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Posts Tagged ‘cpc’

It’s fairly obvious that the next “advertising” land-rush is in mobile.  Really, it’s been that way for a solid 5 years.   What’s not yet clear is how the marketplace will develop.   Up until the explosion of iphones and android there hasn’t been enough demand (inventory) to put into a marketplace that supports bidding, yield management and the associated structures.   It’s now time.

A couple of clear distinctions between mobile advertising and other mediums is how much more you know about the user and little real estate (display and attention) you can get from the user.   i.e. the targeting has to be GREAT for this to work en masse.

Here are my thoughts on what the basics of the algorithms would be for a great mobile ad marketplace.

Targeting

Targeting the user isn’t terribly challenging as a great deal of information is available to the advertising engine about a user.   Knowing where someone is and how often they frequent a location and browse certain info reveals pretty much as much as an ad server would need.

Targeting facets:

  • Time of Day
  • Location (lat/long)
  • Demographic (gender, household income, age)
  • Service Provider
  • Phone/Client
  • Connection Speed
  • Segment (business user, soccer mom, etc.)

Yield Management

Targeting only gets you so far.  The most important aspect of “online” advertising isn’t hitting someone right the first go ’round, it’s getting the funnel right.  Can you take someone from initial view/siting/click of an ad through a transaction with the most profit possible?  that is the essential question in advertising.

Yield Management facets:

  • User click history (time of day, location patterns)
  • price per click/action/view
  • advertiser account balance and history
  • Time of Day
  • Location Features (bar district, business, sports complex, etc.)
  • type of advertiser (restaurant, national advertiser, services business, website, application)
  • type of advertisement (offer/coupon, brand ad, registration, etc)

Creative Execution

Beyond getting the math right it’s important to get the creative – the design, content, UI, IA – of an ad correct.  Targeting and yield can only get you so far… if the ad stinks, well, it stinks.  Local ads are of a different type than Super Bowl ads.   What’s good creative in a specific time and location and context isn’t always what wins a CLEO award.

Ad Capabilities:

  • Text only
  • Display
  • Connected to App
  • Click to SMS/private offer
  • Alerts
  • Customized to user info
  • Connected to Inventory Feeds (where it makes sense)

Bidding

To put the above three in play you need some sense of a bidded marketplace – some way for advertisers to compete for real estate.  Generally that was determined, on older local sites, by very basic algorithms involving who pays the most for the top spot within a category and location (e.g. who pays the top cost per click for Restaurant in NYC gets the top spot).

This approach is no longer sufficient.  The market is there to compete for “top spots.”  However, what’s changed is the concept of top spots.  Owning a keyword on a search engine, even if it’s a “local” search engine doesn’t matter that much and isn’t worth bidding on.   What matters now is are you the ad/sponsor/location/brand that pops up/shows up/is presented when the user passes through a particular latitude+longitude?

Amazingly, the world has been here before.  It’s called a billboard.   Very quickly that’s what local advertising online (in mobile apps) becomes –  a competition for a couple of premium “billboards” in navigation and “check in” apps and social networks.

Bidding algorithm will center on figuring out who pays the most, has the most inventory available and converts the most users over time.  You’ll pay more as advertiser if you are further away, don’t spend enough and/or can’t put buts in seats.  Figuring out how to report those metrics back isn’t that hard as more of our systems (e.g. FB Connect and Open Table and pos systems) become tightly coupled.

Recommendations

If you are still buying online ads based on category and general location keywords or IP location you are wasting your money. And if your ads are still “click” based you are wasting your money.  People don’t click on their mobile phones.  They act.

The Algorithm To Rule Them All (…Locally)

To be published soon!

it goes something like (and this is very much not real math):

show_particular_ad? = category_segment_action_history+historical_action_per_impression*(budget_remaining/cost_per_action) is greater than (other ads values in consideration based on basic relevance of lat/long, keyword, category).

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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.

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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.

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This is a pretty useful data dump from Google’s CEO

Economic situation pretty dire. Combination of what we’ve seen does not appear to have a bottom. People are using the Internet more. Obviously will affect online ad market because our systems are so tightly tuned. It will eventually be reflected in CPC, CPM. We are not immune to this. We may be better positioned from ad perspective, but ultimately the real pain felt by companies worldwide will sometime translate to our world

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