Oxyfish

The doom-and-gloom set have been getting a lot of press lately, and the conventional wisdom seems to be that display advertising will die off in favor of performance-based marketing. But don’t write the obituary yet. There’s an interesting new study from MarketingSherpa and ad:tech that surveys 1200 marketers and concludes that most actually plan to increase display ad spending in 2009. From the report summary:

The greatest shift in budgets is for behaviorally targeted ads. About one out of five marketers (21%) are cutting their budget while more than half (52%) are investing more money. Slightly more than 30% of the respondents said that behaviorally targeted ads were providing a great ROI, as noted in the first chart.

Surprisingly, 46% of marketers reported that they are increasing spending on rich media ads, despite the fact that more marketers reported that they deliver a poor ROI (27%) than a great ROI (23%), as noted in the second chart.

Traditional online ads will get more spending from 29% of marketers. That tops the 24% who said they’re cutting budgets in this area. This is surprising as well since about 1 out of 3 respondents (34%) said banner ads deliver a poor ROI and only 13% said they were great.

Perhaps the branding effect of the ads, while not directly attributable to revenue, is seen as vital. Almost half of marketers (47%) are holding steady in this category.

Surprisingly, this seems to suggest that marketers are not exactly running away from traditional online ads, but instead could actually be increasing their spend, particularly for rich media. And behaviorally targeted ads are typically display ads too, just targeted at audiences instead of content. So while performance-based advertising is very important to every marketer’s mix, let’s not lose sight of the fact display advertising, in various forms, is critical too.

We won! Out of nearly 1000 startups who applied, we won!

This is a great validation of our fantastic technical team. We have been chosen as one of the most innovative users of Amazon’s cloud computing technology. We could not have done this without your hard work. Thank you!

This was a great experience for us. The Amazon team was very professional throughout, the event was well-managed, and they even made a cool video featuring our development team. The press release went out tonight, and there was even a blog post that beat mine.

Here’s the blow-by-blow, for those who want all the details:

We pitched the panel of judges, all senior execs of Amazon, at 1pm. They had 50min presentations from each of the seven finalists, and had been going since 7am. We did our standard pitch, and did a great job talking about how important AWS is to us. They seemed to appreciate the presentation, but were somewhat poker faced, so while we felt we did a good job, it was hard to tell their reaction.

Later in the afternoon, we had a “VC speed-dating” event, where we had 10 minutes with each of 5 VCs. The firms were all first-rate (BlueRun, Hummer Winblad, Madrona, Greylock, and CMEA). Our product is pretty complex, so it’s hard to get across in 10 minutes, but we did our best, and each of the VCs seemed to get it quickly enough. All were interested in following up, but again, hard to tell how we ranked.

Then there was a reception while the judges and the VCs deliberated. They had invited 200 other startup people to come hear how the seven finalists were using AWS. My guess is closer to a hundred people were in the room, and we had to do another 10 minute presentation on AWS, with slides, to this group. We managed to do it in only 5-6 minutes and get our message across. Finally, around 9pm, it was time to announce the winner. We were jubilant when they picked us – I let out a shout of joy and a fist pump, to the delight of the audience.

Andy Jassy, the SVP of AWS said some nice words and gave us the traditional golden hammer. We were then invited to take a whack at an old rackmount server they had, to symbolize the destruction of our own servers. John and I both hammered it pretty hard, but we barely dented it – those steel frames are tough.

Then everyone came up to congratulate us, and we shook hands with big grins on our faces. We took a couple of pictures, approved the quote in the press release, and talked with the Amazon folks some more. All great stuff.

Finally, we headed out for a celebratory dinner. Once again, thanks to everyone in the company for your hard work – we did the talking, but we could not have done this without all of you.

Hooray!

We were delighted to learn yesterday that Yieldex was selected as a finalist in the Amazon AWS Startup Challenge. Seven companies were selected out of probably 100′s that applied (apparently 900 applied last year, don’t know how many applied this year). We even got a TechCrunch mention – can’t wait to see what that does to our web site traffic. For the record, our web site is intentionally vague – we didn’t want to really launch the company until we had a few customers up and running – and we’re getting close.

We view this as a great validation of our sophisticated technology for solving the complex and difficult problem of maximizing the value of premium inventory for large web sites. By using cutting-edge software that takes advantage of the unique capabilities of the cloud, coupled with our patented engine, we are able to tackle these challenges that have resisted commercial solutions for a decade or more. Congratulations to our development team – they deserve this!

Analytics have long been an important part of content management, with companies like Omniture and Quantcast building nice businesses helping media sites understand how people are finding and using their sites. In contrast, the analytics focused on the revenue side of the business, particularly the display advertising, are surprisingly primitive.

One big reason for this is how much data is thrown away. Take DoubleClick DART for Publishers (DFP), for example. If you are a DFP user, you have access to some very basic information, like delivery count for each ad yesterday. But if you want to know which zones of your site a run-of-site ad was delivered on, you’re out of luck, they don’t keep that around. If you want that kind of data, you need to turn on “data transfer” and analyze the logs yourself, which despite their protestations of “it’s your data”, is an extra cost service (more on that below). And here’s a little-known fact about DoubleClick’s data transfer: it still doesn’t give you all the data. The DFP ad server strips out any publisher-specific tag attributes that aren’t used to target an ad. So, if you have your site divided into categories, with a key-value in the tag specifying the category, even with the detailed logs you still have no idea what categories a run-of-site ad was run on. They do have a workaround: duplicate your entire tag into a new parameter “u=”, with a new set of delimiters, and then you can re-parse it on the other side. In summary: re-tag your entire site, to get back “your data” that you are paying them to give you. The other ad servers are not much better.

If you ask your ad serving provider for the raw logs, they will claim that this is a lot of data, so they need to charge you for storage, bandwidth, etc. Let’s take a look at cost for a minute. If you are a pretty large site, you might generate 10GB of logs a day. For a reasonable comp, let’s look at what it would cost to use Amazon S3 for this service. 10GB of data transfer each day is $1/day to get it in, and $1.70/day to get it back out. To store it for 30 days would be $1.50. So, about $150/mo to move and keep 30 days of data, at the top end, with a healthy margin for Amazon. Remember that you pay extra to Amazon for the flexibility of scaling up and down easily, a dedicated hosting center would almost certainly be cheaper. So, if your ad serving provider is charging you much more than that (one DoubleClick customer I know was quoted $3500/mo for about 100MB of data per day, they negotiated it down but are still paying way too much), you should push back. Memo to ad server companies: storage is a lot cheaper than it was 10 years ago.

Ad sales and operations groups are starting to realize that they need detailed analytics to do their jobs. The first step of that is good underlying data, and getting that is way too hard. This needs to change.

In a previous post I made reference to the lack of technology available to publishers to increase the value of their premium inventory, which in many cases makes up 80+% of their total revenue, even though it is often a much smaller percentage of their total impressions.  One of the main ways to make it more valuable to brand advertisers is to give them a more targeted audience, and charge higher CPMs because of the increased efficiency to the advertiser.  Many publishers are reluctant to do this, however, for two reasons: either the don’t have the data, or their afraid that targeting will fragment their inventory.  They know that without good inventory tools, inventory fragementation could result in lower overall revenue.

There are a number of ways to collect and target on better data: behavioral targeting, user registration, and data exchanges are just a few examples. And, there are a number of companies like Tacoda or NextAction that can help provide data that advertisers will pay more for.

The second reason above, fragmentation, hasn’t gotten as much attention.  Brand advertisers want a targeted audience with broad reach, so publishers end up building broad products that take inventory from many different parts of their site.  While it’s clear that selling Moms for $20 CPM is better than selling my Entertainment section (which overlaps by 50%) for $15, if I’m also stealing inventory from my $25 CPM Travel section, that’s not a good thing.  This kind of data can be highly complex, and quickly outstrips an ad operations team’s spreadsheet skills.  The industry is just beginning to deliver the tools that publishers need to really take advantage of better data to generate more revenue, and Yieldex is at the forefront.

There have been a flurry of great blog posts lately about how broken brand advertising is online, mostly because we are trying to measure it the wrong way. My own contribution to this effort notes that click through rates are the “hammer” of online advertising, and when all you have is a hammer, well, you know the rest.

Dave Morgan has a recent one about vertical publishers, where he talks about brand advertisers:

Major brand advertisers are starting to take online very, very seriously; just look at the announcement earlier this week that General Motors plans to shift 50% of its ad spend online within three years. Just look at all of the pioneering online ad work done recently by big offline brands like Coca-Cola, Pepsi, Snapple and P&G. These brands are now making online a big part of their overall marketing programs, and they are not just focused on direct-marketing objectives. No, while performance objectives will always be a big part of the online ad ecosystem, more and more marketers are looking to online ads to help drive consumer perception objectives. Yes, they are using online to drive brand-oriented objectives like awareness, favorability and purchase intent.

He then says “the portals and major online ad platforms are probably not going to be the ones selling it [ad space]“, but that vertical networks will fill the void.

John Battelle wrote on a similar topic, pointing out how technology is winning over talent in the brand wars – and this is not a good thing. He asks:

Do we sell inventory to the highest bidder via algorithms, automated processes, and platforms? Or do partner with marketers and creators of media to build brands – both media brands, and consumer marketing brands?

He then goes on to assert that the obsession with chasing Google has led the likes of Microsoft, Yahoo, and AOL to ignore their strength in brand building.

Cory Treffiletti wrote a good one, too, asking when we are going to stop using clicks as a primary measure? He has a good description of the difference between direct response and brand advertising:

Fundamentally all advertising exists to do one thing: increase sales and/or market share. If the goal is to generate an immediate response, meaning the acquisition of information or a customer in a single session generated via a click, then we can consider that to be a direct response effort. If the goal is to drive an increase in sales, market share or customers over a longer period of time (basically anything beyond that initial single session) we should likely consider that to be a branding campaign, or what is most typically now referred to as a brand response effort.

He then goes on to detail why click-through rates are not necessarily a good proxy for brand campaign success.

Finally, Eric Picard has an excellent interview with Jeff Einstein, where Jeff says:

We’ve been obsessed with our own ability to measure performance (regardless of the metric) since day one online. Our obsession with efficiency and scale all but eliminates the quality of the message from the consideration set, largely because quality is much more difficult to measure and formulize. We can tinker all we want with metrics and formats, but as long as we remain fixated on efficiency and scale as the keys to the kingdom, performance will continue to decline.

I couldn’t agree more. Reminds me of trying to use standardized testing to measure everything kids are supposed to learn in elementary school. Sure, it’s okay for basic math and reading, but our kids aren’t learning how to learn, because we only “teach to the test”. Brand advertising (and teaching) still requires a generous helping of creativity and talent.

UPDATE: Another great blog post by David Koretz asks if increasing CTR can actually hurt your brand:

If an advertiser’s goal is truly branding, then driving clicks by annoying the user is a horrible approach. Not only will it detract from the user experience, but it will also damage the very brand it was intending to build.

Well worth reading.

Brand advertising on the web is suffering from a major problem: too much measurability. To be more specific, too much measurability of the wrong things.

Click-through rates were the first measure of online ad effectiveness, and seemed like the holy grail of ad measurement. Finally, advertisers could figure out which half of their ad dollars were wasted. I think the first well-known demonstration of the shortcomings of CTR as a measurement was the MCI “Shop Naked” ad back in 1996. The ad had tremendous click-through, but nobody actually bought anything.

This spurred innovation in measuring conversions. For direct marketers, measuring conversions really is the holy grail, becuase you can immediately understand if your ad is generating more margin than it is costing. The problem is, both of these metrics, CTR and conversion rate, are direct reponse metrics.

Brand advertisers typically have very different campaign objectives. Does Coca-Cola expect you to click through and buy a Diet Coke? Does P&G expect you to click through and buy some Tide? Of course not, but these campaigns are being force-fit into having direct-reponse objectives, because that’s what we can measure immediately on the web.

Campaign objectives for brand advertisers typically include affecting a customer’s attitude and propensity to buy, their liklihood to recommend to a friend, and simple brand awareness. CTRs and conversion rates are not good proxies for these objectives. Measuring the effectiveness of campaigns on the internet probably requires the same old-fashioned techniques as measuring the effectiveness of TV or radio ads: panels, questionnaires, and close analysis of the effect on local sales.

I say “probably” because there are always new measurements on the internet, and some may turn out to be good proxies for brand objectives. Look at some of the innovations that are coming along now: brand engagement metrics with widgets, for example, or some of the video ads that VideoEgg and others are touting. However, those have yet to really prove their effectiveness relative to the real campaign objectives (witness the number of games where the players can’t name the brand that sponsored them). And, they don’t typically have the reach that brand advertisers need to make meaningful buys.

What is particularly effective for brand advertisers on the web is their ability to target. While Oprah may be a pretty good proxy for Moms on TV, on the web it’s possible for Minute Maid to target exclusively Moms. And instead of limiting their reach to content that is aimed at Moms, they can use behavioral targeting and other techniques to find Moms wherever they are on a network of sites. This can make brand buys on the internet much more efficient, assuming they can measure them appropriately.

Another effective brand advertising technique that only the internet really offers is frequency capping. Most publishers and ad networks can offer frequency caps that allow a brand advertiser’s message to reach their audience an optimal number of times, without burning them out. We all have had the experience of seeing the same TV ad so many times you actually change the channel – with the internet, that doesn’t have to happen.

Brand advertisers need to start to embrace online advertising for what it can offer, targeting and frequency capping, and stop trying to use direct response metrics to measure their campaign effectiveness. When all you have is a hammer, everything starts to look like a nail. Click-through rates are the hammer of online advertising, and brand advertisers are getting nailed by them.

I’ve been talking to a lot of publishers recently, and I’ve gotten some very consistent feedback: a relatively small percentage of their impressions often make up a disproportionate percentage of their revenue. This is not news, it’s a classic 80/20 rule (although the numbers may differ – some are 90/10!). And every publisher knows what inventory I’m talking about: it’s perennialliy sold out, and the sales guys are all fighting over who gets to sell it next month. Here’s a slide illustrating what I’m talking about:

Now this is oversimplified, but typically this “premium” or even “super-premium” inventory is sold to brand advertisers. Deals can be time-based sponsorships (typically with impression guarantees) or guaranteed-impression buys at relatively high CPMs. The remaining inventory is generally either sold on a CPA/CPC basis, at much lower eCPMs, or sent to a remnant network or ad exchange for a low CPM or revenue share.

What is interesting about this from an industry level is the amount of time and energy the industry has spent on optimizing the value of the 80% of the impressions that are not premium, and by comparison how little progress has been made on increasing the value of the inventory that makes up the majority of the revenue. Performance-based ad networks have sprung up everywhere, and ad serving providers like DoubleClick have products that are focused on increasing click-through rates, and therefore revenues, from performance-based ads. But these only help turn your $0.25 CPMs into $0.50 CPMs, they don’t do anything for your $10 CPM premium inventory.

The reason is not hard to guess: performance ads, because they are directly measurable, are much easier to optimize. Lots of people have had roughly the same idea: if I crunch enough data, I can more accurately predict who is likely to click on which ads, and therefore I can get more revenue out of less inventory.

Brand advertising is much less amenable to optimization in this same way, because click-through rates aren’t typically a good proxy for brand campaign objectives (look for a future post on this topic). To get more out of your premium inventory, you have to either make it more valuable to the advertisers, by adding more data and targeting more tightly, or you need to utilize it better, so you waste less through fragmentation and inaccurate allocation. Yieldex is focused on providing tools that help publishers maximize the value of their premium inventory, which is the 20% of the inventory that results in 80% of the revenue.

I’m looking for a product manager to own defining the features and functionality of our product. Here’s the spec, please let me know if you know anyone. Thanks!

Senior Director of Product Management

Brand advertising dollars are skyrocketing on the internet, and publisher traffic growth is not keeping up, creating a pressing need for optimization tools that give publishers the inventory control required to capture these ad dollars. Yieldex is a venture-funded startup with patent-pending optimization algorithms, built by some of the folks who invented the first online ad systems at NetGravity and Matchlogic.

Our next key hire is a product person, someone who knows the ad operations side from inside and out, and can make sure the product we build has the “wow” features that deliver huge value to our customers, without neglecting the required functionality that customers need. Ideally this person has worked at a publisher or ad network between ad sales and the ad technology group, and knows both how the sales process works, and what existing systems are currently capable of. This position could be Senior Product Manager, Director or even VP level, but we need a doer, not a manager. This person will be gathering feedback from customers, writing functional specs, and working with the engineers on a daily basis to refine the product for the market. Key attributes are the smarts to integrate lots of complex input, the ability to work with both customers and engineers, and the organizational skill to make sure nothing falls through the cracks. Actual product management experience is a plus, but not a requirement.

The engineering team is located in Boulder, CO, and the business team is in San Mateo, CA. This position could be either location, but would require some travel between them, and in particular would need to spend time with the engineers in Boulder. There would also be travel to customers.

Please contact jobs at yieldex.com to apply. Thank you.

It’s clear to me now that I’ve always had an engineer’s disdain for sales people. After all, how hard can it be? Our great product practically sells itself. As a CTO, the sales calls I went on were all easy and almost fun. My job was to talk up the features and functionality of the product, and wow the customer with how smart we were and how great the architecture was at solving the problem they had. No problem. How little I knew about the constant follow-up, the customer requests, the research and preparation and effort that went into understanding an account well enough to close a million-dollar sale. Now that I’m the head sales guy, I’m learning the hard way. My only hope is that I’ve started to understand how little I actually know, and I’m getting much better at asking for advice and coaching.

I had a classic sales situation the other day: a champion at a top prospect who loved our product, and the next step was to vet it with the technology folks. We set up a conference call for two weeks out. Then it was rescheduled for two more weeks out. Then they sent an Outlook appointment update – not even the courtesy of an email or a phone call – to reschedule again for over two months later. Then our champion left. Poof – no more top prospect. Of course, as an entrepreneur we never say die, and I’m back in there trying to make progress, but this is the startup roller-coaster.