Feeds:
Posts
Comments

Posts Tagged ‘advertising’

I recently watched the PBS documentary, art and copy. it’s a feature about advertising focusing mostly on the big agencies and agency personalities. absolutely fascinating. partly because these are big personalities but mostly because the campaigns featured are ones almost all of us know well and probably love.

there’s a stat at the end… 186000 employees at ad agencies worldwide. 26000 agencies. but 4 holding companies produce 80% of the advertising spend.

what that implies there just isn’t that much advertising that gets big, mass consumer popularity (and likely nor does the products behind the advertising).

so the questions for me:

is most advertising unappealing? just noise?

do people only have so much attention to give? the populace can’t support more than a few campaigns getting big?

are most folks in advertising biz just not very good?

is the ad biz really about unglamorous, small campaigns that work for small companies?

is the old ad model going to last? more and more big brands didn’t need an agency and an ad budget at all to go big (google, facebook, twitter, crocs…)

when should a biz use a big traditional campaign?

I don’t question whether a well capitalized, well executed branding campaign works. they do. I think it’s hard to get all the right things to make it happen and only those with the deepest pockets, best products and most aggressive teams will ever have a shot.

I think that’s why other advertising approaches are more appropriate for most businesses and growing in spend online advertising, for the most part, isn’t artful. it’s math. it’s about getting frequency and follow up and flow just right. science based advertising works better for the majority of products and services where there’s little differentiation or brand value between competitors. price and location (at time of purchase) are the keys, not artful impact.

also worth noting is that the current context in which online is viewed doesn’t lend itself well to bigger more potent messages like tv or radio. I think some of that has to do with the fact that tv and radio are more passive consumption around visuals and sound of people rather than text about the world. and tv and radio are usually consumed with others generating more shared experiences. the built in fragmented personalization of the web means known of us ever have the same basic experience.

I’ve worked on a lot of online campaigns that tried to do the big budget big branding thing. no shortage of good ideas and mostly good execution. the consumers just never respond.

there are no best way to do it.

one thing I think the folks in the documentary have in common with the successful math based online advertisers and agencies is a willingness to try and be wrong. too many folks think there’s a best way to do it and that you can know that a priori. you can’t.

as one of the agency celebrates. fail harder.

Read Full Post »

Facebook’s new releases and plans were the talk of the week In the tech industry (by the way, not the only industry that matters!). Probably for good reason. Facebook’s size and growth is very impressive and the service is obviously very useful to millions of people. However I’m not ready to proclaim them the most important tech business or even a fundamental component to the web.

Facebook is a collection of many existing ideas packaged better than anyone else has been able to do it. Even the new LIKE button is basically digg done in a friendly way. And yes it’s useful but not entirely life changing. Will it be as important as the hyperlink? Some ask that… I have no idea how to answer that but without hyperlinks the “like” thing and social web doesn’t work. So by that fact I’m inclined to say no.

Is analyzing the social graph for information a better approach than page rank based web search to help people get to the information they want? Not really, just different. Fb gives us new ways to find things but that doesn’t mean it displaces other methods. Last I checked Email, Im, web search, texting were still growing…

Is facebook as a single sign on service significant enough to be a can’t do without piece of the infrastructure? Not yet. If it were somehow to get into the enterprise and be integrated fundamentally into operating systems, then yes. I’m not sure for security reasons that fb can make that happen.

Forget all the technical discussion about fb, it’s the business model that ultimate limits fb. Its revenue model is dependent on advertising. There’s nothing in the history of advertising based businesses that suggests that fb can escape the limits of that model. Google is by far the most successful advertising based business ever created. Its growth is slowing and probably will top out at 50 billion in revenue. There simply isn’t enough advertising spend in the market to sustain growth passed that. New competitors and options constantly pull at ad budgets and keep the advertising world forever fragmented. (this is a highly simplified explanation but directionally correct).

Google has indicated the truth of this logic by launching into office software, mobile phones, cloud computing and other transactional / sell a good or service to a customer type businesses. Google recognized a long time ago that an ad only business was just not going to move them far into the future. Recently In the tech world apple has shown that their are billions more dollars that are more quickly earned by actually selling stuff to people.

So at some point fb will face a similar situation. Is everything fb is building setting itself up to one day be able to actually sell something to customers or will it forever rent eyeballs, clicks and likes? Fb’s one billion in revenue is awesome for a company so young. It will grow for the next 15 years… That sounds impressive… But it really isn’t that far into the future… And the next major advertising competition is probably already up and running…

Read Full Post »

Nice write up from my friend, Florent, about Foursquare API being used to create location heatmaps. This is precisely the location behavior data I was talking about in my post the other day.

You see in his heatmap I know where he works, where he hangs out and where he lives… and when he goes between all that.   What’s great is you don’t actually need a lot of check ins and you don’t need someone to use one app or another.  There’s enough location data flowing around through facebook, twitter, myspace, flickr, foursquare, yelp, email accounts, etc. etc. for ad networks and ad providers like Apple, Google, Microsoft to build the location mapping for you.

Once you have a users location map it’s pretty obvious how you want to target ads to them by day part, ad type, etc.

This isn’t all that surprising, is it?   The surprising part to me is that we didn’t really need every user in the world to be tracked by some big brother entity, some central GPS tracker.   The way of the Internet (loosely coupled/linked services) provides all the information, perhaps more, than we need to build better targeting algos.

I suspect more and more user will opt in to ambient location pinging if it means they get more relevant, less distracting content and advertising.

The key in making a successful ad network on all this data/targeting is building up the marketplace such that bidding happens based on Latitude/Long and day parting, not keywords.  Most of the infrastructure for bidding systems now is largely keyword based.

Oh, and… location based bidding systems won’t be strictly about pushing ads to your mobile device.  It will include digital out of home displays like billboards, signage, etc. etc.   (My friend Lane was trying to get a bidding system in place for that a couple of years ago!)

Read Full Post »

Update 3/29/09: Danny Sullivan correctly pointed out to me that he is a publisher and an advertiser.  I’ll disagree on the idea that he is a “real user”, by which I meant “regular user”, because he is not nor I am.  We study websites, traffic and human behavior – we notice and ignore and react to things very differently than a user just flying by to get the latest news and views.  I do agree with Danny that my argument mostly matches his… thus, I’m only calling out Clemons argument.

Update 3/28/09: Techcrunch keeps stirring this up.  Now Danny Sullivan replies…

The most damaging part of both of their arguments is that neither one is arguing Clemons original argument and rebuttal mostly fail to convince his claims about the death of Internet Advertising.  He’s conclusions don’t match actual data and experience from the perspectives of an advertiser, a publisher nor really a regular user.

These points are not defensible without real data:

Users don’t trust ads
Users don’t want to view ads
Users don’t need ads
Ads cannot be the sole source of funding for the internet
Ad revenue will diminish because of brutal competition brought on by an oversupply of inventory, and it will be replaced in many instances by micropayments and subscription payments for content.
There are numerous other business models that will work on the net, that will be tried, and that will succeed.

In fact, let’s consider some counter examples:

Someone sold 4 million Snuggies based on ads.  Did the people who responded to those ads not trust the ads?  Their behavior shows they did enough to fork over $15 bucks for a blanket with holes in it.  The better statement is some users don’t trust some ads.

Users do want to view ads.  Millions of people love superbowl ads and actually seek them out online and on their TIVOs.  Online only ads that people do want to view include the millions of mini games they play, youtube videos they watch, contests they enter.  A better statement is that some users to want to view some ads, especially when the ads are not engaging, useful or catchy.

Users do need ads.  Search engines and social graphs can only show you information about things that are already popular/reached tipping point.  They cannot show you stuff just coming out of the labs.  Users need ads to learn about new and different products and services.  And the only way to introduce people to new things is put new things alongside already known things.

Ads are not the sole source of funding for the internet. Anyone who is claiming this is what web companies think clearly has not really studied the industry or worked at a web company and/or companies that extensively use the web in their business models.

Ad revenue will continue to grow in the long run.  As long as businesses need to sell more product, more ad revenue will go into the market.  The difference is that the ad spend is spread among more and more entities, so individual businesses will get less ad revenue.

Many other business models already work. and more will be created.  Selling apps, selling computer time, renting server space, selling subscriptions, donor models, barters, licensing, premium access…. I mean, gosh.  I don’t think we lack for business models that work.  The media is simply pointing to the high profile failures of big media companies that haven’t figured out to how to shoehorn it’s model into the internet way of doing things.

Once again we see that pundits rarely represent the real story.  They don’t know the price of milk. Just talking to people in the industry and summarizing the conversation is not enough to predict the end of online advertising.

See below for rest of my original response.

—————

Despite the impressive length,  a recent TechCrunch guest feature on the failure of internet advertising fails to reveal what’s really destroying the ad model online.  Clemons neither states what he claims is actually failing and doesn’t really prove it is. Alas, I will still attempt to refute the possible implications of his claim.

It is not a particularly insightful observation that “The problem is not the medium, the problem is the message, and the fact that it is not trusted, not wanted, and not needed”. Of course people don’t like being distracted with ad messages.  That’s always been the case, that’s why marketers have to pay for ad placement.  Nothing new here.

Advertising itself is not broken nor will ever go away.  As long as companies have products they need to push into market, they have to advertise, regardless of nature of the medium.  Play with the language and state definitions all you want – advertising will always be a part of our lives and media experiences.

What’s wrong with the business models of sites that rely on advertising is the pricing, not the actual idea of advertising.  Spending in terms of dollars is down in all mediums, certainly.  However, the amount of advertising we’re exposed to is likely still growing.   I have a long post on all sorts of data points on this topic here.  The short of it:  marketers have a growing number  advertising impressions out there, everyone know’s how well they perform and thus the pricing is coming way down from the relatively overpriced “older” advertising models in print, radio and tv.  This shrinking pricing model puts pressure on the business from a margin standpoint and so the less efficient businesses fail.

Yes, I generally hate banner, text, billboard ads and neon signs like everyone else. Except when I don’t.  And when I don’t that’s valuable to the company that paid for that placement and it’s valuable to me to be notified of something I might have missed.  We’re just arguing price.

Read Full Post »

Failure to understand how users and money flow through the Internet costs media and etailers a lot of money every day.  There are huge misconceptions about where the “value” actually lives for user data, advertising performance and profit margins on all this high tech.

The following figures attempt to disambiguate some of the confusion.  The summarized conclusions come from a variety of data sources and real life experiences analyzing financial statements, traffic reports, advertiser analysis and experimentation.  Specifically one could get someone exact figures by combining comScore, Quantcast, Compete, Google Analytics, TNS, @Plan, SEC Filings, internal reports, revenue statements and DART forecasting as I have done several times.

This post is meant to be a demonstration of the core concepts, not a statistical treatise on the topic.

If you hate reading too much, skip to the end for a somewhat realistic example of how traffic flows.

Traffic on the Internet roughly splits 7 segments.  (as shown in the figures below).  These segments are defined by where the sit in the user experience by amount of consumptive behavior (clicks, reading, sharing, watching). How the user gets from segment to segment is not completely linear in actuality, but when you coagulate a users behavior you’ll roughly see a funnel in terms of time spent, pageviews and ad impressions.

Traffic Funnel

Traffic Funnel

The segments can be characterized also by their ad performance, ad targeting (how specific is the user in their activity), and their audience coverage (how much of the particular audience segment does a type of site/service reach)

Funnel Traffic Segments

Funnel Traffic Segments

Each segment has a different cost profile.  Here I look at labor costs to maintain and capital expenses to build and power.

Where's the Cost?

Where's the Cost?

As you can guess, each traffic segment has a different profit profile too.  This is largely the result of combining the advertising/revenue performance with the cost profile.  Certain Internet services simply do not have a strong profit opportunity because they borrow old models and/or cost more than the market is willing to pay. (Perhaps that will stabilize one day, but I think software tools and low cost hardware disrupt the demand curve A LOT because users can often supply their own demands once the cost gets too high, hence why TOOLS are the most profitable segment.)

Profit Margins by Segment

Profit Margins by Segment

Make no mistake about what I’m presenting here.  The profit online is all in retailing, portals/search and tools/utilities.  The stuff in the middle of the funnel is highly susceptible to competitive displacement and has very little intellectual property protection.  You can verify this conclusion by reviewing revenue statements and SEC filings for the big tech and internet companies.

The advent of citizen journalism and self publishing flattened the media market.  Owning a printing press was once “high tech” and a capital investment barrier.  Owning the right location on the main street was once a logistical barrier.  High speed computers and difficult programming languages was once a technical barrier.  Those 3 feature are gone.  Media is now, well, almost purely a creative barrier.  There’s a huge pool of creative talent constantly struggling against each other.  Creativity is worth a lot once it rises above everything else.  That happens so rarely to make it a bad investment.  Every minute more and more people enter the creative market (how many blog posts per hour? how many videos go up each day?… a lot.)

organizing, sifting, filtering, distributing, aggregating… that’s the sweet spot.  There is a technical hurdle, but the investment is worth it as there will never be less of a need to filter, sift, find, distribute.

This week we had a beautiful illustration of these concepts with the Presdential Inauguration.

Most of the US users watched the Inauguration, most on TV, a lot with online video streams and 2 million in person.  During and Immediately following the inauguration the Internet lit up with content creation and massive usage.  The portals and search engines featured as many new links and breaking stories to the news coverage.

The social networks shot pictures, tweets and status updates around, occassionally referencing links to the confirmation gaff, benediction speech text, and satelite pictures from DC.

Micro bloggers summarized everything as fast as they could, while the search engines and utilities sucked in that content.  The original content creators probably released a previously composed story and put that live.

Mainstream users shut down their video streams and took to the portals and search engine, seeking more info on what just happened or insight into a specific moment.  Most times they ended up at CNN or NYTimes.  Many times, but less frequently, they hit a blog that had some recent content.  Most users probably ran into a wikipedia reference link or youtube video.

Some users ended up on amazon to buy Obama’s books or some inauguration swag.  Finally as the day concluded and original content creators finally had enough time to craft something, users might find themselves falling asleep to a good OpEd on the history of the day or an interview with the Michelle Obama dress designers.

By 3 days later the amount of content available on the inauguration is 1000x greater than within the first 10 minutes.  Original content creators are hopelessly buried amongst the blog posts, tweets, continuosly AP feed CNN articles and YouTube embeds.  The bloggers are buried by other bloggers.  The news stories give way to other news stories.

The utilities that sort, sift, filter and monetize on it all just got a 1000x better experience and continue to catch the huge volume of user investigation and digging.  The own the head, the trunk and that dreaded long tail and collect user targeting data all along the way.

Read Full Post »

Look, folks, there’s no such thing as privacy. Not on the internet, not in your home, not at work.

As long as you are connected, in any way, to others, you are tracked and counted and watched. It’s not always big brother. it’s not always a mean corporation. Sometimes it’s your friends, your family or your happy coworker. Our technology and lifestyle makes it so.

Consider:

  • Your IM lets people know when you are at your desk
  • Caller ID tells people when you called and how frequently
  • Your credit card statement shows your buying behavior
  • Your TIVO reports back your viewing habits
  • XBOX live reports your playing time and online and what you are doing to your friends
  • Your WII sends MIIs out without your help
  • Your gas meters show when you get cold
  • GPS and Imagery satellites are mapping your house right now
  • You didn’t respond to that State Farm mailer, they just added you to the send again with different message list
  • You didn’t show up to the hair salon, so their appointment system just sent a reminder
  • and so on.

Our environment is one giant data collecting and processing monster. There’s no avoiding leaving your data around.

Perhaps one can make the case that by “privacy” we’re usually referring to the motivation behind what we do. Our intentions, our goals. Let me explain. There’s really nothing interesting about the facts above until you consider their context. Perhaps mapping your house with image satilites is bad for you because you run a meth lab that is obvious from above shots. Perhaps the amount you log on to XBOX is bad because you should be at school. When you missed your hair appointment you were out with someone who was not your spouse.

I think that’s the concern for most of us in regards to privacy. We don’t want to be tracked and put within context. We don’t want others to see what, when and why we behave.

This is my first topic on this blog because of some of the press Ask.com got yesterday. This really is not an important development for the world or for their business. It seems like a solid attack on Google’s dominance, but it’s really not.

First – there’s no such thing as privacy. Even if Ask erases the search history, their ad server, their tracking tags, Quantcast, Alexa, Yahoo Toolbar, Google Toolbar, MS Vista, etc. is still watching those urls, those queries.

Second – most people get over the tracking thing if the utility of the service is great. Examples abound. Few mind, to the point of revolt or service cancellation, that blackberry scans all your email, or gmail matches ads to the content of your message, your IMs are tracked 3 or 4 times, you call logs are mined… and we’re not even going to get into social networking, resume sites and all the more obviously NOT PRIVATE AT ALL services. Ask.com is attacking Google on a non issue for most users. Google search works better than Ask. Its spiders are better, its results are better, its cooler and your friends use it.

Third – Ask.com will shoot itself in the foot on this. Now that they claim to erase data if someone finds some they are busted. Worse, all these non-annoying ads are based on the fact that they are matched to you. I know, I know we all hate ads, but really hate them less if they are somewhat relevant in content and presentation to our own lives. Think about the commercials you love or hate – chances are the ones you love have some natural tie to you.

Let me bring this around full circle. If you want privacy, ask for less of it. Make sure everyone – every company, every politician, every doctor, every teacher, every net user has their data out there for everyone to see. If all activities are transparent there can be little abuse of data, for it would be easy to see who is abusing. This is the most basic of reinforcers. if everyone knows they are being watched, they will tend to follow the groups behavior. If everyone is answerable to everyone else, we get some bit of equilibrium. Watch the watchers.

I have no illusions about whether this is possible. However, we are more likely to get more transparency than we are to get more privacy. We’re never going to have less data collection. We’re never going to have fewer connected devices. We’re never going to have fewer advertising impressions.

We may not like the idea, but a lot of sure do like connectedness and personalization. Usually when we cry foul on privacy, it’s due to something else not working how we like.

~ Russ

Read Full Post »