation as to what went wrong, with suggestions ranging from launch delays in the Panama ad platform, to a trickle-down from woes in the financial and automotive sectors. And for what it’s worth, I think most of the speculations have real validity.

But pointing to any one problem misses a crucial underlying issue that’s giving Yahoo trouble. That issue is the disconnect between Yahoo’s search engine and the Yahoo Publisher Network. Simply put, Yahoo’s hurting because its publisher side refuses to learn from its search side.

My reasoning comes from an examination of what’s going wrong at Yahoo, and what’s going right. As Majestic Research’s John Aiken told the New York Times, Yahoo’s search arm seems to be doing just fine. It’s the publisher side–which is in the business of delivering graphical display ads–that’s to blame for bringing ad sales down. (It’s also noteworthy that analysts see Google as still on the rise; Google is much more search-centric than Yahoo is.)

Meanwhile, a recent Reuters story links Yahoo’s troubles with the pain that publishers of all kinds–including The New York Times and Dow Jones–are currently feeling . The trend across publishers would imply that Yahoo’s problems don’t originate with Yahoo. They originate with problems faced by publishers everywhere–including Time Warner, which is busily trying to sell off 18 magazine titles as I write.

What’s the reason for the publisher slump? Marketing strategist Laura Ries, president of Ries & Ries (quoted in the Reuters article), suggests that while ad spending overall hasn’t dropped, marketers are shifting ad spend “all over the place, because they’re looking for something that works.” And if they’re shifting ad spend away from publishers, then they see the publisher model as something that doesn’t work. By keeping their money in search advertising, they’re demonstrating their faith in search as a medium that does.

To get the publisher model back on track, then, publishers need to make display ads work as well as search ads do.

How could publishers close the gap with search? There are several avenues that they could take; for now, I’d like to focus on just one. Publishers need to make their ads more targeted.

From the very start, search has been a personally targeted medium. Each searcher typing in a query has a unique question in mind, and a unique Web page and online experience that will satisfy his/her needs best. Both the search engines and search marketers understand this; that’s why search’s last 10 years has been the story of engines, and search marketers, trying to improve their understanding of who’s searching, and of how to reach out to that exact person in the most effective way. Search’s personalization methods range from delivering the listings that are most relevant for a precise keyword, to serving up geographically targeted search landing pages.

And search’s targeting works wonders, because consumers respond to you based on how relevant they feel you are to them. The more targeted your outreach is, the more personally relevant you can present yourself as being–and the more your customers will respond.

But in stark contrast with search ads, display ads are rarely personally targeted. They’re certainly not personalized in print; and they’re rarely well-targeted in digital display ads, either. Instead, digital ads are delivered to wide segments of online viewers in the hopes that someone, somewhere, will respond.

There’s no reason that the publisher model can’t change. And search-style thinking, and search itself, can lead that change. The new method of behavioral search retargeting, for example, uses individualized search data to deliver highly targeted ads to the most conversion-likely customers. Another example of the new targeting is MSN’s behaviorally targeted display ads. MSN’s display ad targeting isn’t search based; but the thinking behind it clearly derives from the same source as MSN’s targeting-heavy search platform, adCenter. This kind of fusion of search thinking and display ad presentation will be crucial for the ongoing health of the publisher model.

And Yahoo, which is a clear leader in both the search and publisher spaces, is in a unique position to close the gap. So far, it hasn’t gone very far in that direction–hence its ad troubles in Q3 and stock troubles last week. But by letting its search thinking guide its publisher side much more, Yahoo could have better success in Q4–and a stellar year in 2007.

Out-of-Home Is the Next Auction Medium September 18, 2006

Posted by Bill in Online Advertising, Online Auction Tips, Search Marketing.
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You know those ads you see on screens in airports, office building elevators, and on the  occasional person? They’re called out-of-home digital ads. And my prediction for them is that they’ll be almost entirely auction-based by 2010.

Last week, marketing consultancy Profitable Channels came out with a report on the medium. The report is definitely a worthwhile read; the point that stood out most in my mind–the point that led to my conclusion about auctioning out-of-home spots–comes from the report’s description of out-of-home’s value. This value, the report observes, stems largely from out-of-home’s proximity to the point of sale.

In July, I wrote a piece about why Google’s attempt to auction print ads didn’t work. Since auctions are so competitive, I argued, buyers tend to avoid them unless they’re absolutely necessary–unless the auctioned item is scarce, and there’s no other place for auctiongoers to shop. That’s why fine art get sold ub auctions–because it’s one-of-a-kind; but vegetables and pants are almost never auctioned, because vegetables and pants are widely available.

Print advertising goes into the “widely available” category. Print publishers add pages to their newspapers and magazines as they sell more inventory, so they can always make space to accommodate more advertisers. That’s hardly a scenario of scarcity, and so it’s hardly a scenario for offering an auction model.

That logic also explains why keywords are sold in auction. Since only a finite number of searchers will search a given tem, keyword traffic is limited. It’s also highly valuable, as keywords represent consumers who are headed towards a point of sale. The combination of high value and limited availability makes keyword traffic a thoroughly auctionable item.

Now consider the out-of-home ad. Out-of-home advertising, again, is so attractive because it puts your ad very close to the point of sale. Your ad for kids’ cereal might be nice during Saturday morning cartoons; but think of how valuable it would be if you displayed it right in the cereal aisle. Or how valuable an ad for Pepsi could be if it was delivered right next to the soda machine. And since there are only so many spots in the world that are next to a point of sale, out-of-home advertising offers something that’s highly scarce. And, once again, scarce + valuable = auction-worthy. It’s only a matter of time before networks realize this, and sell out-of-home impressions accordingly.

Auction-based out-of-home ads will be a big news for auction marketing, because out-of-home advertising is big business. In the same report, Profitable Channels predicts a total of $1.2 billion in out-of-home ad sales this year–about the equivalent of a major TV daypart.

And the out-of-home market is still largely untapped. A second study released last week, this one by media research firm Arbitron, found that  a third of the people who watch Sunday Night Football in Houston watch it out of home. And I’d say it’s a safe assumption that a substantial number of those out-of-home viewers watched their NFL games in a bar. That creates a real opportunity. Given the sheer numbers of viewers watching football in bars, imagine how valuable bar-specific advertising would be to a beer distributor who could reach viewers, in a bar, in the middle of NFL programming.

Such a network would be so valuable, I’d like to suggest, that it’s only a matter of time before we see bar-specific networks that overlay bar-specific ads, and deliver them to bar TV screens during the commercial breaks of sporting events. And it would make perfect sense to sell the ad slots by auction: it’s a scarce resource (there are only so many commercial breaks in a game, and so many bars that the networks will reach); and, since a bar is a crucial point of sale for beverage vendors, it would also be incredibly valuable.

And bars aren’t the only location that would attract networks. Arbitron finds that, with TV sets in a slew of other places–like airports, hospital waiting rooms, hotels, and gyms–a lot of television, including daytime TV, gets major out-of-home viewing. Many of these out-of-home views could support their own overlays, with hospital TVs getting ads from insurance companies; gym TVs getting ads from diet products; hotels getting ads from tourist attractions and restaurants, and so on. For nearly every location where there’s a TV, there’s an industry or two that would see that TV as incredibly targeted real estate. Those industries would gladly participate in a bidding war to place their advertising there, and to keep their competitors out.

How long before out-of-home goes auction-based? It won’t be overnight. But it will, most likely, be within the next three years. It’s a possibility I’d put a high bid on.

Why Display Ads Are Looking More Like Search Ads September 11, 2006

Posted by Bill in Online Advertising.
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This week, MSN rolled out behaviorally targeted display ads. MSN monitors audiences for Web page views and search history; it serves up relevant ads accordingly across the MSN network. And with that rollout, MSN has done a lot more than just offer a new app for advertisers. It’s blurred the lines that divide display ads from search.

Ask any search marketer why search is a different kind of medium, and they’ll tell you two things. They’ll tell you that search offers unparalleled targeting: TV ads might shoot messages to 20 million viewers at a time; but there’s a good chance that 80 percent of those viewers won’t care about your product. With search, the keyword alone–to say nothing of more sophisticated search targeting–gives you a very good chance that the person who sees your ad is actually interested in what you have to sell.

The second differentiator any search marketer will point to is that search is customer-forward. In traditional media, viewers are bombarded by messages they haven’t requested; and that, by and large, they don’t want to see. Search is the opposite: searchers come to engines because they want information.

With behaviorally targeted display ads, the sharp distinctions are changing. First, behavioral targeting brings the targeting of display ads that much closer to the targeting capabilities of search (even if those capabilities still are very far apart). And second–and perhaps even more surprising–behavioral targeting makes display ads a lot more customer-forward.
There’s a wide spectrum, after all, of how customer-forward a medium is, and how forward-facing a customer can be. On the one hand, many ads ask consumers to buy items they’ve never considered buying, from brands they don’t know. On the other hand, there’s search–in which customers already know what they want, and are only turning to the medium to fill in specifics.

And there’s also a middle ground. There are people who aren’t looking for an item right now, but who are, more broadly speaking, “in the market.” It’s not that they’re not looking, or that they’ve stopped looking. It’s just that they’ve put their search on pause, or that they’ve tuned it down a notch–they’ve shifted from aggressively seeking, to researching where it is they’d like to turn next. To take an example at random, someone who’s “shopping for a house” might be haggling with a real estate agent; or she might be reading the real estate section; or she might be playing golf, and won’t take steps to look for a house until tomorrow. Searching isn’t just an activity–it’s also what takes place in the back of your mind, and the general direction in which your purchase is heading–even if you’re not making a purchase at this very moment.

Behaviorally targeted display ads fill the vacuum that’s been needed to address that middle ground. And when you couple their ability to encounter the middle ground with their ability to pinpoint precise viewers, you’ve got a medium that brings display ads a lot closer to search than they’ve eve been.

For marketers and agencies, that means that the niches we’ve filled until now are all becoming less distinguishable from one another. And it means that, if we’re to continue to give the same level of service to our clients that we’ve provided until now, we need to acknowledge that fact.

For those of us in search, that’s a tremendous opportunity. Search marketers have already cornered the market on targeted marketing and on reaching out to forward-leaning customers. As those elements become more prevalent in media outside of search, our clients will increasingly turn to us to guide them in leveraging those elements in other media. Already, you can see that shift taking place, with search firms providing new offerings like behavioral search retargeting.
Am I advocating the return to the one-stop shop? Not for the next 10 years, anyway. But I do think we need to start thinking about how we need to reconfigure media as everything comes a little closer together.

Accountability Matters August 28, 2006

Posted by Bill in Online Advertising.
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In my continuing discussion of the new e-Media Exchange–the auction-based ad-buying exchange driven by blue-chip advertisers with technology from e-Bay–I’d like to talk about why the push for auction-based advertising is, at its root, a push for accountability. I think it’s important for me to explain this point because I’ve used it as something of a presumption in my discussion of auction media up until now.

To explain the issue, let’s start at the real focal point of the accountability problem, and of the Exchange: the ad-buying process. Currently, traditional ad buys are the result of discussions between advertisers’ media buyers and network salespeople. Pricing, packages, and details are all hammered out on a case-by-case basis. That sounds OK, but it’s frustrating for advertisers, since every deal is both personalized and shielded from the view of similar deals in the marketplace. That combination means it’s hard for an advertiser to get a sense of a going rate for an ad unit–if you don’t know how much anyone else has paid for a similar unit, it’s hard to know if you’ve paid a reasonable price.

Yet another problem, in the words of Home Depot Senior Vice President of Marketing Roger Adams (in a Wall Street Journal interview last week), is growing advertiser concern over the trend of “increasing rates for media and decreasing audience delivery.” Translation: between eyeball dispersion away from TV and towards new media, on the one hand, and TiVo on the other, traditional ad viewership seems to be shrinking–but the networks are still charging more.

I would argue that these problems are related. Since networks ad buys don’t have standardized pricing, it’s hard to know how much you ought to be paying–and it’s even harder to know if you’re paying too much. If you don’t know if you’re paying too much–if there’s no clear sense of an ad’s precise value–then there’s less incentive for the networks to present a case as to why their pricing reflects what an ad is truly worth. That’s a serious lack of accountability.

The reverse is also true. Transparent, precise pricing means that everyone in the market knows what kind of deal they’re getting. If everyone knows exactly how much they’ll have to pay, networks are forced to explain how they came up with that price. That creates an incentive to provide better information to advertisers about network traffic in general, giving advertisers a better grip on the real value of their network buys. Since auctions create precise pricing that the whole market is aware of, auctions force the auctioneers to provide that kinds of broad information. In the case of auction-based advertising, the auctioneers are the networks.

Google and Yahoo’s free keyword-list development tools illustrate the point nicely, albeit somewhat anecdotally. Yahoo’s Keyword Selector Tool provides keyword suggestions for search marketers; it also serves as an index of how many searchers have queried thousands of unique terms each month. If you’re developing a keyword list, those numbers can be a powerful for your arsenal. Google’s Keyword Sandbox, on the other hand, also suggests useful terms–but it doesn’t offer precise numbers on monthly keyword queries.

This distinction is important because Yahoo operates through a nearly pure auction: the more you’re willing to pay, the higher your ad gets ranked (more or less). But Google strays from the pure auction model, determining ad rank by a black-box algorithm combining bid price with other factors, like click-through rate. And it’s the engine with the purer auction that provides better traffic data.

It’s also interesting to note that, as Yahoo plans to shifts towards a black-box hybrid auction similar to Google’s, its Keyword Selector Tool has suddenly became much harder to find. Try to locate it by typing inventory.overture.com into your browser–until recently, that URL would automatically redirect to the actual Keyword Selector URL,; now it gets rerouted to this Yahoo Search Marketing landing page. All of this might be coincidence, of course, but I do think it’s illustrative nonetheless.

Now, I’m not arguing that Yahoo and Google black boxes will set them up for advertiser rebellion–search is still the most accountable game in town. Plus, in contrast with TV ads, the eyeballs are moving toward the engines–not away from it. Instead, I’m arguing that auctions create an inherent incentive for networks to be accountable, that advertisers understand this point, and that it’s this very point that’s driving the new e-Media Exchange. It’s also the reason why, as advertising evolves, auction-based media will only become more entrenched.

Why You Can Auction a TV Spot, Part 2 August 21, 2006

Posted by Bill in Online Advertising.
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Last week, I began my rebuttal to the traditional networks’ argument against the e-Media Exchange. The e-Media Exchange, again, is a new auction-based exchange for selling traditional ad spots, in which the networks compete with one another for advertisers’ spend. That competition, advertisers feel, will force the networks to be more competitively priced and competitively accountable–two features which, many advertisers feel, the current upfront system lacks.
The networks’ argument against the exchange goes like this. Auctions work great for commodities: things like cattle, Pez dispensers, or maybe a keyword or two. But traditional networks, the networks argue, don’t deal in commodities. They deal in custom-tailored ad packages, putting together a unique cluster of ad spots, product placements and the like for each and every advertiser. And since you can’t auction a custom-tailored product, you can’t auction a traditional network buy.
Last week, I pointed out that there’s a difference between a wholly customized product and a Chinese menu. Media packages are the latter; and anyone who’s seen a search campaign can tell you that you most definitely can auction off the individual ad units that make up a Chinese menu. If you can auction hundreds of thousands of keywords to make a search campaign, you can auction off any other kind of grouping of ad units in the same way.
This week, let’s assume, for the moment, that traditional network packages are completely non-auctionable. I’d like to use that premise to point to the far deeper flaw in the networks’ point of view: given their logic, the networks are much better off being wrong than they are being right.
Remember that it’s the most-valued advertisers–a blue-chip group including the likes of Wal-Mart, Toyota and HP–that want the e-Media Exchange to go forward. They’re the ones who see an ad-buy exchange as the best solution to perceived network accountability problems. In response to that need, the networks have gone much further than saying that they won’t go along; they’ve said that they can’t go along, because an inability to participate in auctions is part of the networks’ business model.
Now also keep in mind that the drive for advertising accountability didn’t develop from nowhere. It grew out of experience with other, highly accountable channels–like search, other forms of online marketing, and direct mail. And so lingering in the back of advertisers’ minds is the knowledge that, if traditional networks won’t deliver on accountability, there are plenty of other channels that will. And if the traditional networks aren’t capable of delivering that accountability, then advertisers will give up on trying to change the networks’ mind on the Exchange (something which, according to the networks’ viewpoint, they can’t do)–and they’ll start seeking out alternatives instead. If I were in traditional network sales, that would worry me.
Maybe the networks see the situation differently. Perhaps they feel secure in the position that everybody still needs to be in TV and magazines, no matter how they’re buying, because TV and magazines are where the eyeballs are. And there’s certainly a realistic basis for that sense of security: I, for one, don’t see Toyota halting all television spots anytime soon.
But while I can’t see a near-future in which Toyota halts TV spots, I can see a future in which Toyota spends much less on TV than it has up until now. Search, display ads, e-mail, and viral branding along the likes of Burger King’s Subservient Chicken could do an awful lot of the job that’s been reserved, until recently, for TV and magazines–with a far higher degree of accountability. And as accountability becomes increasingly important to advertisers–as CMOs starts to work still more closely with CFOs–that kind of spend migration will become only more attractive.
Indeed, that kind of spend migration is happening already. I’ve personally witnessed a major client or two shift ad spend from traditional venues into expanded search; I’m sure that parallel new-media CEOs have seen the same kind of thing, and that traditional networks have begun to feel it.
That’s exactly why the networks really don’t want to be right when they say that, due to the nature of their business, they’ll never be able to sell ads through an auction. By making that kind of admission, they’re bound to drive advertiser spend away.
But in the end, the networks really don’t have so much to worry about. Because, as I pointed out last week, their argument is wrong–fortunately for them.

Why You Can Auction a TV Spot (Part 1) August 14, 2006

Posted by Bill in Online Advertising.
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Last week I discussed the new e-Media Exchange, an automated ad auction exchange, created by a blue-chip group of advertisers with technology managed by eBay. The Exchange will sell cable and broadcast TV, radio, and print ads through automated auction; the advertisers see auctions ad buys as more accountable than the current, human-managed upfront. The advertiser list includes Toyota, Wal-Mart, Microsoft, Hewlett-Packard, and Home Depot. The Exchange will certainly go down as a major landmark in advertising history. The TV networks, meanwhile, are not happy.
An article in last week’s Wall Street Journal nicely covered the networks’ displeasure. Members of the TV world put forth a number of arguments why they think the system won’t work; over the next few weeks, I’d like to dissect those arguments to explain why I disagree. This week, I’d like to focus on just one point that the networks made: since networks don’t just sell individual ad slots–rather, they sell media packages that are customized to the advertiser–the auction model doesn’t work for them.
The networks’ argument goes something as follows. Traditional network placements aren’t just about TV spots. They also include “product placement, mobile extensions, sponsorships, and branded vignettes;” and so each advertiser isn’t just buying a TV placement, but a custom-tailored media package. In the words of Bill Abbott, senior vice president of ad sales for Hallmark Channel, network media isn’t a commodity “in which you can package everything together and put a price tag on it.” Since each advertiser is buying a custom-tailored package, it doesn’t make sense to sell it by auction.
To understand why that thinking is wrong, you need to realize that the same argument could be made about search. Search marketing, after all, isn’t just a system of purchasing keywords. It’s a system of purchasing many different keywords, across many different engines, and many different kinds of engines and networks. Each advertiser must decide which unique combination of keywords, engines, and syndication and contextual networks will bring the most value, out of all the possible advertising choices.
Meanwhile, each search campaign needs to custom-tailor that unique combination, because every campaign will react to the same ad buy differently. Some businesses, for instance, will fare better on shopping engines than others; some businesses will fare better in contextual networks than others; and some will perform better in Google than in Yahoo, or vice versa. In terms of the package itself, that’s easily as complex as a traditional network buy–if not more so, as advertisers must fashion a single campaign out of thousands upon thousands of possibilities. Even within an individual engine–which, to be fair, is a far closer analogy to an individual TV network–advertisers still need to create their custom-tailored package. They need to combine the right mix of branded keywords, generic keywords, low-hanging and high-hanging fruit terms; primary engine and/or syndication and contextual partners–the list could go on, and the possible packages an advertiser could buy within an engine are nearly endless.
And so, at least in terms of customized packaging, there’s a strong similarity between search engines and traditional ad networks. And yet, search engines sell ads through real-time auctions, while traditional network packages sell through human-managed upfronts.
Why? Because the search engines took the opposite solution to the same problem. While traditional networks have said, “We’re selling you a package, you can’t auction off a package,” the search engines have decided to sell each individual component of that package–the keyword–one item at a time. And while you can’t auction a custom-tailored package, you most certainly can auction off the itemized components that make up that package.
Of course, the TV networks could do the same thing. If the concept of bundled offerings is what’s standing in the way of their embracing the e-Media Exchange, they could certainly unbundle their offerings. And given the success of search, and the creation of the e-Media Exchange itself, it’s fair to say that the advertisers would want them to. And yet the networks don’t seem to want to take that step.
Over the next few weeks, I’ll discuss further why that might be, and why it’s in everyone’s best interest–the advertisers’ and the networks’ alike–for the networks to embrace the e-Media Exchange, rather than pushing back against it.