Tuesday, October 30, 2007

Interactive Advertising, Innovation, and the American Dream

Today and tomorrow, the U.S. Federal Trade Commission is hosting a Town Hall entitled “Ehavioral Advertising: Tracking, Targeting, and Technology.” The FTC describes the event bringing together "consumer advocates, industry representatives, technology experts, and academics to address consumer protection issues raised by the practice of tracking consumers’ activities online to target advertising - or 'behavioral advertising.'" The Interactive Advertising Bureau sought and received permission to present our point-of-view about the centrality of interactive advertising to American competitiveness and to the diversity of voices available on the Web. The IAB will live blog from the hearings today and tomorrow at www.iab.net and www.randallrothenberg.com. What follows is the testimony I just delivered.

Good morning. On behalf of the Interactive Advertising Bureau, the trade association for advertising-supported interactive media in the United States, I thank the commission and its staff for the opportunity to participate in this important Town Hall discussion regarding online-behavioral advertising.

The IAB’s 350 member companies represent the present and the future of marketing and media in the United States. Among our members are the burgeoning new media brands that have entered American consciousness during the past decade, companies such as Google, Yahoo, AOL, MSN, and CNET. There are the major media companies that have made two-way communications a significant component of their offerings, from The New York Times to NBC Universal to Condé Nast to CNN. There are smaller, successful information companies serving market niches, such as Cars.com and WebMD. And there are platform specialists in areas such as digital video, online games, and social networking, with names like Brightcove, Wild Tangent, and Facebook.

Historians undoubtedly will look back on this period as the most dynamic and innovative in the history of American business. Central to this dynamism has been the promise of advertising support. A question before all of us today is: What is the best policy framework to maximize such innovation and competition, in order to produce the best products, services, and diversity for consumers?

Prudence and Self-Regulation

There is a clear answer, supported by copious evidence dating back at least to October 1994 – the date the Netscape Navigator Web browser was released, initiating the Interactive Era: The unprecedented proliferation of goods, services, and information diversity that characterize the Internet has been generated within a framework of industry self-regulation and market forces. It is incumbent on the business community to ensure that Interactive advertising, marketing, and data-use practices are responsible. At the same time, Government must be prudent in ensuring that no regulation is drawn that would curtail interactive advertising’s potential to continue to support this extraordinary pattern of innovation and consumer benefit.

Advertising is the economic foundation underlying the dynamism of the Interactive Era. With interactive media, it’s become a commonplace that marketing spend – one of the last redoubts of imprecision in American business – is becoming more accountable and more productive. This is possible because of the availability of mathematical and technological tools that enable the analysis of non-personally-identifiable data to detect patterns in peoples’ interests and consumption habits, and to allow the matching of advertisements to their needs. Other analytics tools allow for predictive modeling based on the responses to these well-targeted ads, enabling the development of even better-targeted ads. All of these advancements ultimately work to the benefit of consumers. They not only receive advertisements more relevant to and productive for them; they receive more and better free content and services online.

Because these advertising processes are largely automated, they are taking costs out of and improving the results from advertising. In addition, because the Internet allows the seamless aggregation of thousands of Web sites into online advertising networks, marketers can reach consumers in volumes that rival, even surpass, the audiences of broadcast television. Yet they can do this with a precision that no previous medium can match.

In such ways are interactive media contributing to the productivity revolution that is driving American competitiveness in the 21st Century. For such reasons, interactive advertising spend in the U.S. this year likely will reach $20 billion, according to research by the IAB and PriceWaterhouseCoopers. That is nearly one-third the amount marketers spend on television – and a sum reached a mere 13 years after this medium’s invention.

Fabric of Communities

This revolution is reaching deep into the fabric of communities across the nation. Today, all of us, quite literally, own a press – and much, much more. The Internet has torn down barriers to entry in both content creation and distribution. It is now possible for an individual to publish a national “magazine,” even program a global television network, with the applications that come built into his or her laptop computer. Never has speech been more open, available and varied. As of July 2006, some 12 million American adults – about 8% of the American population – were publishing their own blogs, which were being read by 57 million others, according to the Pew Internet & American Life Project.

If any of the commissioners or commission staff want a tutorial on how to create your own national media outlet, the IAB would be glad to provide it – if you’ll promise in return to join the IAB once you begin to sell advertising!

For you most assuredly can use advertising, and build a business on the Web based on little more than your brain, passion, and energy. According to Pew, 32 million American adults have used online classified ads for selling or buying, and 35 million American adults have participated in an online auction. eBay, the best known auction site, says more than 768,000 small businesses across the U.S. use this online marketplace as their primary or secondary marketing channel. More than 1.3 million people supplement their income by selling materials on eBay.

Millions of other people are making their livings creating and operating media venues that house well-targeted advertisements. The 24/7 Real Media online advertising network partners with 950+ websites in six countries. Tacoda numbers more than 4,000 websites in its online ad network, which reach 122 million unique visitors per month. Advertising.com, another online ad network composed of thousands of small sites, has more than 150 million unique visitors in the U.S. each month.

These sites are the Mom & Pop grocery stores of the World Wide Web: Just as the local retailer anchors a geographic community, so these sites anchor communities of interest that span towns, cities, states, even nations. They do this with their content – and they finance their content through advertising.

Tim Carter's Story

Let me give you one example of just how small and just how successful these businesses can be: Tim Carter, the proprietor of Askthebuilder.com. Tim is a 55-year-old man with a wife and three children who lives in Cincinnati, Ohio. Askthebuilder.com lives on the computer screens of anyone anywhere who is interested in building a house, renovating a kitchen, or re-doing a bathroom.

Tim’s Web site is deep and rich – unsurprising, because, until about 15 years ago, he’d spent his life as a contractor, actually doing the work he writes about. He was darn good at it, too: In 1993, Remodeling magazine named him one of the top 50 remodelers in the nation.

Then disaster struck, in the form of three clients from hell. He’d battled the scourge of lowball contractors, the wear and tear on his body, only to be stiffed by his customers. He told his wife, Kathy, that he’d reached his limit, and wanted out. She suggested he take a book idea he’d had about home repair and renovation, and turn it into a newspaper column.

Tim is an energetic fellow. In short order, he’d persuaded the Cincinnati Enquirer to run a column by him. Within nine months, he self-syndicated his column to 30 other newspapers around the country. He quickly discovered that writing wouldn’t make him rich – his average take was $8.00 per thousand-word column.

But even though there was a Christmas or two when they didn’t exchange gifts, and evenings when dinner was Japanese ramen-in-a-cup, Tim Carter didn’t give up. “I was convinced that long term, it would work,” he told me a few weeks ago. He knew he was touching people: Certain topics – on deck sealing, for example – would draw as many as 1,000 letters in a week.

In 1995, Tim saw the Internet for the first time. “Instantly,” he said, “I knew I was going to be a publisher.” He taught himself rudimentary HTML programming. No longer constrained by newspaper schedules, he began writing like the Dickens – Charles Dickens, to be exact. He started hanging out at a local computer users forum, and an entrepreneurs forum, seeking to become better as a Web publisher.

In 2004, a member of his entrepreneurs group told him about Google’s Adsense Network. Like the ad networks run by Yahoo, Microsoft, AOL, and many other companies, Adsense is a collection of websites on which Google places well-targeted advertising – like the ads that run on the right side of the Google search-results page, but in this case, placed contextually on sites themselves. As Google describes it, “Google AdSense matches ads to your site's content, and you earn money whenever your visitors click on them.”

The colleague who told Tim Carter about Adsense strongly suggested that Tim log onto Google and sign up. “With your content,” this fellow entrepreneur told him, “you could easily make $500 a day.” This certainly piqued Tim’s interest: In his best year as a builder, he’d earned $80,000.

But the fellow was wrong -- by half. When I met Tim Carter in late 2005, Askthebuilder.com was finishing its first year as part of an online advertising network. Tim was to make $350,000 that year.

Here’s how large Tim Carter’s editorial staff is: One person, himself. With that staff of one, Askthebuilder.com draws more than 31,000 unique visitors a day. Here’s how large Tim’s sales staff is: Zero. Managing that nonexistent sales staff is Tim’s chief financial officer: his wife, Kathy. Now that online video advertising is evolving from promise to reality, he has a video editor working for him a few hours a week. As his online advertising tools have progressed, the benefits have similarly accrued to the visitors on Tim’s site, as they now enjoy richer, more educational content.

Tim Carter is the American dream. But he is not alone. Hundreds of thousands, perhaps millions of others, are supporting themselves and their families – and, in turn, aiding a burgeoning entrepreneurial economy in the United States – using interactive advertising. They are creating niche media on which well-targeted advertisements serve as bridges between niche marketers and niche audiences.

The revenues from these ads, in turn, support benefits to American consumers that are without parallel in number, quality, and availability. According to numbers released by the companies themselves, Google, Yahoo, and MSN together provide 500 million email accountsfor free. The research firm comScore reports that more than 200 million Americans age 15 or older conduct search-engine searches each month – for free. Also each month, some 20 million people search the top three online job-listings sites – Monster, Hotjobs, and CareerBuilderfor free. Just one of those sites, Monster.com, has 41 million resumes posted on it by job-seekers – for free.

Yet, as we all know, these services aren’t really free. Most of them are premised on the ability of the digital publisher, giant incumbent media companies and individual entrepreneurs alike, to sell advertising – to link marketers and consumers in a relationship of mutual interest, mutual advantage, and mutual satisfaction.

For those who want to understand the future of the media, I have one piece of advice: Go to Askthebuilder.com and see what Tim Carter did with his brain, energy, and passion – and with a global marketplace and a set of automated advertising tools. This is not the interactive future. This is the interactive present.

Monday, October 22, 2007

New York Time Misses Real News: Measurement Discrepancies Will Be Resolved

As a former newspaperman, I’m sensitive to complaints that “you missed the story.” But today’s New York Times article on audience measurement discrepancies in interactive advertising did skirt by some of the more important developments in our industry during the past year.

The most significant development: The major audience measurement companies are now working with the IAB to get to the bottom of discrepancies, and we are committed to working together to identify, implement, and educate the marketing and media industries on best and emerging practices in audience measurement.

I’m not a Polyanna – these matters can be very complex, and (let’s face it) disputes between media companies and audience measurement firms are as old as audience measurement itself. But I am confident that, as an industry, we are on our way to reducing measurement discrepancies as an issue.

Discrepancies Matter

I don’t want to dump on The Times story – if you think it’s so easy to summarize a history of the world in 750 words, try it someday. (Then try it five days a week, as some of us had to do in our youth.) But today’s piece did read like a rehash of the complaints and counter-complaints we’ve been hearing and voicing for years: The counts offered by comScore and Nielsen//Netratings differ from publishers’ counts by 30-40-50%... The comScore and Nielsen counts differ from each other… Cogent explanations for the differences can’t be easily had… People at work are undersampled… High-income Web users are undersampled

For my taste, there was too much emphasis in the piece on at-work populations, and not enough notice of other populations that are chronically undersampled in audience research, notably ethnic and racial minorities and young men. And there was no notice of one of the ways current audience measurement techniques subvert a primary promise of the Web: the ability to match niche buyers and niche sellers through the perfect media vehicle. Hundreds of thousands, perhaps millions, of small media sites – the Mom & Pop grocery stores of the Web – likely don’t show up in samples because of their audience size or traffic patterns, thereby robbing advertisers and agencies of potentially valuable matchmaking knowledge (but building a business case for the ad networks and search engines which do deliver ads to and eyeballs from such sites).

IAB’s Historic Summit

These complaints had been festering in the interactive industry for years, but they had resisted resolution. Why? My guess is that publishers, measurement firms, and interactive agencies were too busy inventing a new civilization to take the time to perfect that civilization’s culture. When you’re spending all your time building mud huts and foraging for food, it’s a bit hard to worry about table manners.

But as the funds flow into interactive media began to increase strikingly, the impact of these discrepancies on publishers’ sales, pricing, and competitiveness was taking an ever-larger toll. The IAB’s management and board determined it was time to act, and to act aggressively. Last April, we issued an open letter to comScore and Nielsen//Netratings. We sought two things: a “summit meeting” at which we could agree together on a process by which we could resolve discrepancies; and agreement by these vitally important companies to undergo third-party audits and accreditation of their processes.

That story has been well-covered elsewhere (although alas, not by The Times) so I won’t repeat it. (For a full history and continued updates, go here on the IAB Web site.) What never got covered were the opening remarks I made in kicking of that historic summit in May. To the assembled comScore and Nielsen executives, I said, “Your companies are among the heroes of the interactive marketing and media ecosystem. Starting years ago, and continuing through some very dark days, you took risks based on strong beliefs about where our industries are heading. Because you took those risks, you have built vital, important companies. You are important because you are excellent. You are excellent because you practice superior science, lead superior operations, and deliver superior service. And your strength is our strength. We thank you for the work you’ve done to build interactive media.”

But, noting the persistence of the measurement discrepancies amid the transformation of interactive media into major components in marketing plans, I added, “This transformation requires us to find new ways to collaborate. Yes, there will always be tensions among buyers, seller, and intermediaries. And yes, let us be fierce competitors within our individual industries for revenues and share. But let us also do what our various industries have long done, to greater or lesser degrees: work together to serve our customers and delight our consumers at the same time.”

Audits Are Happening

The important points are these: comScore and Nielsen DID join the summit meeting, along with representatives of the AAAA, ANA, MPA, OPA, ARF, and executives from numerous agencies, publishers, and marketers. And the two companies DID agree to undergo audits and accreditation supervised by the Media Rating Council. And the two companies ARE now undergoing these audits – indeed, they will increasingly compete against each other on the basis of the quality of their numbers, and of the insights that can be derived from these numbers.

The audience measurement companies, in turn, had their requests of the IAB. They need agreed-upon standards against which they can measure, particularly definitions of unique visitors, page views and time spent. We agreed to intensify our Audience Measurement Committees’ efforts to derive those standards. We also agreed that we would work to understand more concretely the impact of cookie deletion, international traffic, spiders and bots and other potential factors in audience-size discrepancies.

(By the way, one of our summit meeting conclusions appears to have gotten lost in the shuffle. While IAB and the measurement firms disagree on the significance of cookie deletion as a systematic factor in measurement discrepancies, we all agreed that more rapid and frequent reporting on site traffic would certainly minimize whatever significance it has. Thus we concluded that a system of “overnight” ratings, similar to television’s overnights, would buttress the current system that emphasizes average monthly visitors – a somewhat jejune construct, anyway, in the interactive space. I still would like to see movement in this direction.)

We also agreed that IAB would lead a market-education campaign on the frontiers of audience research. I’m happy to report that our launch is only a month away. On November 29, IAB inaugurates its Audience Measurement Leadership Forum. comScore and Nielsen will be presenting – as will Quantcast, M:Metrics, Visible Measures, Millward Brown, CNET, Conde Nast, CNN, and many other thought leaders and practice leaders from the research, media, and marketing industries. (Might I suggest booking soon? There are fewer than 300 spaces, and as you might expect, it’s been filling up fast.)

Quest for Insights

Without minimizing the painful financial impact measurement discrepancies have today on many interactive publishers, in a very real sense audience measurement is a side show. The main tent is called Insights, and in it are three rings: Transparency, Accountability, and Predictability -- what’s happening, what did happen, and what will happen. Our goal must be – as we said in our May summit meeting – to achieve “convergent validity.”

“Convergent validity” is a phrase coined by Peter Daboll, Yahoo!’s chief of insights and head of global market research, and a former president of comScore’s Media Metrix division. It emphasizes finding the best data sources for different ends, and bringing them together to create a mosaic of the audience, its needs and desires, and its consumption patterns that is richer and more useful than the thousand snapshots we currently assay separately.

Put another way, server logs and panel-based measurement are far more valuable together than they are apart. Server logs – a census counting technique – may be exact, and they should help agency media planners assemble a crank, but they cannot provide us and our advertisers crucial information we need about audience composition. Panels may never, by definition, be exact, but they can provide textural detail of immense value. Bringing these and other techniques together will get us closer to the real insights our customers want.

This is the path we’re now on. I wish The Times had that story. But who needs The Times when you’ve got the Clog?

Sunday, October 14, 2007

Al Gore: Saving Television (and the Earth)

He might not win another Nobel Peace Prize for it and it doesn’t rank with protecting the earth from global warming, but Al Gore may go down in history as the man who saved television advertising.

In fact, as various cultural and technological phenomena come together – social networking, user-generated content, the convergence of Internet and television devices, and marketers’ need to reach audiences in the face of fragmentation – the former Vice President may be remembered as the man who saved television itself.

A day after the Nobel committee announced its selection of Mr. Gore as co-recipient of this year’s peace prize, the former Democratic politician appeared as a central presenter at the Association of National Advertisers annual “Masters of Marketing” conference at the Arizona Biltmore near Phoenix. Mr. Gore has been a ubiquitous presence on the media and marketing conference circuit during the past several years. Most of the time, he has used the platforms to promote to these influential audiences his research and views on the dangers of climate change – the subject of his Academy Award-winning documentary An Inconvenient Truth. Indeed, just two days before his ANA appearance, he took the stage at the Google Zeitgeist conference in Mountain View, CA, to continue his campaign to influence the influencers on environmental degradation.

But at ANA, his subject was, fittingly, advertising – and how to advance it. “The fact is,” he told an audience of some 1,200 marketing, media, and agency executives, “the old format of television advertising is being questioned. A citizenry empowered with TiVo and remote controls and Internet access has called into question how long the traditional television model will deliver the service you marketers want it to perform for you.”

He made a pitch for his own cable TV network, Current TV, and the interactive properties built around. But unlike many sales pitches at this and other conferences, his resonated with a large chunk of the crowd. “We believe our model allows you, your companies, and your brands to become a part of their conversation,” Mr. Gore said.

Spots Still Prevail

The ex-Veep couldn’t have picked a better moment to address that audience. For the entire previous day, the marketers had heard speaker after speaker talk about the importance of inviting their consumers to co-create their brands with them. They heard marketing chiefs from across industries declare yet again that the era of one-way communication is dead, that advertising is now a conversation, that they had no choice but to harness interactive social media to their companies’ causes, that they had to stand for something to stand out in the cacophony of cultural conversations taking place through the Web.

For the many who had come to Phoenix from the Google conference, it was déjà vu all over again. For those who had attended IAB’s MIXX Conference in September, it was as if Jiminy Cricket was riding their shoulders whispering the same message repeatedly in their ears.

Yet in each of the ANA case study presentations, the dominant format – the overwhelmingly dominant format – deployed to illustrate the “new rules” of advertising was the 30-second television spot. The audience cooed at the emotional commercials and chuckled at the funny ones. But it was difficult to spot the breakthrough format advances in anything other than the conversation.

It was hard to avoid the conclusion that the marketers were merely talking the talk, or, worse, acting pathologically – doing the same thing over and over again in the insane belief that it would somehow yield a different outcome.

The persistence of the one-way, 30-second spot format isn’t really surprising. A $65 billion industry, employing hundreds of thousands of people, has been built around it in the U.S.. It’s not only what so many of us know how to do; it’s what we know how to react to. At the conference, I ran into Andrew Susman, CEO of Studio One Networks, the creator and syndicator of online and off-line multimedia content, and asked him how he explained the dissonance between the calls for change and the dearth of examples. Since I was carrying a new “Flip Camera,” a lightweight, palm-sized device that can record an hour of video on its flash drive, I captured his answer.

Marketers and agencies aren’t ignoring the disjunction between desire and action. During Google’s Zeitgeist conference and the ANA meeting, I heard no message more insistent from the agency and marketing execs than “help us change.” Hundreds of people packed the auditorium and a subsequent luncheon discussion of the joint IAB-AAAA-ANA-Booz Allen “Marketing-Media Ecosystem 2010” study, which is all about driving change across the value chain. And several signed up on the spot for the IAB’s “Interactive Boot Camp for Senior Marketers,” which we announced at the ANA meeting.

The Veep’s V-CAM

But among presenters, Al Gore was one of the few who offered an actual innovative path to try change in real-time – “a way of relating the Internet to television,” he said, that is more than “television sliced and diced and spit out onto the Internet,” which is how he characterized the current state of online video advertising.

Current TV is entirely premised on user-generated content, some of it socially uplifting, as befits its political provenance, and some of it purely entertaining. It’s a video aggregation site whose secret weapon is active editing and collaborative filtering.

And that’s the innovation behind its V-CAM’s – the Viewer Created Ad Messages. Yes, they are user-generated advertisements, just like those lured in (to great incumbent media attention) by Dorito’s and dozens of other brands over the past two years. But Current TV doesn’t program its V-CAM’s as high-profile one-offs. Rather, they’re built into the fabric of its Web site and its cable network, as much a part of the contextual dynamic as the user-generated documentaries. Moreover, they are constructed according to briefs drawn up by the marketers and, in many cases, their agencies. Current even provides graphic and bumper material to assure the spots are brand-compliant.

And its V-CAM’s are “socially filtered,” as Mr. Gore put it, “by real live human beings,” before being put online for judging by the community of viewers. This assures their marketer friendliness. Although the former Veep says the network has yet to receive a negative ad for any of V-CAM advertisers (a roster that includes Toyota, L’Oreal, Mountain Dew, and several others), he made a cogent case that marketers harm themselves more by that fearfulness than they ever would be by their openness. “It’s not as if it’s completely safe to continue with the cluttered model we currently have, with all the consumer resistance built into it,” he told ANA President and CEO Bob Liodice during the question-and-answer period.

For much of the past two years, I’ve been seeing increasing evidence that active editing and programming are meeting social media in a new blend, one that provides protection for nervous advertisers while still allowing the power of conversational media to cut through the clutter of the Web and the interactive television “dial.” Current TV seems one more bit of support. Mr. Gore says his company’s research shows that viewers prefer V-CAM ads to traditional spots by a 9 to 1 margin.

Audience Laughter

The ANA audience seemed to provide additional support. They cooed and oohed at the lovely, animated Toyota Prius V-CAM, and erupted in laughter over a clever T-Mobile V-CAM. A L’Oreal for Men V-CAM even received the kind of spontaneous applause usually reserved for Crispin Porter Bogusky television spots. True, agencies could look at the V-CAM approach as yet another threat to their existing business models. But from the professionalism of some of the work, it seems more like a recruiting tool for the next generation of creative talent.

ANA President Liodice asked Mr. Gore what he saw as the best practices coming to light for consumer generated media. The Nobel Prize-winning former pol replied:

“When I was in college, Marshall McLuhan was a touchstone. In his book Understanding Media, he wrote a story of a swimmer caught in a whirlpool, swimming against it, getting exhausted, and drowning. Going with the current is the right model to get out of the whirlpool.

“The digital universe is in a swirl. Simply swimming against the flow can be exhausting. We offer you a way to swim with the current, not with all your inventory, but with enough that you can learn from your audience what they want from you.”

Friday, October 12, 2007

The Cure for They-Don’t-Get-It Syndrome

We are on the verge of finding a cure for They-Don’t-Get-It Syndrome.

Everyone in marketing during the past 20 years has suffered from – and with – They-Don’t-Get-It Syndrome. It first afflicted the marketing and media industries during the initial wave of agency megamergers in the 1980’s, and became increasingly widespread and painful as the digital era took hold. A malady familiar to students of business dysfunction, its primary sufferers are members of evolving industry value chains. You can tell whether a company has been infected when its executives routinely profess: “Oh, we get what’s happening. The problem is they don’t get it.”

As in: “We marketers get what’s happening, but the agencies just don’t get it.” Or: “We agencies understand the change that’s occurring. But our clients don’t get it.” Or: “We media companies grasp the transformation that’s out there. But the agencies and marketers don’t get it.”

During the three years I worked at the management consulting giant Booz Allen Hamilton on a client team serving the Association of National Advertisers, incidence of They-Don’t-Get-It Syndrome increased strikingly. We were doing primary research on the evolution of marketing organizations and capabilities, seeking to codify emerging practices marketers were deploying successfully to drive growth as media, audiences, consumer desires and customer demands were fragmenting. We identified the core capabilities companies needed to shape a “Growth Champions” marketing organization, where the marketing team was the primary growth driver in the firm. And we identified the competencies necessary for Chief Marketing Officers to rise from service provider status to become “Super CMO’s.”

But amid the successes we kept learning about was the insistent drumbeat of “they don’t get it.” So we realized we needed to expand the scope of the research to encompass the entire value chain – marketers, as well as their increasingly necessary partners in growth, agencies and publishers.

The result is Marketing-Media Ecosystem 2010, a groundbreaking collaboration among the ANA, the Interactive Advertising Bureau, and the American Association of Advertising Agencies, and Booz Allen. The first phase of the study is being released as I write at the ANA’s annual Masters of Marketing Conference in Phoenix, Arizona. And it will speed up the transformation we’re all living through.

Ninety percent of the 250 marketers surveyed or benchmarked said they intended to grow digital marketing spend; indeed, the study proves that digital transformation is marketers’ top priority. Yet fewer than a quarter of all marketers claimed they are currently “digitally savvy,” and cited as their major obstacles insufficient metrics (62%), lack of experience in the new media (59%), or lack of organization support (51%).

But unlike most studies that admire the problem and then stop, Media-Marketing Ecosystem 2010 identifies practices, priorities, capabilities, and partnerships that are separating the digitally savvy from the laggards. These recommendations emerged both from the study’s quantitative research, as well as from deep-dive interviews with more than 60 marketing, agency, and media leaders, from a range of industrial sectors – from financial services to packaged goods, from media agencies to creative agencies, from digital pureplay publishers to multi-platform media companies. Among the highlights:

  • Marketing is becoming less about one-way messaging to consumers and more about conversing and co-creating experiences with them, with multiple communications tools now becoming a standard part of the brand marketing toolkit. For example, close to half of marketers are planning to increase their PR budgets as a part of marketing.
  • Data are driving insights. Marketers are increasingly calling on their partners to help them develop actionable consumer insights. Eighty percent of marketers place say that gaining behavioral targeting capabilities is a top priority over the next three years.
  • Media is “The New Creative.” Distribution mechanisms and context now rival creative execution in importance, as marketers invest in capabilities that bridge the gap between media, creative and brand strategy, through the creation of communications planning and “integrator” positions. More than 80% of marketers say communications planning capabilities will be critical moving forward.
  • You can’t do marketing without the new math. Data quality, quantity and accessibility have brought complex analytics to all aspects of marketing. Digitally savvy marketers are more likely than others to have the metrics and capabilities to judge the effects of new media.
  • Cross-value-chain collaboration is necessary to drive marketing. The move to digital media necessitates a higher level of collaboration and coordination across all players in the ecosystem. Almost 60% of participants believe that creative, strategic, and media capabilities should be rebundled – but there is no consensus as to which agency ‘type’ should lead. Further, traditional creative partnerships are taking a back seat to media partnerships – twice as many marketers indicate that media company and media agency partnerships are becoming more important than traditional agency-of-record relationships.
Those of you who attended IAB’s MIXX Conference & Expo in September know that IAB’s gospel is “the new strategy” – as we said at the conference, in an always-on, digital, interactive communications environment, marketing value – now and forever – derives from the “mix” of strategy plus channel plus content. And that, in turn, requires new forms of collaboration among marketers, agencies, and media companies. If I might be forgiven a religious mashup, Marketing-Media Ecosystem 2010 adds a bit of Talmud to that gospel, providing new rules for engagement in our industries that will help drive growth – growth for all – in an increasingly complex environment.

“The impact of new media is changing the way marketers interact, target and distribute their marketing message,” said Bob Liodice, President and CEO of the ANA. “As the marketplace shifts to a digital interactive environment, marketing organizations, agencies, and media companies need to transform existing marketing agendas and capabilities to succeed.”

“Now, consumers not only talk back to marketers and interact with marketing messages, but they also reshape and distribute those messages through global communities. The mix of media channels has shifted from a one-way broadcast model to a set of dynamic two-way media forums,” says Andrea Rasmussen, Principal Booz Allen Global Consumer & Media.

For these reasons, IAB is making the study’s findings and recommendations the centerpiece of a new development program we are launching: “The IAB’s Interactive Boot Camp for Senior Marketers.” Our goal is to develop a primer on the currents of digital marketing, and to show how marketers and agencies are successfully leveraging interactive media companies’ skills to drive growth for their clients – and themselves. For marketers and agencies wanting more than an introduction, IAB will help develop tailored programs that bring experts from among our 350 member companies to help train marketing and agency personnels in the new strategy.

Suffering from They-Don’t-Get-It Syndrome? Take one of these, and emailme in the morning. Seriously: Randall@iab.net.

Wednesday, October 10, 2007

Those Elusive Industry Standards

Question: When does an industry need a standard?

Answer: Never, if you can help it.

That’s a curious sentiment, considering that the Interactive Advertising Bureau today issued two fundamentally important documents that will help shape industry standards. The first is the Rich Internet Application Ad Measurement Guidelines, which help marketers, agencies, and media determine at what point an ad impression is counted in rich internet application environments built with technologies such as AJAX and JSON. The second is The Video Game Interactive Advertising Platform Status Report developed by the IAB Games Committee, which provides a detailed overview of the current state of advertising in and around video games.

So why call industry standardization into question at exactly the point when the IAB is fashioning vitally important standards? It’s to highlight an unarticulated debate that’s central to the evolution of interactive media and advertising – the debate between standardization and innovation. My strong belief is that standards must support innovation; if they can’t or don’t, their pursuit probably should be abandoned. I’ll explain – and hope I can provoke your response and guidance.

Dynamism vs. Control

If there’s a single foundation myth in the American economy, it’s that businesses love competition. They do not. In the outwardly combative chest of every successful business leader lies the stable, beating heart of a monopolist. And so should it be: If the goal of the business leader is to continually increase shareholder value, then there’s no better means to that end than the ability to establish prices and make them stick.

That business truism wars against the American character. Having fled a Europe where ancient land grants and royal monopolies locked in the benefits of the privileged few and blocked opportunity for the disenfranchised many, the United States’ founding fathers – and, notably, their offspring – recognized this natural predisposition and strived through the years to thwart it. A large swath of U.S. economic and business regulation (Federal anti-trust laws, for example) aims to offset businesses’ monopolistic tendency.

Still, over the years, some businesses have managed to create, and even receive Government blessing for, their monopolistic or oligopolistic positions. The arguments they have mustered have not changed much through the decades: national defense, public safety, efficiency, and public improvement top the list. AT&T wrapped these contentions together; beginning in the 1920’s with its “One Policy, One System, Universal Service” advertising and lobbying campaign, Ma Bell turned itself into what the late historian Roland Marchand called a “loved monopoly,” and maintained its regulated market control over the U.S. telephone system for more than a half century.

The thing is, these arguments can be valid. For good reasons, suburban towns and large cities don’t want to grant every cable television company an unfettered right to dig up the streets and lay wires, so they bestow temporary monopolies. For public safety reasons, we frequently provide Government a monopoly over the development and enforcement of regulations; for example, there’s a public interest in not having airplanes fall from the sky, hence pilot licensing, and the government-managed air traffic control system.

Reducing Friction

When regulation is recommended or imposed by non-governmental bodies, it often takes the form of standards – “concepts, doctrines, products and designs to achieve and maintain the required levels of compatibility, interchangeability or commonality in the operational, procedural, material, technical and administrative fields to attain interoperability," in Wikipedia’s definition. Such standardization can do more than protect the public: It can also make markets blossom, and lead to widespread economic growth. The Institute of Electrical and Electronics Engineers, Inc. (IEEE), the professional organization for the electronics industry, for decades has used a consistent, open approach to instantiate standards across a wide range of technical fields. It identifies seven benefits to the development and acceptance of industry standards:

  • Market growth for new and emerging technologies
  • Reduced development time and cost
  • Sound engineering practices
  • Decreased trading costs and lowered trade barriers
  • Increased product quality and safety
  • Reduced market risks
  • Protection against obsolescence

Because of their importance in reducing and eliminating market friction, standards play a vital role in innovation. They also can be a coveted commodity; being first to market with an eventually accepted standard can be akin to owning a patent. Indeed, frequently a standard is a patent, or a set of patents, which allow their owners to extract rents from across a value chain. That’s a major reason why the quest for standardization has been a driving force in the history of interactive media – satirized only slightly in the title of that late, great interactive industry trade publication, The Industry Standard.

There’s no one way to get to a standard. Sometimes government bodies dictate winners and losers. Sometimes consumers anoint a victor – as they did with the MP3 codec, which, although far from the first digital audio encoding standard, won out over others because of its openness. Sometimes multiple players across an industry ecosystem come together to develop standards in open forums, as do the IEEE, the World Wide Web Consortium, and the Interactive Advertising Bureau. And sometimes well-heeled corporations buy or bully their way into the de facto imposition of a standard.

Whatever the process, the tension here should be obvious. By reducing risk, standards can promote innovation – but by locking out competition, they can also prevent innovation from occurring.

Self-regulation by industries can be particularly susceptible to this lockout problem. For the best of reasons, Herbert Hoover, as Secretary of Commerce, encouraged companies in an industry to band together in their own self-interest. “When legislation penetrates the business world it is because there is abuse somewhere,” Hoover said in 1924 about the rising tide of regulation. But, he added, “Legislative action is always clumsy--it is incapable of adjustment to shifting needs. It often enough produces new economic currents more abusive than those intended to be cured. Government too often becomes the persecutor instead of the regulator. The thing we all need to searchingly consider is the practical question of the method by which the business world can develop and enforce its own standards and thus stem the tide of governmental regulation.”

Yet what Hoover called “associational activities” became, in many instances, a vehicle by which industries could curtail competition, especially from new market entrants. Consider, for a moment, how many states still require the licensing of barbers and cosmetologists. Then ask yourself: Why in the world would we want to license barbers and cosmetologists? Is it “to ensure the health and safety of …consumers by promoting ethical standards and by enforcing the laws of the beauty industry,” as the California State Board of Barbering and Cosmetology professes? Or does it simply recreate the discriminatory guild mentality that ossified European economies over a period of centuries?

Making Markets Matter

Trade associations, if we’re not careful, can be like these ancient guilds. Our members want us to establish standards for the best of reasons: to make markets. But standards established in the wrong way or the wrong time can hinder dynamism.

In my 10 months leading the IAB, I have been struck by how frequently we are asked to develop industry standards in areas ripe with innovation, and bubbling in utter ferment. Digital-video insertion standards, mobile advertising creative standards and, most recently, widget size standards are among the requests that have been made to our various committees. In most cases, I believe such standards are premature and inadvisable.

Take the case of digital video. Online video advertising is one of the fastest growing areas in interactive marketing, its growth propelled by the entry of major consumer products companies into the marketplace. For several years, but with great insistency during these past 12 months of brisk expansion, some media companies and advertising agencies have been seeking format standardization to encourage even more rapid uptake. Pre-roll, post-roll, mid-roll, in-banner, five seconds, 15 seconds, three seconds – let’s just get together and do something to drive the market.

But had we done so at IAB, we would have rendered a disservice to our members, and potentially sent the industry down a pockmarked path. Most mainstream advertisers placing video advertising online are still using 30 second spots repurposed from their existing advertising inventory; many probably would prefer a 30-second standard as a way of keeping production costs, if nothing else, in control. But among their media and agency partners, experimentation is rampant. In May, NBC Universal announced it would no longer accept pre-roll ads longer than 15 seconds for short form content. More recently, Google introduced a transparent overlay format for YouTube which, research suggested, would be non-intrusive and effective. Meanwhile, creative geniuses deep in the bowels of agencies and startup publishers are innovating far wilder ideas.

Why in the world would the IAB want to do anything that could potentially impede that dynamism?

There is an indirect response. Five years ago, the IAB’s development of format standards for banner advertising did eliminate much of the chaos that then enveloped this nascent medium, and successfully created a market for online advertising. Had IAB’s founders not done so, the evolution of online advertising could well have been a lot slower than it was. Instead, about half of all banner ads today hew to IAB standards.

But when the IAB’s founders set out to develop those banner ad standards, their aim was to prove the viability of the medium itself as an advertising platform. Today, no one doubts the medium’s utility for advertisers, at least as evidenced by the market caps of the IAB’s largest members and by the 25-35 percent year-on-year growth in interactive advertising spend. Is there, then, still a role for standardization?

The answer is yes – but it’s a limited role. My view is still developing, but I see three conditions under which IAB should explore and work with its members toward the instantiation of industry standards:

  • When the primary goal is to reduce operational complexity and lower cost barriers
  • When it will not impede creativity or innovation
  • When there is real market demand across the value chain, certainly from both sellers and buyers in the market, and ideally from participants outside the core vertical market

New RIA Guidelines

The IAB’s Rich Internet Application Ad Measurement Guidelines fulfill all three conditions. During my first few months at our trade association, I was asked no single question more frequently than “what will be the new metrics that matter, now that AJAX and other rich internet applications are rendering pageviews obsolete?” The question came daily, from agencies, media companies, measurement suppliers, and marketers. The reason is insistent: measurement of ad impressions is, quite literally, the currency of the economic relationship between advertising buyers and sellers. Agreement on how impressions should be measured, even as technology evolves, is central to the smooth operations of the entire industry.

These new guidelines provide an answer, by specifically addressing online browser or browser-equivalent-based Internet activity, where page-content changes and ad serving are no longer linked. The guidelines, developed openly, are applicable to Internet media companies and ad-serving organizations, and are being welcomed by the agencies.

"We support the IAB's continuing efforts to create guidelines that can become lingua franca," said Mike Donahue, executive vice president of the American Association of Advertising Agencies. "These guidelines have been reviewed and endorsed by the AAAA's Digital Marketing Committee."

(In an effort to educate the industry on the use of these guidelines, the IAB RIA Ad Measurement Working Group will host a webinar, including participation from the Media Rating Council, to review and explain key components of the guidelines on Friday, October 19, at 12 noon EST. All members of the industry are invited to attend. To register for the webinar, and to download the guidelines, please visit www.iab.net/standards/RIA.aspx.)

The Communications Game

Such standardization efforts are critical. But they are not the only path to market-making. One of the best activities in which a trade association can engage is to help markets make themselves. How? By communication.

Markets can be a remarkably efficient means of allocating resources, and should be left to their own whenever they do not compromise other important values. But they can be hobbled by obstacles in the information flow. Critical issues central to the smooth functioning of marketplaces remain obscured by lack of interaction among and between buyers and sellers. Who’s buying? Who’s staying away? What are the success factors? What doesn’t work? What’s going on with pricing? Where are there supply chain inefficiencies that need active intervention to resolve?

IAB’s Video Game Interactive Advertising Platform Status Report seeks to remedy the information-inefficiency problem in one such marketplace: the market for advertising in online game environments. The report provides a detailed overview of the current state of advertising in and around video games, and outlines the myriad opportunities for advertisers to reach and engage consumers in the highly immersive environment of video games.

"The growing number of video game players across multiple demographics coupled with the intrinsically engaging gaming environment offers a unique opportunity for marketers to deliver brand messages to consumers at a moment when they are most involved and attentive," said Dave Madden, EVP Sales, Marketing and Business Development at WildTangent and Chair of the IAB Games Committee. "This report educates the industry on how to best leverage this fast-growing platform.

(To showcase the variety of games, advertising formats and insights for successful campaigns the Committee will host a seminar for agencies and marketers on November 6 in New York City. For more information on the seminar, or to download the complete report, please visit www.iab.net/standards/games.aspx.)

The Games report is the first of a steady stream of qualitative research studies IAB intends to launch to help markets make themselves. Our intent is to conduct original research, gather case studies, and communicate market opportunities across the marketing ecosystem, in all the vertical segments we touch – from mobile to digital video to search and beyond. They’ll answer, we hope, a critical need for guidance that surfaces everywhere in interactive marketing these days. Our aim is to be quick-to-market, cogent, instructive, and aimed at growing the marketplaces that can serve marketers’ and consumers’ needs.

And if in the process we discover a need for an industry standard, we’ll work to create one – as aggressively as we always have done, but with the promise that promoting innovation always will come first.