The Online Advertising Conundrum — More Metrics, Less Meaning September 11, 2007
Posted by Mark Blei in : Uncategorized , add a commentThe Online Advertising Conundrum — More Metrics, Less Meaning
Posted September 11th, 2007 by Joe Marchese
Last week’s Metrics Insider, by ComScore Chief Research Officer Josh Chasin, does an excellent job of laying out one of the major issues facing online advertising: the lack of measurement standardization. Time and again it has been a topic discussed in this Spin: you can’t build a sustainable, advertising-supported marketplace if you can’t establish a meaningful unified currency for exchange. Trying to build a marketplace without a unified currency is like trying to build a house (the Internet) on a poor foundation (advertising). There are many ways to build the house in the short-term (VC, PE and other sources of non-sustainable capital), but the more you try to expand the house, the more likely it will crumble to the ground due to the weak foundation. And I think we all know how the house in our analogy reacts when faced with poor weather (economy).
And the issue goes beyond just a lack of standardization. The greater issue is that, regardless of efforts to standardize measurements, money (advertisers) is still seeking the wrong metrics!
Let’s take a quick look at the lack of standard metrics first. In our house-building analogy (which I promise to beat into the ground over the course of this article), this lack is analogous to trying to build a foundation when every tool you use gives you a different reading.
It’s not easy to create unanimously accepted standards when there are five people in a room. I am not sure how we have even come this far given the magnitude of self-interest among the many participants interested in defining online measurement standards.
The larger problem for the entire online eco-system, including advertisers, is that standardization of measurement won’t matter if advertisers continue to demand meaningless, and even harmful, metrics. Going back to our housing analogy, building the online advertising marketplace on the “wrong” metrics, is like building our foundation with the wrong materials altogether. Instead of concrete, we’re using silly putty — destined to collapse our house.
I have written before about how creating a market for impressions is corroding the entire Internet eco-system (re: “Advertising’s Role In Crippling The Internet As A Medium”). The basic gist is that if money demands impressions, then online publishers (and ad networks) will do what’s necessary to generate impressions.
The problem is that, unlike with television, the impression is not an efficient proxy for quality online. Television could only generate impressions by providing value to people, thus the impression-based market facilitated a solid foundation for television’s house. Online, there are a number of ways to generate and increase impressions without actually benefiting the people. Worse, most of these unscrupulous methods for achieving impressions make the impressions worthless, or of negative value, to brand advertisers.
So we have a flood of poor quality product in the marketplace, degrading the quality of our foundation and creating a massive misalignment of goals between content viewers and content producers. Even among quality content, not all impressions are worth the same to all advertisers. In the end the advertisers are forced to take an average value of impressions, which accounts for the deceptive methods for generating the metric they demanded and the inability to define which quality impressions will deliver the most value. This average is obviously well below what would be necessary to support quality content producers trying to produce impressions without “cheating,” and so our house crumbles.
For the sake of space we won’t get into the misalignment among advertisers, publishers and consumers created by utilizing clicks as a foundation metric. I will simply refer you to just a few of my favorite examples of the ads currently polluting the Internet seeking clicks: “Win a free _____” “Shave Britney’s Head” “System Error, Click Here.” And those are just the ads themselves; I’m not mentioning the various techniques online content publishers use to “trick” visitors into clicking.
My new favorite saying is, “The goal isn’t to connect brands to impressions, the goal is to connect brands to people.” What’s needed is a new system of measurements based on a true and solid “foundation metric” that actually means something to each advertiser, can’t be faked by publishers, and won’t incentivize the continued pollution of our online eco-system for the people. But how do you measure this? The foundation metric will have to be a proxy for content quality, account for content type and be a measure of volume delivered. Finally, as discussed in the Metrics Insider piece, the foundation metric will have to be standardized for exchange. What are your thoughts on what would be included in a proper “foundation metric”?
Targeting: To What End? July 17, 2007
Posted by Mark Blei in : Uncategorized , add a commentTargeting: To What End?
Posted July 17th, 2007 by Joe Marchese
Statement: Digital media advertising technologies will allow for unprecedented targeting. Question: Targeting of what and to what end? It’s true that these technologies are improving daily in their ability to refine targeting based on context and consumer’s behavioral data, but targeting can only serve to improve advertising’s effectiveness when combined with an advertising plan that fully accounts for the abilities and limitations of targeting technologies. In the end, the key to unlocking targeting’s potential lies in the ability for advertisers to create targeting’s necessary counterpart, relevancy.
To form an advertising plan that fully leverages improving targeting technologies, advertisers must ask a number of questions. The first are: Why am I targeting? What is success? I am fairly certain the only metric that really matters is an advertiser’s ability to sell more products while maintaining margins reflecting that advertiser’s perceived brand premium. The difference in strategy lies in whether advertisers measure success in the short or long run, and/or whether they measure success as simply increasing sales volume or increasing brand equity to increase sales margins and product life cycles. Making these decisions has always affected the execution of offline marketing, yet we consistently fail to apply this type of thinking to digital advertising targeting strategies. By evaluating these goals, digital advertisers can determine if success is measured in views, clicks, online purchases, or some other measure more in line with traditional advertising goals.
Next, in order to evaluate digital media targeting strategies to achieve internally defined measures of success, advertisers must ask: What am I targeting? Targeting the people viewing an advertising opportunity (behavioral and demographic targeting) is very different from targeting the context of the message surrounding an advertising opportunity. Optimizing for targeting people requires creating a personally relevant independent advertising message, as context surrounding the advertisement will likely vary. Whereas, targeting context requires creating a more simple contextually relevant message that can “borrow” the message of the surrounding content to help convey the advertiser’s message.
Ideally advertisers can take a hybrid approach to targeting and utilize both contextual and personalized targeting. However, as advertisers begin to layer on levels of targeting, the two greatest weakness targeting are exposed; lack of scalability with regards to message creation, and lack of advertiser clairvoyance.
Addressing advertiser’s lack of clairvoyance first: How many times have you heard advertisers tell a story about how they thought they knew exactly who their target market was, only to be surprised? Or an advertiser that was convinced that its brand message was X, only to find out that the market perceived its brand message as Y? In short, over-targeting can cause advertisers to miss opportunities in a medium that should be providing marketers with unparalleled feedback on how people actually perceive their brand, and new ways to adjust messaging to capitalize on this dialogue.
The scalability issue of creating relevant messaging as advertisers utilize increasingly refined targeting technology is perhaps the most daunting. Targeting a “market of one” is certainly a great concept, but if you have a product with broad appeal, creating millions of marketing messages can be a bit prohibitive. Even creating 10 to 20 quality messages for a single campaign can be difficult, especially when the most effective campaigns will be reactive to dialogue with consumers echoing their perception of your brand back at you. There are some interesting experimental solutions to this issue such as modular ad creation and dynamic ad display. I personally feel that some form of distributed creative development will play an integral role in solving scalability issues.
Targeting’s real limitation in its current state is that digital media has yet to fully quantify/qualify what is available for targeting. Part of the onus for correcting this lies in the hands of publishers. Publishers must realize that they are not “selling their audience.” We have all had the discussions regarding the death of push advertising, yet publishers are forced to sell in a market that still behaves very much like a broadcast advertising market. Targeting and relevancy unlock the potential for QUALITY publishers (from individuals to professional media producers) to sell so much more than the attention of their audience and advertisers in order to build effective targeting strategies, offering so much more than just a demographic mix. But publishers must do a better job of defining what their true value is to advertisers and help advertisers to create greater relevance to the publisher’s content and audience alike.
Understanding the limitation of not being able to target on the true value of digital media (especially for brand advertisers) can create significant opportunity for those advertisers who can best glue together current targeting technologies to execute on a strategy of tapping undervalued digital advertising opportunities for their brands.
The Digital Media Empire May 22, 2007
Posted by Mark Blei in : Uncategorized , add a commentThe Digital Media Empire
By Joe Marchese The death of print news is inevitable. Even with the timeline still very much in question, news printed on dead trees with ink that will come off on your hands, containing stories you’ll never read, or interesting ones that were restricted by arbitrary print deadlines, already out of date in an age of instantaneous digital information access, sooner or later will go the way of the VHS. So what? If traditional media empires were really only differentiated by their logistical ability to distribute a physical good by a certain time every morning, then FedEx and UPS would have put News Corp. and Time Warner out of business a long time ago. Delivering the news means infinitely more than pushing paper.
The pains currently being experienced by print news media are merely a result of massive economic misalignments as people adopt new methods of consuming news media — while the appropriation of advertising dollars to new news media lags woefully behind. There are two main reasons for this. First, the development of advertising distribution technologies significantly trails news media distribution technologies. It’s not advertising technologies’ fault; even the most creative people need to see what new media distribution and consumption look like before they can invent methods for monetizing the medium. How long was search around before search advertising hit its stride?
The second major pain point for traditional news media outlets is the layer of complexity caused by major media organizations’ dependence on brand advertising and brand advertisers’ reluctance/inability to spend appropriately through new media. Not only are advertising/monetization technologies extremely insufficient to support “media empires” in their current form, but there needs to be a sea change in industry thinking, in the form of an entirely new currency and marketplace for media publishers to extract the full value of their services to people and advertisers.
At a macro level, people having roughly the same consumption demands, and having numerous options for satisfying those demands, should result in marketers continuing to dedicate a similar level of resources to influence people’s consumption choices. This will mean leveraging decades of knowledge developed regarding brand building and brand equity. If the medium providing that influence opportunity is digital, then marketers’ resources (re: dollars) will follow. And if the number of opportunities for delivering brand message through digital media is reduced and/or efficiency in message delivery is increased, then the market price for these opportunities will increase so that total dollars dedicated will remain constant (in the hypothetical “long run”).
The ability for digital media to deliver influence opportunities (what markets have always bought) will rely solely on its ability to provide the same value it always has to the people. The real value-add services provided by a digital media empire will be the same as those provided by a “traditional” media empire: to satiate the need for information while maintaining journalistic integrity. The traditional media organizations have decades of experience doing this. Dow Jones and the New York Times have the organizational DNA necessary to continue to deliver the news, even if it doesn’t mean delivering newspapers.
There will be extremely tough times ahead as traditional media organizations attempt to continue operations while a significant portion of consumer attention shifts to a digital medium that’s only driving a small percentage of revenue. There will be the need to drastically shift operational expense structures. But the only people that can really destroy the true value of today’s news media giants are the shareholders of said giants, by attempting to gut operational budgets to adjust to the short-run monetization capabilities of today’s embryonic digital media economy.
Simply because the market has not figured out the appropriate currency and monetization method for digital distribution of news does not mean that the true societal value of the news organization has suddenly eroded. It just means there is a new storm to weather and climate to adapt to. And the prize for the fortitude and foresight needed to weather, and even take advantage of, the storm is the formation of the first digital media empire.
Advertising’s Role In Crippling The Internet As A Medium May 15, 2007
Posted by Mark Blei in : Uncategorized , add a commentAdvertising’s Role In Crippling The Internet As A Medium
Posted May 15th, 2007 by Joe Marchese
The Internet is one of the great expressions of the free market. For any clearly defined demand, you will see an overwhelming rush to supply. Due to the Internet’s ability to spawn innovative solutions at breakneck speeds, the rush to create supply commonly produces a massive surplus. Due to the reactive nature of the Internet economy to continuously and immediately oversupply any clearly defined demand, advertisers and advertising technologies have played, and continue to play, a defining role in crippling the Internet by creating demand for impressions.
It’s generally agreed that the impression is dead — yet I haven’t seen it really going anywhere recently. Even when talking to some of the most progressive thinkers in the space, any conversation around Internet advertising quickly reaches the question “So what’s my eCPM?” While anyone with common sense can tell that the impression is a virtually meaningless metric, there is nothing else for comparison across media. The problem is that the market for impressions in digital media has caused a fundamental misalignment of goals between advertisers and publishers.
The ever-increasing association between advertisers and the content they advertise on introduces significant challenges to advertisers in the digital generation. One of the greatest of those challenges is the need to completely reevaluate the quantitative method for determining the role the surrounding content plays in determining the value of delivering an advertising message.
For most forms of “traditional” media, the best way to generate impressions is to create high-quality, engaging content appropriate for mass audiences (which commonly means brand-safe content). Unfortunately, there are many ways to create impressions that have nothing to do with quality content and engaging experiences. As a matter of fact, rather than spend the time and effort to create quality content, it is commonly cheaper to engineer pages, perform click arbitrage, SEO Web sites, spam emails and generally trick people to generate more impressions, clicks, leads etc. This results in a significant portion of the Internet consisting of content unfit for brand advertising and providing little or no benefit to users.
Even when a brand manager can buy the influence he needs through a quality medium, the eCPM will appear horrid compared to the volume of impressions many of the ad networks can provide. The marketplace for impressions places quality content producers in the unenviable position of competing with click farms and low-quality impression inventory, incenting even quality content producers to play the games that will increase impression volume at the expense of the user’s experience.
Even when comparing opportunities in quality digital content, the impression is practically meaningless, because even two pieces of quality content don’t necessarily offer the same brand lift to any given advertiser. This is because the advertisements are in the content, rather than between the content. The need for content relevance demands that the advertiser, at least in part, leverage the context of the content to build a brand message. The result of this is that an impression within content X may be worth one amount to Advertiser 1, and a very different amount to Advertiser 2. The impression is woefully inadequate for accounting for this.
Impressions have their role in the next generation of advertising metrics, but as a component. I would argue that any meaningful metric will account for volume of impressions, quality of content and alignment of content with brand advertiser goals. Combining these variables will create the demand market for influence needed to correctly align publishers’ and advertisers’ goals. We must unlock digital media’s potential as a brand advertising medium in order to support and sustain the development and distribution of media in a digital world, but first we must determine how we will measure what we are unlocking.
What elements do you feel need to be included in digital media’s new measurement metrics?
News Corp’s Nightmare Scenario: Achieving ‘Never-Ending Friending’ May 1, 2007
Posted by Mark Blei in : Uncategorized , add a commentNews Corp’s Nightmare Scenario: Achieving ‘Never-Ending Friending’
Posted May 1st, 2007 by Joe Marchese
We have all been told, “Be careful what you wish for.” One wonders if this truism shouldn’t bear careful consideration by News Corp, given its current monetization ambitions through brands achieving “Never-Ending Friending.” This study, commissioned in part by MySpace, focuses on the pervasiveness of social networks in the everyday life of the digital generation and includes case studies of recent successful branding efforts inside the MySpace ecosystem.
While this report may accurately reflect individual successes in social marketing methods, the mass adoption of these methods and, more important, the subsequent mass “gaming” of the marketing methods outlined by this report, will destroy the most valuable social media property of the digital generation. Through the commercialization of the MySpace community, a platform with a lifetime’s worth of $100s of billions more than the short-term financial gain from the “friending” monetization method could be broken forever.
There is a critical point at which the commercialization of any medium erodes the value of that medium for consumers. The point is this: If tomorrow every advertiser began creating profiles within MySpace in parallel with coordinated promotions and friending efforts, the balance of the MySpace ecosystem would shift considerably, likely resulting in stunting MySpace’s real growth, and disenfranchising its current population.
Already there is a shift of “real” members of the MySpace community to set their profiles private to avoid “fake” profiles, spamming messages and comments. Imagine the coming SNMO (Social Network Marketing Optimization) industry’s efforts to yell over the clutter. Getting bulletins from one brand about sales is “cool”; getting bulletins about sales from 50 brands is suffocating. People may perceive brands as friends, but brands just can’t be good friends to all of us (I hope your friends aren’t bottom-line focused). The relationship between brands and people is symbiotic, but brands are not people, and therefore lack a pretty significant requirement by most definitions of friendship. But this won’t stop brands from trying to be our friends in social media 1.0.
The rush is already on. The study’s assessment by Marketing Evolution’s Rex Briggs of the meaningful return on marketing for Adidas and EA was right on target. It is very reasonable, however, to believe that any high-attention medium with relatively low professional marketing competition would provide significant returns on marketing efforts. How will returns compare when there is greater competition for brand friending within social media? How will this competition affect MySpace’s ecosystem?
It is the very attributes that made MySpace an overwhelming force in digital society that now threaten the social network’s future as it pushes towards monetization. The self-serve nature of digital platforms means advertisers can “experiment” with digital media with the same speed and volume as people adopting social networks. Google’s self-serve platform allowed for hundreds of thousands of advertisers by tapping into the long tail of direct marketing. Social networks not only will, but must, do the same for brand marketers to sustain themselves. Joe’s Fish Shack would love to brand itself. As would the hottest club in Las Vegas, and local retailers…
The problem with hundreds of thousands of advertisers entering MySpace as friends in an unstructured manner is that it will compromise the user experience and significantly under-monetize on MySpace’s true value. Brands will continue to extract the most valuable influence at rates far below those that influence market value (potentially even receiving the influence for free), and the social network “black hat” marketers, in combination with the avalanche of the well intentioned marketers, will continue to erode the value of the medium to the MySpace community.
Google handled the volume of advertisers by first deciding what the rules of relevancy would be for advertisers utilizing its system. Next, there was some level of self-regulation by advertisers because erroneous keyword bidding had a financial cost to advertisers, so it was in their best interest to improve marketing effectiveness. Despite its meteoric rise, Google started with baby steps in advertising, careful not to interrupt user experience and clearly notating to users what was advertising. Finally, Google had the benefit of a uniform metric for measuring effectiveness of performance: the click. No matter how relevant you were, you paid a market price for your click.
For social media to leverage brand monetization as effectively as search leveraged direct response monetization, social media needs to determine its set of rules for relevancy, create a marketplace for auctioning its influence, and separate brands from friends so that the social media user community can do the same. All of the above requirements will first require a different type of participation by the social media publishers (aka the social network member).
Finally, measurement of return on branding efforts within social media will not, and should not, be measured in standard performance metrics. Rather, measurement and buying will be in terms of influence delivered. What advertisers and agencies are able to do to attract and leverage that social media influence will be their competitive advantage (this how we look at what Rex refers to as the “momentum effect”).
Where I’m in lockstep with the “Never-Ending Friending” report is in agreeing that the potential value of branding through social media is unparalleled in other mediums.
Web 2.0: Where's The Business Model? April 17, 2007
Posted by Mark Blei in : Uncategorized , add a commentTuesday, April 17, 2007
Web 2.0: Where’s The Business Model?
By Joe Marchese
You can measure the rate of change in an industry by the number of conferences held to address key issues and discuss innovative solutions. In turn you can discern the amount of money at stake by the conference pricing and volume of conference attendance. By these, or any other measurements, Web 2.0 is at the zenith of a rollercoaster ride and VCs have made sure to stuff the cars with cash.
I am at the Web 2.0 Expo in San Francisco this week in a never-ending, and seemingly futile, attempt to keep pace with change. Regardless of the futility of keeping up with all the news, there is inherent value to at least attempting to take it all in and drink from the fire hose. The human mind is an amazing piece of machinery, and you know what you’ll get when you give it the right fuel. I do my best to maintain a regular helping of RSS feeds, media news clipping services, conferences and conversations. Most important by far are the conversations with other individuals passionate and knowledgeable about a given space, where one’s mind can most easily draw complex insights and create “knowledge mash-ups” between the areas of expertise and focus.
I am always surprised at the parallels you can draw between two very different businesses’ approaches to Web 2.0. — specifically, how understanding the technical issues of building online communities can help create improved business and monetization models. To this end, I was shocked by how few advertisers at OMMA had a significant presence at Web 2.0 — and how few of the great technology companies at Web 2.0 I saw at OMMA.
It’s as if every business here has declared that advertising will someday be its main revenue stream, but it’s not a central component of what they are doing today. Don’t get me wrong; by all means develop product functionality solely to create value for the user — but if advertising will have to be part of that value to be accepted in a Web 2.0 world, why is that something you put off worrying about till later?
Pretty much everyone will agree that we are not selling eyeballs anymore. Even the page view seems to be on its last legs. Yet 2.0 businesses and valuations continue to be built with a “If you build it, they will come” mentality. “It” being traffic and/or user base, and “they” being advertisers and their checkbooks. But solving the issue of advertising in Web 2.0, or any social media, has to be more than an afterthought, because like the Web 2.0 products and services themselves, advertising solutions are going to require education, experimentation and iteration to deploy. This means, if you have created just the right balance and eco-system you are looking for in your Web 2.0 community without any advertising, and only later attempt to introduce any sort of significant revenue-generating advertising, you’ve greatly increased your risk. Also, making changes to accommodate an advertising revenue stream that would have been easy early on is cumbersome and costly at later stages (indecently, this is the time when the greatest pressure will be applied to begin revenue generation due to increased expenses).
I think the biggest issues come with the following statement: “We don’t want to force advertising on our users yet because we are at a very sensitive time in our growth.” A couple of points. First, you will never be able to force advertising on your users to a degree that will generate any significant revenue going forward. Second, if you haven’t yet begun to think of how introducing advertising can enhance the experience of your user base at this “sensitive” point in growing your community, than you have the wrong mindset for what advertising needs to be, and you are not building for a complete solution. For VCs, this should be an especially salient point. On the advertiser side, if you are waiting for Web 2.0 companies to reach critical mass in volume and reach before you can be bothered, than you are missing all of the same opportunities — and most advertisers have more at stake than a $1 million dollar seed round. It’s only going to get harder, and the integration and creation of valuable, experience-enhancing advertising opportunities will be missed entirely and end up being presented as more of the same old ineffective banner ad inventory. The only way to avoid this is to collaborate.
