Baking Bread In Online Ad Sales

January 12th, 2014

The following post first appeared in AdExchanger.

Being a premium publisher these days is a lot like being a baker.

If you’re a baker, your content is bread. You craft fine, high-quality bread with organic ingredients, made with patience and care. Your customers love your bread.

Your bread is so good that party planners are valued customers. The planners will often start with a custom-baked “centerpiece” loaf. They also want a number of high-quality loaves and rolls for the meal, and may fill out their basket with some croutons or breadcrumbs. You, the baker, are happy to supply all their needs, but you make most of your money on the centerpiece and the high-quality loaves.

The world changes, though, and some planners don’t have time to go to your bakery any more. They find it more convenient to go to buy cheap bread at the supermarket. Supermarket chains – or retail networks – buy some of your artisanal loaves at rock-bottom prices, then mark the price up to resell the loaves on a shelf right next to cheap bread. You remove your name from the label to avoid cannibalizing sales at your bakery, but you still get just pennies on the dollar.

Worse still, the breadcrumb industry has exploded. Over just the last few years, the rise of giant rapid-distribution networks has enabled planners to buy tons of breadcrumbs at dramatically lower prices. Breadcrumbs still make up only about 15-20% of the entire bread market, but the growth is rapid, and you feel forced to participate. You sell your day-old bread into this distribution network, and again remove your name from the label, but you can’t even pay for your organic flour with the result.

What’s an artisanal baker – or a premium publisher – to do?

The first step is to understand what kind of bread you have to sell. Unlike most bakers, a surprising number of publishers don’t have a good handle on what they will have to sell next week or next month. Learn which bread is hot at parties these days, and which bread is just good for crumbling up, so you don’t give away the valuable loaves.

Then, pay attention to the best bread. Despite the growth of breadcrumbs, the party planners still want good bread. Most people throwing high-end parties (advertisers) want bread that is perfectly suited to the theme of their party, and different from the bread served at their neighbor’s party. They are willing to pay for it, as long as they can find it and buy it conveniently.

The breadcrumb sellers will try to convince you that their trucks are great for distributing your artisanal loaves, but there are an awful lot of pipes to connect and middlemen to pay. And the planners who buy tons of crumbs often don’t control the budget for buying the loaves too. You need a direct connection to your planners, one that enables them to buy from you easily and quickly, but still gives them your best bread, at a fair price.

Similarly, programmatic buying is changing the digital advertising landscape. But programmatic doesn’t need to commoditize your inventory into a pile of crumbs. Invest in systems that show you how much you have to sell, and what kinds of bread are valuable. You spend a lot of time and energy whether you’re baking bread or building content. Don’t just crumble it up.

What Google Glass is good for

August 12th, 2013

So far, it’s good for a quote in Forbes magazine, which actually pretty good. Here’s the relevant paragraph:

Being able to pull up all kinds of facts in a hurry would make Glass compelling both at work and at play, adds Tom Shields, founder and chief strategy officer at YieldEx, an advertising analytics platform for digital publishers. During a family weekend at Lake Tahoe, Shields says he was delighted when Glass could provide instant answers about which actors and actresses started in famous movies — and annoyed when the Google gadget turned out to be the most slow-witted presence in the room.

I’ve had it for a week or so, and I’d say it’s still more of a party trick than a real product, but that’s why they are calling it a prototype. Sure will be interesting to see what the killer app(s) turn out to be.

A Discussion of Programmatic Direct

July 3rd, 2013

I had a nice conversation with one of Skip Brand’s folks about Programmatic Direct, and they captured it nicely in this post. I’m still beating the drum – along with many others – that RTB is not taking over the world, despite the number of column-inches devoted to it. I got a couple of nice kudos from folks on twitter, including this one:

Let’s Not Expand ‘Programmatic’ To Include Everything

March 1st, 2013

This article originally appeared in AdExchanger

Over the last three months, the word “programmatic” has been featured in the headlines of dozens of articles, and each one seems to use a different definition. This confusion was a central topic this week at a packed Town Hall held at the IAB’s Annual Leadership Meeting. Is programmatic just for RTB, or does it incorporate direct relationships? Does programmatic include guaranteed impressions, or guaranteed CPMs, or both? What emerged was a consensus that “programmatic” is being used to describe at least two completely different things: RTB, and process automation.

Most people think programmatic equals RTB, and despite heroic efforts by Legolas Media’s Ran Cohen and others to redefine programmatic to include non-RTB delivery, nearly everyone still thinks of programmatic and direct delivery as opposites. Scott Spencer at Google defines programmatic in an RTB context: “In programmatic, the buyer gets to determine what inventory they get,” whether the price is directly negotiated (like a private exchange) or an auction. AppNexus’ Andy Atherton points out on his personal blog that this is a one-way guarantee – the seller guarantees to provide impressions, but the buyer doesn’t guarantee to take them.

The confusing part is when people also use “programmatic” to refer to automation and standardization of the operational processes involved in executing a buy. Standard direct-sold buys, the kind that Meredith Levien refers to as “transactional RFPs“, have cried out for execution protocols for nearly a decade. Of course, process automation can apply to negotiated programmatic buys as well, as the fulfillment process is often arduous. One publisher (who shall remain anonymous) recently lamented the effort it took to execute private exchanges, telling me “programmatic buys are the most manual part of our process.”

If programmatic didn’t already have a strong association with RTB, it would be a good term for this, but given that execution process automation can apply to both RTB and direct buys, overloading “programmatic” just adds confusion and slows adoption. I would submit that “automated” is a better word. Automation implies server-to-server connections and operational efficiency, and can be used to execute buys that are either direct (e.g. Automated Direct) or programmatic (e.g. Automated Private Exchange).

Automated Direct and Automated Private Exchanges are both very exciting areas of innovation today, and I look forward to seeing dozens of other articles explaining them in the future. As ad technologies become more sophisticated, we need well-defined terms to cut through the confusion and grow the market for everyone. Let’s not try to expand “programmatic” to include everything, or the term will become as meaningless as “premium” has become. Instead, let’s keep “direct” and when it is automated, call it Automated Direct.

I also got some nice tweets:

Are Ad Sales People Obsolete? No!

February 18th, 2013

Got this question from Adotas, and answered it along with a few other folks. Here’s my answer:

“Ad sales people bring unique value from premium publishers to smart marketers that an algorithm cannot duplicate. The ad sales people know their audiences best, and can craft packages and placements that are more valuable to the marketer than a few cherry-picked impressions. Better yet, marketers can work with sales to take advantage of first party data, both implicit and explicit, that would never be available on an exchange. Algorithms are great for bottom-funnel direct response outcomes, but as long as ads are designed to affect human emotions, we’ll need humans at both publishers and agencies to craft and place them for maximum effect.”

What do you think?

‘Viewable Ads’ and Brand Dollars: We’ve Seen This Movie Before

September 20th, 2012

This article originally appeared in AdExchanger

Ever since my March column addressing viewable impressions, I’ve been tagged as “that anti-viewable impressions guy.” This misses the point. I’m not against viewable impressions. That’s like being against vegetables – they’re probably good for you. What I am against is the idea that if we can just move the standard to viewable impressions, we’ll unlock the flood of brand advertising dollars that are too afraid to move to online.  Thing is, we’ve seen this movie at least twice before.

Here’s what I mean:

Back in the mid to late ’90s, some advertisers started to realize that many impressions and clicks were being created by robots and spiders deployed by huge companies like Excite, Infoseek and Lycos. Industry experts predicted that if we could just make sure every impression was seen by a human, we’d get those brand dollars. Publishers worried that their impression counts and revenues would drop precipitously. With time and effort the industry adopted some standards that mostly solved the problem, but it didn’t unleash the flood of ad dollars.

Then in the early 2000’s, third-party ad servers really started to take off, and discrepancies began to arise. Advertisers started to insist on paying according to their numbers, not the publisher’s counts.  Again, industry experts predicted that using advertiser numbers would unleash brand dollars.  Again, publishers agonized over losing impressions and revenue. Now, the majority of premium ad buys are paid on third-party ad server numbers, and the money flood hasn’t materialized.

Here we are again.  Everyone knows measuring viewability — despite its obvious flaws — is better than just measuring delivery. Industry groups are pushing for it, because it wins elections as a small but marketable success. Publishers are dragging their feet because of the cost to deploy, and potential impact on revenue. Digital agencies see it as a bright shiny object they can use to prove they “get” digital to their clients. For companies in the space, it’s essential to support it – allowing clients to forecast viewability. But in the end, it won’t solve the real problems of brand advertisers online, so it’s more of a distraction than a panacea.

As I stated before, the real challenges we need to solve are laid out in the other four principles of Making Measurement Make Sense: rationalizing measurement across media, understanding online’s contribution to brand building, and generally making it easier to spend big budgets online and get ROI that makes sense. Let’s focus our efforts on these challenges, so we can grow the market to $200 billion for everyone.

Defaults matter

July 11th, 2012

Disclosure: Yieldex is not directly in the interest-based targeting business, although some of our customers are.  Nevertheless, the opinions below are my own, not my employer’s.

A very few people care a lot about online cookies, on both extremes: some our outraged and some think everything’s fine.  And an extremely large percentage of people don’t seem to care much one way or the other.  I don’t think anybody seriously argues with the idea of choice – if you want to make a choice about your privacy, you should be able to.  And I’d argue opting out of interest-based advertising has been made very easy – every major browser allows opt-out and/or has an incognito mode for anonymous browsing.  If you stipulate that the choice exists, then the debate becomes not about choice, but about defaults.

Defaults are really important.

Here’s a real life example from a study by Eric Johnson and Dan Goldstein: In Germany, citizens check a box to opt-in as an organ donor, but in Austria (a very similar country), they check a box to opt-out. The results? In Germany only 12% consent to organ donation, while in Austria nearly 99% do. Defaults in Austria are saving lives – that’s pretty important.

The default for the first 15 years of the Internet has been for browsers to accept third party cookies, which are often used for interest-based advertising.  Apple’s Safari browser was the first to alter that default, and now Microsoft is effectively changing it (by enabling Do Not Track) in Internet Explorer 10.  There is also legislation that has passed in the EU and pending in the US to restrict the use of cookies.  This means there is a very real possibility that the majority of browsers in use in a few years will have the default reversed.  This could have important repercussions, so let’s analyze the pros and cons of changing this default:

On the “change” side, no data can be collected.  A few people are happy, most don’t really care. Ads are less relevant, and less valuable to the advertiser.  Publishers make less money.  New legislation often has unforeseen and usually negative consequences.  And one more thing: we don’t actually know what the internet looks like without third party cookies, so we’re pretty much flying blind.

On the “leave it alone” side, non-personally-identifiable data is collected.  A few people are forced to click an extra time to opt-out.  Most people don’t really care.  Ads are more relevant. Publishers make more money. Does some of that money go into the pockets of corporate fat-cats who then buy yachts?  Yes.  But does the competitive market also provide incentive for reinvesting a good chuck of that money into more and better free content? You bet. This is not a zero-sum game. By the way, no new laws. And we already know it works.

So, let’s recap.

Incognito default:
  • Most people don’t care
  • Sites might require people to opt-in to get content
  • Less relevant ads
  • Less high-quality free content
  • Fewer yachts
  • More legislation, with possible negative consequences
Anonymous data default:
  • Most people don’t care
  • A few people have to click to opt-out
  • More relevant ads
  • More high-quality free content
  • More yachts
  • Less legislation
I believe that the potential downsides of changing these defaults far outweigh the potential danger of privacy violations. Don’t change the defaults.

Some things actually do change

June 10th, 2012

Anyone who has met me knows that one of the most memorable things about me is that I’m 6’7″ tall.  Leading to the most common small-talk question I get: “Do you play basketball?”  For most of my life, the answer has been very simple.  No.  And if I’m feeling particularly vexed, I’ll answer “No, do you play miniature golf?”

When I was in ninth grade, I grew six inches in one year, which resulted in a tall and comically uncoordinated teenager. On the playground, team captains would always pick me first to be on their basketball team, even though I would protest that I was not good at basketball. “You’re tall – just stand there and shoot!” they would say.  Then, about halfway through the game, after I missed my 10th layup, somebody would say “Dude, you suck at basketball!” Needless to say, it didn’t take long before I swore a vow to never play basketball again.  Ever.

This was one of those rash teenage decisions that somehow stuck.  I kept that vow for nearly 30 years. I rowed crew in high school and college, then learned volleyball after I moved to California, but never played basketball again.  Until last year.

Last year, a friend organized a group of dads more as a social experiment than as a sporting event, and the activity was basketball.  I tried to bow out, but was persuaded to join by the fact that a number of the guys had never played basketball before. Much to my surprise, I found I really enjoyed the game.  I was still terrible, but playing with friends – real friends, who would keep passing to me even as I missed shot after shot – made me want to keep trying. I now play with this group as often as I can, about every other week or so, combining great exercise and bonding time. And now I don’t suck at basketball nearly as much.

This experience made me think about what other assumptions I am carrying from 30 years ago (or 20, or even 10 years ago). Ruts come in many different shapes and sizes, and sometimes can be hard to recognize, but they all benefit from regular re-visiting to see if they’re still taking you the direction you want to go.

Now when people ask me if I play basketball, I still answer “not really.”  But now instead reminding me of failure, it makes me think of spending time with friends and learning new things.  Some things actually do change.

Moving to “viewable impressions” isn’t the answer

March 29th, 2012

I am biased, I’ll admit it.  I wrote the first technical impression counting standards for the IAB in 1998.  And I think that trying to move the industry to “viewable impressions” is a bad idea, for three reasons: it won’t make any difference to marketing ROI, it doesn’t help bring dollars online, and it will be expensive and confusing to adopt.

Let’s start with the argument that using “viewable impressions” improves marketing ROI.  Measurement vendors trumpet “CTRs are higher!” for the marketer, while “CPMs will rise!” for the publisher.  Let’s do a little math.  C3 Metrics claims that CTRs are understated by 179% because so many ads aren’t in view.  Wow – CTRs will double!  Except, publishers will charge double the CPM for “viewable impressions”, so the CPC (and ROI) is actually the same.  On the publisher side, Magid Abraham presented to the IAB an example of 35m premium impressions selling at $5 CPM netting $175k to the publisher.  However, only 75% of those are “viewable” according to ComScore, so the eCPM is “actually” $6.67.  Wow – CPMs will rise!  Except that the publisher can only charge that higher CPM (CPV, actually) for “viewable impressions”, so their revenue stays the same.   And somebody has to pay the measurement vendor.  This is progress?

These “increases” may improve the perception of online advertising, but marketers and publishers are smart enough to know they don’t make any real difference.  Yes, the current impression standard is flawed in many ways, but we have over a decade of experience in setting rate cards, negotiating deals, and measuring results with it.  A new standard will have new as-yet-unknown flaws.  More importantly, it means creating new rate cards for CPV, and then redefining CTR (should it be VCTR?) with viewable impression as the denominator, so people don’t compare apples and oranges when looking at historical data.  The cynic in me says that this apples/oranges comparison is the main reason this idea is getting traction, but I can’t imagine anyone I know falling for that.  Other cynical reasons for the excitement may be that many agencies see this new metric as just the ticket to demonstrate to their clients that they “get” digital, and a few technology vendors see this as their path to revenue.  But in my view, this metric just adds another tax in Tolman Geff’s slide of ad ecosystem intermediaries, without creating any real value.

The real challenges we need to solve are laid out in the other 4 principles of Making Measurement Make Sense: rationalizing measurement across media, understanding online’s contribution to brand building, and generally making it easier to spend big budgets online and get ROI that makes sense.  If we can focus our efforts on these challenges, we can get to the $200 billion market we all want to see.

This article originally appeared in AdExchanger.

A Sermon on Cognitive Bias

January 26th, 2012

This is a talk I gave to a group of friends who periodically gather to present TED-style talks. I dressed in a dark suit (uncharacteristic for me) and adopted a solemn demeanor.

Welcome brothers and sisters, to the sermon of the evening. As with many sermons, let us start with a reading from scripture. In this case, my bible is a book called “Thinking Fast And Slow” by Nobel prize winner Daniel Kahneman.

A reading from the book of Daniel: (slightly edited for brevity)

An inconsistency is built into the design of our minds. We want pain to be brief and pleasure to last. But our memory has evolved to represent the most intense moment of an episode of pain or pleasure (the peak) and the feelings when the episode was at its end, but ignores the duration of pain or pleasure. This is called duration neglect, and the peak-end rule.

We designed an experiment using a mild form of torture that I will call the cold-hand situation. Participants are asked to hold their hand up to the wrist in painfully cold water until they are invited to remove it. Each participant endured two cold-hand episodes: The short episode consisted of 60 seconds of immersion in water at 14° Celsius, which is experienced as painfully cold, but not intolerable. The long episode lasted 90 seconds. Its first 60 seconds were identical to the short episode. At the end of the 60 seconds, the experimenter opened a valve that allowed slightly warmer water to flow into the tub. During the additional 30 seconds, the temperature of the water rose by roughly 1°, just enough for most subjects to detect a slight decrease in the intensity of pain.
After the second trial, the participants were given a choice about the third trial. They were told that one of their experiences would be repeated exactly, and were free to choose whether to repeat the experience they had had with their left hand or with their right hand. Of course, half the participants had the short trial with the left hand, half with the right; half had the short trial first, half began with the long, etc. This was a carefully controlled experiment.

Fully 80% of the participants who reported that their pain diminished during the final phase of the longer episode opted to repeat it, thereby declaring themselves willing to suffer 30 seconds of needless pain in the anticipated third trial. If we had asked them, “Would you prefer a 90-second immersion or only the first part of it?” they would certainly have selected the short option. We did not use these words, however, and the subjects did what came naturally: they chose to repeat the episode of which they had the less aversive memory. The subjects knew quite well which of the two exposures was longer—we asked them— but they did not use that knowledge. Rules of memory – the peak-end rule, and duration neglect – determined how much they disliked the two options, which in turn determined their choice.

Now think about this in the context of some of the decisions you have seen at work, at home, in your social life. When your friend decides to manage another product launch, they are remembering that the last product launch was successful, not the fact that they worked with jerks every day for 3 years. People endure tedium in line for hours to get a glimpse of their favorite celebrity, but only remember how exciting the experience was.

So, now that you know about the peak-end rule, and duration neglect, and I’ve given you some examples, you’ll never make these kinds of mistakes again, right? Wrong.

Here’s the real problem: not only are we blind to these cognitive biases, but we are blind to our blindness. We are confident, even when we are wrong. The only way to avoid them is to constantly question our own thinking, would would be impossibly tedious and inefficient.

But here’s the good news: it is easier, and more fun, to recognize other people’s mistakes than our own. The problem here is it is hard to talk about errors in judgement with other people. Most people would naturally respond with rationalization and defensiveness.

So here’s what I am giving you: a name for this cognitive bias, duration neglect. By naming it, we make it easier to recognize and talk about. And instead of being a mistake, it’s more like a medical condition. Gently saying you’re suffering from duration neglect is more like saying you’re suffering from a runny nose, it’s something over which you have no control, and we can work together to mitigate the effects. And hopefully make better decisions.

To come back to the book of Daniel: “My hope is that by giving you the vocabulary to discuss these and the ability to recognize and name them, we can create a community in which we can help each other avoid or at least mitigate these challenges and limit the potential damage.”

Your brain has blind spots, one of these is duration neglect, which can sometimes result in poor decision making. Avoiding these kinds of biases is almost impossible – they are hardwired into your brain. However, you can often see them in others, and with a little humor and humility, you can sometimes help them avoid bad decisions.

So here is the lesson I leave you with: to err is human. To – gently, candidly, humbly – help someone avoid an error, divine.