Saturday, December 27, 2008

The IAB Annual Leadership Meeting:
A Home-Made Commercial

So I put my weekend where my sentiments lie, and tried to craft an online video ad for the Interactive Advertising Bureau's Annual Leadership Meeting, "Ecosystem 2.0," using only found objects. Take a peek.




Logistics:
IAB Annual Leadership Meeting, a.k.a. "Ecosystem 2.0"
This year's theme: Brands Battle Back!
Orlando, Florida
February 22-24
Information & registration: www.iab.net

Special offer: Send or upload your own (commercially-acceptable, which means by me) video ad for the IAB Annual Leadership Meeting, and I will personally hand you a $5 rebate off your ticket price when I see you in Orlando. That's right -- five big ones!

Saturday, December 13, 2008

Another Childhood Star Meets a Tragic End

We report, you decide:


Mikey

Blagojevich


That's

Friday, December 12, 2008


Another Rant on Audience Measurement


Anyone who still thinks that contextually targeted online video doesn't have impact ought to have been in my shoes last week. My appearance on "3 Minute Ad Age" beneath the headline "
IAB CEO Rants Against Audience-Measurement Complexity," tore up my email box as well as the advertising-obsessed quadrants of the blogosphere.

While enormous credit goes to Ad Age editor Hoag Levin -- who knew the hot word "rant" would be a magnet to blogging, traffic-driving controversialists -- I believe my generally mild charge struck a chord because it reflected the daily reality of marketers, agencies, and publishers who are weighed under by the numbing complexity of selling, planning, buying, placing, and measuring advertising.

You can watch the video, but here, in essence, is what I said:

Measurement is not just a science; it is also an essential business process. Yes, measurement aims to uncover truths about the brands, products, services, and consumers with stakes in an advertising campaign, but those truths are worthless unless they improve -- unless they add value to -- the companies and customers on either end of the chain.

Our problem is that, right now, the marketing-media ecosystem has been so consumed by the equivalent of an angels-dancing-on-the-head-of-a-pin debate, that we make the transacting of advertising business more difficult than it needs to be. Measurement, as I told the crowd at the IAB's Audience Measurement Leadership Forum last week, isn't the cause of this complexity crisis, but it's certainly a major ingredient.

Physician, Heal Thyself

An apt analogy is modern medical science. Advances in molecular biology, diagnostics, neuroscience, and technology and instrumentation have revolutionized our understanding of how the body works and malfunctions. But were it not linked to the practice of medicine in ways that allowed physicians to cure peoples' ills, we'd consider it a failure.

That's unfortunately where we are with so much of modern media measurement: The science is diverging from -- even divorcing itself from -- the practice. We can measure so many things, in so many ways, that the actual customer -- the marketer -- is tuning out. The McKinsey & Co. study I referenced last week, "
How Poor Metrics Undermine Digital Marketing," is sad proof of this undeniable reality. "Companies have failed to crack the code for measurement," the consulting firm concluded from its survey of 340 marketers around the world. Comparing its findings to a similar study done in 2007, McKinsey found that "most companies have made little progress in this area."

Who's at fault? Let's ask, rather, what's at fault. Interactive media is an industry with historically low barriers to entry. Moreover, its delivery is based upon the almost continual exchange of bits and bytes of information. Pretty much by definition, that means the more media we create, the
more data out there that can be measured -- and the more opportunities to measure them. Pageviews, hits, clicks, time spent, pre-roll completion -- the media glut almost pre-determines a measurement glut.

The IAB was created to bring form to this chaos, and has done a fine job of coalescing all parts of our industry around standards and guidelines that create the definitional consistency that make business simpler to conduct. Last week, we issued for public comment our Audience Reach Measurement Guidelines. Forty-four companies -- publishers such as the Wall Street Journal and the Weather Channel, researchers such as Scarborough and Millward Brown, auditing experts such as Price Waterhouse Coopers and the Audit Bureau of Circulations, giants like Google and Microsoft, and newer innovators like YuMe Networks -- came together to find the simplicity on the other side of complexity.

When Dinosaurs Ruled

The public comment so far has been largely quite positive. But not all of it. Edelman Public Relations executive and well-known blogger Steve Rubel said the guidelines are "beholden to an era when the reach dinos ruled the online landscape. They don't any more. It's a new era." Mr. Rubel wants a whole range of measurement standards, including those for engagement and "reputation/sentiment."


Well, you know, we all want to change the world. Me, I want to help those "reach dinos" do business today -- and reach analysis remains a fundamental way they want to do it. Some of these dinosaurs are even advancing the practice considerably. The McKinsey study concludes on a hopeful note, finding that "
some marketers have made rigorous measurement a priority," and details the benefits they have accrued:

One marketer—a home-furnishings rent-to-own chain—used a method called RCQ (for reach, cost, and quality) to optimize its allocation of spending among ad vehicles. This metric, combining rigorous analytics with systematically applied judgment, measures the number of people each ad vehicle reaches and the cost of reaching them by vehicle. It also includes a quality factor based on changes in engagement, attitudes, and behavior. The RCQ analysis showed that the chain spent too much on its workhorse vehicles, such as direct mail, and too little on television infomercials (which convey more information) and online ads (which can be targeted more precisely).

I am reminded of something IAB Chair Wenda Harris Millard told me when I was taking this position, and has repeated in several venues since: "We" -- the interactive industry, the cognoscenti, digerati -- "need to be a part of, not apart from."

So with apologies to Mr. Rubel (whose writing and mind I admire), maybe we put measurement standards for reputation and sentiment aside for the time being -- and abandon a lot of other sectarian pursuits -- so we can do business with our customers, not against our customers. Coalescing around a set of standards that simplify the ways we make people aware of, knowledgeable about, and favorable toward brands is (as Ms. Millard's boss Martha Stewart would say) a good thing. They might even help us rebuild the consumer economy.

Monday, December 01, 2008


A Services Strategy for Interactive Publishers

What do you call a publisher that provides its advertisers
original and data-rich consumer segmentation and preference research, a cross-platform communications strategy, customized executions, trade promotion support, qualified sales leads for considered-purchase goods, customer relationship management of those leads, and end-to-end analysis of a campaign's returns?

Very successful.

As the recession tightens its grip on the American economy, the media industry is discovering that the one segment not only holding its own among marketers but thriving is interactive. There are certainly numerous reasons for our relative strength. The gap between consumer time-spent and advertiser-spend is wider in interactive media than any other platform, an invitation for advertising share to shift this way, if only to reach equilibrium. Then, too, the availability of high-quality video on demand, an outgrowth of the broadband revolution, is proving increasingly attractive to the consumer-brand advertisers that had been relatively absent in the earlier days of interactive commerce.

But the larger reason for our vigor, as I argued in my last "clog," is that interactive is a medium that can do it all -- simultaneously. "Online marketing increasingly aims for awareness, consideration, preference and loyalty all at once," The Economist wrote this week, in support of the IAB argument that interactive is the über-medium.
"Internet advertising," the publication proclaimed, "will be relatively unscathed in the downturn."

This represents an historic shift in the nature and purpose of media companies. Where once a medium could thrive by serving as a simple channel for single-purpose advertising -- as network television did for national brand advertising -- today and in the future a multi-purpose services strategy likely will be the new normal for media companies.

And interactive publishers, the evidence below will show, have a considerable head start.

The Clicks Curse

Online publishers' blessing begins with a bit of a curse: Advertisers historically have under-leveraged us for brand advertising.

For better and for worse, interactive began largely as a direct-marketing vehicle. "Advertising is a science, but the limitations of the media turned it into an art," Doubleclick co-founder, Chairman and Chief Executive Kevin Ryan insisted to me in 1999. Mr. Ryan was wrong: Advertising is neither science nor art, but a craft -- a skill-based trade, infused by artistry and based on principles established through time, that aims to achieve practical objectives. Although he meant only to invoke the claim to accountability that was and is a strong suit of the medium, he and other early Internet pioneers so closely associated accountability with specific, immediate, measurable actions that marketers reflexively identified us as a direct-response channel.

Even then, interactive industry leaders lamented the unthinking connection between interactive media and direct response. "There's no correlation between click-through and brand building," Rich Lefurgy, the founder of the Interactive Advertising Bureau, told me more than 10 years ago. "That sent us in the wrong direction."

Indeed it did. A study recently released by our cousins at the European Interactive Advertising Association showed significant growth in selling-related "below-the-line" expenditures by marketers between 2006 and 2008 -- a pattern consistent with what we've seen in the U.S. For example, the number of marketers saying they use the Internet to "generate sales" leaped 50 percent in that two-year period. The number saying they deployed interactive media to "influence purchase decisions" rose by one-third.

There's nothing wrong with direct marketing. To the contrary, it's a foundation of the marketer's craft, and its $173.5 billion in annual expenditures dwarf those for any media-advertising segment. And because recessionary economies prompt marketers to shift budgets from brand-related media advertising toward direct-marketing and promotional activities, interactive's strength in below-the-line functions has certainly helped to sustain our industry during this tough time.

But by concentrating our efforts on selling to the exclusion of branding, we have only limited ourselves. When the Booz & Co. consulting firm presented Phase II of their groundbreaking "Marketing-Media Ecosystem 2010" study, sponsored by the IAB together with the American Association of Advertising Agencies and the Association of National Advertisers, at our Annual Leadership Meeting last year, Booz media practice leader Chris Vollmer was unsparing in his criticism. Displaying a chart indicating that only 39 percent of U.S. interactive advertising revenues came from the nation's top 50 advertisers -- the advertisers with the largest stake in building and maintaining great sustainable brands -- Mr. Vollmer told our members: "You have grown by picking the low-hanging fruit."


Free-Rider Syndrome

But there's a much more pernicious consequence to interactive's reputation as a direct response vehicle: the free-rider syndrome. Because clicks represent a small percentage of total advertising exposure online, marketers are gaining valuable brand lift -- the kind that comes from frequent consumer exposure to advertising campaigns -- for a fraction of what they typically would pay for effective branding campaigns.
comScore recently published research showing that interactive display ad campaigns successfully boost marketer site visits (+46%), e-commerce transactions (+27%) and offline retail sales (+17%) -- little of which is credited when cost-per-action (CPA) or cost-per-click (CPC) are used as the measure by which compensation will be calculated.

In other words, publishers are giving away that portion of the powerful marketer-brand equity they help to create for the price of a click. "With click rates for display ads now falling under 0.1%, I believe that publishers who sell display ads at a price that is based on the number of clicks could be engaging in one of the biggest giveaways since the invention of the medium," comScore Chairman Gian Fulgoni wrote in a response to my last clog. "Publishers need to use the right metrics."

(Mr. Fulgoni is speaking later this week at the “Empirical Generalizations in Advertising” conference at the Wharton Business School. His presentation, "How Online Advertising Works: Whither the Click?", is available at 1-866-276-6972 or www.comscore.com/contact.)

I believe the free-rider syndrome will fade reasonably quickly from the scene -- most likely after it kills a few good brands whose managers fooled themselves into believing they could sustain billion-dollar franchises on ten-cent direct-marketing efforts. After all, in most customer-supplier relationships, you do get what you pay for, certainly over the long-term. So if you optimize a campaign for immediate response, you are unlikely to gain the brand effects you are seeking.

Just ask the Detroit automakers, which for three decades, pushed sales by acclimating their consumers to a predictable, endless cycle of discounts, eroding virtually all affinity their audience once felt for their "timeless" brands.


Metrics That Matter

It's beyond dispute that the lack of agreement on branding metrics has constrained the evolution of advertising, and probably harmed marketers, agencies and publishers.

Because of "inconsistent metrics, and a reliance on outdated media models, marketers are failing to tap the digital world’s full power," McKinsey consultants Jacques Bughin, Amy Guggenheim Shenkan, and Marc Singer concluded after a recent study of global marketing decision-making. "Unless this problem is addressed, the inability to make accurate measurements of digital advertising’s effectiveness across channels and consumer touch points will continue to promote the misallocation of media budgets and to impede the industry’s growth."

The McKinsey survey of 340 senior marketing executives worldwide, almost all of whom are using digital channels, is an astonishing exposé of marketing malpractice. Consider a small sample of its findings:
  • Of companies stressing the importance of brand building, only half try to measure increases in brand strength from their digital efforts
  • Fewer than one-third of companies attempt to measure the offline effects of online marketing
  • Eighty percent of respondents use subjective judgments instead of quantitative analysis to allocate budget across media.
  • Only half the companies using the Web as a direct-response vehicle use click-through rates -- "the most basic of metrics," as the consultants put it -- to assess the effectiveness of their campaigns

The McKinsey judgment is harsh. When asked why they weren't shifting more of their spending online, the marketers surveyed trotted out the habitual response: “insufficient metrics to measure impact.” But the real reason, the consultants found, is "a startling failure to measure."

This research underscores a vital, valuable, and ultimately hopeful point: Assessing the effectiveness of interactive advertising for the purpose of media-mix allocation is not a measurement science problem -- it's a business-process problem. Science can take a long time; business processes can be designed, negotiated and, if the parties to them agree, implemented.

To be sure, there are multiple points of view about the metrics that matter. Many advertising doyens want to find a way to measure engagement, which the Advertising Research Foundation has defined as "turning on a prospect to a brand idea enhanced by the surrounding context." But engagement is proving to have as many tributaries and navigation systems as the Amazon River and, at least for now, appears to be adding complexity to media analysis rather than simplifying it.

Industry guru Jack Myers argues for a more pointed measure of effective brand advertising. In a fascinating and well-reasoned historical review, he says marketers "will have no choice but to accept measures of persuasion and motivation." Several industry efforts to calculate advertising "view-through" -- a metric that comScore's Mr. Fulgoni, among others, favors, and which promises to relate subsequent consumer actions back to advertising exposure, even absent a click -- may achieve this goal. But here, too, there are sectarian differences, with some measurement firms favoring cookie-based approaches to judging effective view-through, others promoting pixels, and still others favoring panels.

There's a great deal of evidence that the work to calculate brand effects is itself having a significant effect on marketer attitudes. The EIAA study, for example, found that more than 20 percent of marketers believe online is a very important vehicle for changing brand perceptions, up from 15 percent two years ago.

Marketer spending patterns also are changing. As Nielsen Online Senior Vice President Charlie Buchwalter noted after the IAB released its mid-term interactive revenue report for 2008, the four growth industries were packaged goods, automotive, telecommunications, and computing; together, they grew their online spend by nearly 30 percent over the equivalent period in 2007.

"Do you see what I see?" Mr. Buchwalter wrote. "These industries have consistently been the big overall ad spenders for a long, long time. Companies within these four industries make up 42 of the Top 100 national advertisers, and 52% of the advertising spend. And note that the two largest ad-spending industries, i.e. CPG and Auto, have been largely absent from the digital world until very recently."

But to further propel growth, we have to reduce transactional confusion. Almost certainly, it will be necessary for industry leaders -- Chief Executives and Chief Financial Officers of brand marketers, agencies, and publishers -- to come together and reach agreement on the metrics that matter, and on ways to simplify the processes by which audience measurement is factored into media planning and buying. Happily, the IAB and the AAAA are attempting to do just that. Several months ago, we established a joint task force to attempt to systematize media measurement, based on objective. We call the initiative "Beyond Counting Exposures."

The Services Imperative

But advanced publishers aren't waiting for a set of magic metrics to instantaneously ignite a brand-advertising renaissance online.
Instead, they have determined to build multiple paths to customer value and their own prosperity.

In my last clog, I noted the transformations that IDG and Cars.com had undertaken during the past decade. IDG recast itself from a magazine publishing company to a multi-line provider of such services as events marketing and premium lead generation, while still maintaining its leadership in print periodicals and online information. Cars.com, launched a decade ago as a classified advertising channel, remade itself into a lead-generation and customer relationship management resource for auto makers and their dealers.

They are far from alone. Meredith Corp., for example, the venerable publisher of women's magazines, has acquired and integrated five marketing-services agencies to boost its value to customers: online marketing firms Genex and O'Grady Meyers, database marketing expert Directive, healthcare marketing provider Big Communications, and word-of-mouth agency New Media Strategies. The objective, as the company notes on its Web site (on a page titled, perhaps uniquely among publishers, "Our Agencies") is to "build... on our proven custom publishing expertise to deliver innovative multichannel communication programs" by "combining digital capabilities with the ability to develop smart content."

It must be working: among other things, Meredith has become the CRM agency-of-record for no less a client than Kraft foods -- one of more than 130 clients of an integrated marketing division that now numbers 500 employees.

Meredith, of course, is not the only publisher that has acquired agencies and the services they provide. Building on its MSN media franchise, Microsoft acquired aQuantive in 2007, and with it an array of client-facing marketing functions. The company introduced one of them -- the "Engagement Mapping" tool to track advertising campaign performance across multiple touchpoints, which was developed by its Atlas Institute, a marketing think tank -- at the IAB Annual Leadership Meeting earlier this year.

CNET, the pioneeering online technology publisher, for years has been adding marketing and sales services to its offerings. Its CNET Content Solutions division provides tech manufacturers, distributors, and retailers product-information management services, business intelligence analysis to aid cross-selling and up-selling, even sales automation tools.

Booz & Co.'s "Marketing-Media Ecosystem 2010" study identified multiple ways publishers are integrating enhanced marketing services into their offerings. While contextual targeting remains the mainstay of the publishing industry, the consulting firm found that about half are providing direct marketing and/or database management options to their customers. Two-thirds are providing consumer-insights analysis. An even greater percentage -- an astonishing 88 percent, in fact -- are designing and implementing marketing campaigns.

Over the coming months, in this clog and in IAB conferences and events, I and the team will showcase the ways these and other publishers are riding services strategies into a prosperous future. The lesson, the evidence will show, is clear: If advertising is under pressure, publishers must diversify their sources of revenue beyond publishing. The way to do that is to serve customers as well as consumers. And the way to do that is to build services that create value exchanges between customers and consumers. Everyone benefits from an economy based on better information, better analyzed and served with a smile.

Monday, November 24, 2008


The "Line" on Internet Display Advertising


When the Interactive Advertising Bureau Internet Advertising Revenue Report came in for the second quarter of 2008, I took one quick look at the figures compiled by the PriceWaterhouseCoopers accounting firm and immediately said (first to myself, and then to anyone who cared to listen), "It's a normal recession trend: Above-the-line dollars are moving below-the-line."


I was surprised to discover how few people trained in interactive advertising had any idea what I was talking about.

I will explain, because it's a response to the increasingly prevalent and nonsensical fear that the online display ad market is collapsing. It's not -- in fact, it's growing. But to understand how and where and why, let me provide a short course on marketing practice.


The Purchase Funnel

Marketing needs are typically defined by an image called "the purchase funnel," a diagram of consumer decision-making identified with the automotive research firm Allison-Fisher International. In this inverted triangle, consumption choices begin with awareness, and gradually narrow to consumer familiarity, consideration, preference, purchase, and ultimately loyalty.

Different marketing disciplines long have been associated with different levels of this funnel. Awareness is generated by main-media advertising -- typically big blasts on television, billboards, and in magazines. Consideration might have more of a retail angle -- newspaper or radio advertising, say, announcing a product's availability for a limited period at a local store or dealership. Purchase often is motivated by a favorable price -- a consumer promotion featured in a newspaper's free-standing insert or in a direct-mailed catalogue -- or merely the fact that the product shows up, thanks to a trade-promotion deal between a manufacturer and a retailer, on an end-aisle display in a grocery store. Loyalty depends on the user experience, naturally, but consumer-relationship marketing (frequent flier and after-market service programs, for example) can play a significant role.

The upper part of the funnel, the functions associated with measured media advertising aimed at fostering brand or product awareness and consideration, are typically referred to as "above the line," while the tasks that relate more directly to selling are termed "below the line." Wikipedia attributes the terminology to Procter & Gamble's methods for accounting for its marketing expenditures beginning in the 1950s, but the phrasing almost certainly derives from the way business expenses -- notably, deductions from adjusted gross income -- are conventionally dealt with in accounting.

Moving the Metal

It's an axiom of marketing that when the economy gets rough, marketers shift budgets from above the line programs to below the line -- that is, they trade off the longer-term effects of brand-building for the shorter-term need to move products off shelves. While such swapping pains publishers, ad agencies, and marketers' own advertising teams, the economics of a business often demand it.

Consider the U.S. automotive industry, now in as tortured a position as it's ever been. Automakers don't sell cars to consumers: They sell cars to dealers, who in turn sell them to consumers. Dealers, just like consumers, have to finance those purchases; unlike consumers, though, they have to finance them in volume, a system known in the auto business as "floor planning." When consumers stop purchasing cars, dealers can quickly get upside-down on their own loans. They often have little choice but to demand help from Detroit, in the form of incentives and rebates and other "trading money," to move the metal now.

I can't do any better in explaining the dealers' dilemma than the description I offered in my last book, Where the Suckers Moon: The Life and Death of an Advertising Campaign. Here's what auto retailers faced during the recession of 1991:

Under the floor-planning system, every day a car sat at a dealership, it cost them money -- the interest they paid on the loans they took to buy the cars at wholesale. A car with a wholesale cost of $13,000 financed at two points above the late 1991 prime of 6.5 percent cost the dealer $1,105 a year, or slightly more than $3 a day. As a rule of thumb, dealers liked to keep a two months' supply of cars on the lot, and ordered them from the manufacturers accordingly. If a dealership accustomed to selling thirty cars a month saw sales suddenly drop to ten cars a month, its floor planning expenditures could rapidly rise from $180 per day to $300 or more per day. Needless to say, dealers deemed trading money necessary for their survival.

To one degree or another, the challenges faced by automotive dealers during a recession are replicated across the economy. Computers, mobile phones, overnight delivery services, air travel, hotel rooms, alcoholic beverages, even hair care products and salad dressings, become harder to sell -- which means that marketers, under pressure from their distribution chain, feel compelled to try a harder-sell, even at the expense of longer-term brand-building that might otherwise help them maintain pricing at more desirable levels.

So when I saw in October that interactive advertising revenues showed a four-point spike in the second quarter for search (which looks an awful lot like a below-the-line marketing function) and a one-point decline in pure display, I recognized the classic budget shift at work. For those who haven't seen it before, I can offer this admittedly slight comfort: "Welcome to the recession."

Prices Under Pressure

This isn't to say that display advertising prices aren't under non-recessionary pressure. They are. But here, too, there are common forces at work that, for better and for worse, predate interactive media, in some cases by a few millennia.

The first and oldest is the simplest: supply and demand. Taking away all possible qualifiers ("premium," "non-premium," "quality," "branded," "network," etc.) there is a theoretically limitless amount of advertising inventory available on the Internet. After all, you or I, if we want, can start a global video network, "magazine," or "newspaper" with the applications that come built into the average laptop and the free or nearly free services available on the Web. Should we get lucky and sell out our ads, we can always add a few billion more impressions quickly and cheaply -- just buy another hard drive (you can get a terabyte for $150 at retail)!

And the fact is, this ain't theory: Analyst William Morrison of ThinkEquity Partners estimates that just under 1 percent of Web sites globally -- 1.2 million of 160 million sites -- sell advertising, on their own or through networks. That's a lot bigger number than the three broadcast television networks I grew up with.

While supply is exploding, demand -- again, viewed in the aggregate, without qualifiers -- is pretty stable. Since the United States emerged from the recession of the late 1970s-early 1980s, annual advertising expenditures have held steady at 2.2 - 2.4 percent of GDP, give or take 10 basis points.

Once you start parsing those aggregate figures, though, you find that the character of that demand has changed quite a lot over the decades. It's a commonplace in the advertising industry that the ratio of U.S. above-the-line marketing expenditures to below-the-line expenditures has inverted since the 1960s. Where main media advertising once comprised some 70 percent of marketers' spend, today, according to advertising guru and consultant Jack Myers, 70 percent of spend goes to trade promotions, consumer promotions, direct marketing, and the like.

In other words, demand for classic brand advertising has been going down for many years, while the supply of advertising inventory has been going up. That, combined with the recession, is bound to put a lot of pressure on brand-advertising prices, which in the interactive world are associated with display.

Branding Breakthroughs

Bad news for publishers and agencies, right? Well, no. Because amid the advertising carnage, it turns out that interactive advertising as a whole is doing quite well -- up almost 13 percent in the second quarter of '08 from the same period a year earlier, and up 11 percent in the third quarter, according to the IAB/PWC report. This growth was taking place while the overall advertising marketplace was in decline. And that online spend was not all going to search. During the first half of this year -- the last period for which we have segment breakdowns -- display-related advertising, including but not limited to banner ads, was up 1 percentage point, thanks to a tripling of online video advertising from a year earlier.

Moreover, premium content and its allied advertising inventory can be really premium. The IAB/Bain Digital Pricing Study, released over the summer, indicates that video inventory is selling out at a 90 percent-plus rate, at an average CPM of $43. Perhaps more interesting, the marketplace -- which is to say marketers and agencies, following the lead of their consumers -- appears to be putting an implicit definition around "premium video" inventory: It's advertising avails associated with content created by well-known, well-branded, video entertainment providers, such as popular television networks, Hollywood studios, and creative stars. In other words, well-branded media attract brand-aware consumers and brand-sensitive advertisers, generating exposure, engagement, and likeability.

But while the growing attractiveness of the online medium to brand advertisers probably accounts for much of our industry's relative strength right now, there's a larger and more important phenomenon taking place: Marketers are recognizing that interactive can achieve most, if not all, of their objectives, quite often at the same time.

In the old world of the traditional purchase funnel, there were clean lines that separated not only the functions identified with different marketing goals, but the media deployed on behalf of each function. Thus, television and periodicals were branding and consideration media; direct mail and FSI's were promotional media; and while the 'twain met on occasion (as with DM ads in the backs of magazines) the merger was too meager to be meaningful.

The Internet is vastly different than the media that preceded it: It's one medium that can perform the marketing functions associated with all media. Indeed, individual advertising executions can serve multiple goals. For what is an online rich-media food ad that allows the user to reach through the tasty visuals to get a recipe, and reach through even further and obtain a coupon for the ingredients from a local supermarket? Is that a brand-awareness ad, a consideration-enhancement ad, or a consumer promotion?

The answer: All of the above. It's for this reason that Neil Ashe, President of CBS Interactive and an IAB Board member, calls interactive "the yes medium." As in: Can it brand? Yes. Can it promote? Yes. Can it encourage loyalty? Yes.

In recent years, advertisers, agencies, and publishers have been consumed by the complexity that combinatory effect presents in marketing strategy development, media planning, measurement, and compensation. From a media-mix allocation standpoint, how do you plan a "yes medium"? How, exactly, do you budget for it? To which agency or functional expert do you assign responsibility for campaign development and management? Who gets credit for its successes?

Our industry's vigor suggests that marketers finally are beginning to see this not as a challenge, but as an enormous opportunity.

Adding Value

This hybridization of media also has historical antecedents. One of the most recent and surprising is the magazine industry.

In the 1980s, for reasons not dissimilar to those we're experiencing now, magazine advertising rates came under pressure. Changes in production technologies and distribution channels prompted a flood of new periodicals, most of them in niche segments that promised marketers more targeted reach to consumers than the established mass magazines. With larger magazines losing scale and facing an explosion of competitive inventory, ad agencies began demanding price concessions, forcing publishers to consider breaking the fixed-rate structure that had dominated the industry for decades.

Publishers tried to resist going off their rate cards by offering their customers what they euphemistically called "added values." These included in-store events, ride-and-drives, shelf-talkers, polybagged inserts, and a multitude of other gimmes. In effect, they were combining an above-the-line program -- magazine advertising -- with various below-the-line elements drawn from the disciplines of trade promotion, consumer promotion, direct marketing, and events marketing.

The problem was, most publishers saw these "added values" as disguised discounts, instead of looking at them as service offerings for their best customers. So most did not build out the new strategic capabilities that the changes in the marketplace demanded; they continued to consider themselves publishers of print periodicals, not providers of marketing services. As a consequence, they did not invest in the talent, technologies, processes and relationships that would allow them to scale these services, and they didn't develop hybrid pricing models that valued the bundled services appropriately. By sticking to the fiction that they were in the brand-advertising-supported print periodicals business, many publishers relegated themselves to endless rounds of price competition for inventory their customers increasingly viewed as a commodity.

Lesson for Publishers

There's a cautionary lesson here for interactive publishers: Development of new marketing services and the hybrid compensation structures that go along with them is the key not only to survival, but prosperity.

The good news is, many interactive publishers have learned that lesson and adapted.

IDG Communications, the proprietor of such titles as PC World and Macworld, has been aggressively and successfully transforming itself from a print and online publisher into a provider of marketing services for its business-to-business customers, with such success that half its U.S. revenues now come from non-print sources, says its CEO Bob Carrigan, an IAB Board member (shown at left). Central to its evolution has been the integration of premium lead generation into its service offerings.

“The excellent thing, and good news, for publishers is that there is life after print — in fact, a better life after print,” Patrick J. McGovern, IDG's founder and chairman, told The New York Times earlier this year.

Cars.com, the 10-year-old destination site for automotive shoppers, has booked record quarters this year despite the trauma in the auto industry because it has built a virtuous circle of marketing services that link such above-the-line offerings as brand, dealer, and classified advertising to such below-the-line tools as lead generation and even customer relationship management for its clients.

"You have to go out and prove it to your customers," Cars.com Senior Vice President and General Manager Mitch Golub (another IAB Board member) told me a few weeks ago, referring to the various forms of value a publisher can and must provide today. "You have to report it to them, you have to show it to them."

What Industry Needs

I am under no illusion that any of this is or will be easy. If a publishers' value to clients lies increasingly in the provision of marketing services as well as media advertising, that implies significant training and development needs for the industry. For this reason, IAB is launching a professional development certificate program to train sales teams and others in the solutions-oriented consultative selling that increasingly will dominate our field. (We launched this program two weeks ago with two sold-out sessions of our new "Yield Management School for Publishers.")

More fundamental still will be agreement on metrics. If the value of hybridized marketing communications campaigns lies in the integration of multiple services to achieve multiple objectives, then we -- publishers, agencies, and marketers -- must agree on consistent metrics that can assess these distinct achievements appropriately and well. We have to get over the delusion that a single measurement technique, such as "clickthroughs," can apply equally to above-the-line and below-the-line goals. If exposure, time spent, and other gauges of long-term brand-building effects have meaning, then publishers should be compensated for them in addition to or separately from the shorter-term selling goals realized through promotional programs.

This is not only good for publishers, it's vital for advertisers: The marketing landscape is littered with dead companies that starved their branding programs in order to feed their selling campaigns -- the surest way for consumer goods marketers to lose their audience and their pricing ability. The long-term value of branding campaigns was not lost on the playwright Arthur Miller, who had Willy Loman, the tragic title character in his epic drama Death of a Salesman, lament his own inability to keep up with his neighbors.

"I told you we should've bought a well-advertised machine," Willy Loman tells his wife, Linda, when their refrigerator breaks down yet again. "Charley bought a General Electric and it's twenty years old and it's still good, that son of a bitch."

"Whoever," Willy bemoans, "heard of a Hastings refrigerator?"

If only to prevent themselves from becoming the next Hastings -- or Ipana, Packard, or Montgomery Ward -- marketers will certainly invest in interactive display advertising and it will continue to grow steadily, quarterly recessionary plateaus and dips notwithstanding.

But what will truly propel interactive advertising is the increasing recognition -- already apparent among marketers and supported by publishers' growing capabilities -- that this is a medium that does more.

Saturday, August 30, 2008

CHEAPER, MORE EFFECTIVE, LESS INTRUSIVE THAN DIRECT MAIL, IT'S... BEHAVIORAL TARGETING, CAMPAIGN-STYLE

There's a great piece in today's Washington Post that uncovers a fascinating -- and curiously undercovered, given the attention it's been getting in our nation's capital -- little secret of this year's Presidential election: Both campaigns are using behavioral targeting online to find their best potential voters.

Post reporter Peter Whoriskey says that using behavioral marketing techniques to locate and deliver ads to voters identified based on their Web-consumption habits "is one of the defining aspects of the 2008 presidential campaign."

Among the Web publishers that say they have worked with both campaigns are Yahoo! and Specific Media.

The Whoriskey piece, although concise, is unusually sophisticated -- certainly relative to most reporting on the subject, which tends to rehash charges by advertising opponents, uncritically and without evidence, that online targeting compromises users' privacy. The Post, by contrast, includes some facts generally ignored by critics:
  • Behavioral targeting "is common in commercial marketing." (Not noted in the piece is the fact that, under the term "occasion-based marketing," behavioral targeting has been employed for years by consumer marketers.)
  • Determining voters' preferences through behavioral and other forms of analysis "has long been part of the science of political marketing."
  • Online behavioral marketing is "less intrusive" than traditional direct marketing because "the name and home address of the target is unnecessary."
The U.S. Congress has held four hearings during the past few months devoted entirely or in part to investigating whether behavioral targeting compromises Web users' privacy. No harm has been shown from the practice by any witnesses, in no small part because the technique does not employ identifying data. But activists -- many of whom have a long history opposing marketing in the offline world -- are seeking regulations that would cover both personal data and impersonal information with the same broad, protective brush.

Now that both parties' Presidential campaigns have been shown to be using these highly effective and efficient marketing technologies, it will be interesting to see whether more reporting will uncover how many members of Congress are following suit.

Wednesday, August 13, 2008



THE FEDS' WEB TAKEOVER


What is the definition of “your data”? The answer may determine the future of the Internet – and, more broadly, of communications media, the users that derive value from them, and the marketers that depend on them.

The combination of the word “data” or “information” with a personal possessive pronoun lies at the heart of the current debate over interactive advertising and privacy. In the Monday New York Times story “Web Privacy on the Radar in Congress,” reporter Stephanie Clifford wrote that a subject of her piece knows that companies “are collecting his data.” The Center for Democracy and Technology, the prominent Washington-based proponent of a Federally mandated “do not track list” against interactive advertising, told the Los Angeles Times recently that Americans are “uncomfortable” with “the collection of their data.” The Federal Trade Commission, in proposing principles to control “behavioral advertising,” recommends that “consumers can choose whether or not to have their information collected for such purpose.” Democratic Congressman Edward J. Markey of Massachusetts said yesterday that he expects to introduce legislation during the coming year that “includes a set of legal guarantees that consumers have with respect to their information."

All well and good, you might say: My identity must be protected from thieves and exploiters. But guess what? The plans that these activists and their enablers are promoting have nothing to do with identity protection. To the contrary, they are agitating – some, perhaps, unwittingly -- for a new property right, unique in U.S. law, that would provide consumers personal ownership of all information that derives from their activities, no matter how anonymous, non-identifying, aggregated, or otherwise impersonal it may be. They are further proposing that the Government, as the codifier and protector of such rights, use this definition of “behavioral data” to assert Federal control over most Internet operations. The effect could be to cripple the architecture of the World Wide Web.


Oh, Behave


Although this effort to socialize the Web is taking place in plain sight, it involves no small degree of artifice. Rarely if ever, for example, are such phrases as “his data” or “their information” explicated – leaving readers to believe that sensitive personal records are being compromised. But on occasion, the activists slip in telling ways. Jeff Chester, the proprietor of the extremist Center for Digital Democracy and a frequent witness in regulatory hearings in Washington, has made clear his belief that no distinction exists between identifying data and impersonal data: If it can be used in any way for marketing purposes, it belongs to the individual, and Government should restrict its application. As he wrote on his blog last April, interactive publishers


… know that in today’s digital marketing era, the very tiny bits of personal behavior they have identified are parts of individual human identity. Our ‘virtual’ identities may be composed of discrete and disassembled bits of information about ourselves: what we like to read, watch, buy; our problems and concerns (such as health or our children’s education) or our political interests, but they are very much living aspects of ourselves. The goal of interactive marketing is to collect, analyze, and use such information to serve the interests of those paying for the targeting. The technique uses one, two or multiple individual data points in a variety of ways (search ads, broadband videos, virtual worlds) to get individual consumers to behave or act in ways that favor or reflect the marketer’s goals.


State legislatures –the stalking horses for the Washington lobbyists and legislators looking to constrain marketing and media – have followed the lead of Mr. Chester and his “regulate-the-Web” comrades. A New York State bill that was written to restrict what it termed “online preference marketing” actually promises explicitly to extend Government control over virtually all consumer research that has a Web component. The bill (sponsored, mystifyingly, by an Assemblyman from Westchester County, home to such consumer marketing and media giants as PepsiCo, the Readers Digest Association, IBM, and Starwood Hotels & Resorts), defines “online preference marketing” as “a process used by entities whereby data is typically collected over time and across Web pages to determine or predict consumer characteristics or preference for use in ad delivery, including the use of non-personally identifiable information.”

These definitions and metaphysical disquisitions help us understand how breathtakingly and unprecedentedly broad the supposedly protective proposals to restrict “behavioral targeting” actually are. They unambiguously define “behavior” as any and all consumption activity, no matter how distanced it is from one’s personal identity. Equally plainly, they say that any “data” or “information” that derives from such behavior would fall under their proposed regulatory scheme, even if it cannot compromise an individual’s identity, let alone cause him or her any harm.


Calling All Clients

Let’s be clear what’s at risk here: the Internet, and any communications activity that depends upon it. Why? Because all Internet activity throws off such non-identifying “behavioral” data all the time. Indeed, behavioral data is the center of the client/server call process that’s the essence of the Internet’s architecture, which delivers content based on information generated by user activity. As IAB Vice President for Industry Services Jeremy Fain, one of the interactive media industry’s top operations experts, puts it: “A client calling a server asking for content, and the server sending it back, is the fundamental underpinning of the Internet.”


Put this vital piece of the Web’s infrastructure under Government control, as the activists suggest, and the ad-supported innovation that has driven this communications revolution would be impaired. As Fain explains, “Within the client request there are many pieces of information, including a cookie, an IP address, and a user agent string. Cookies could be stripped out of that process, but the Web experience would change drastically. Cookie IDs are essential to user experience; as Wikipedia nicely observes, cookies give a state, a ‘memory of previous events,’ to otherwise stateless HTTP transactions.”

Without cookies, each new page view would be an isolated event. The Web's relevancy engine
would disappear. A news site wouldn’t be able to give you recommendations for articles you might want to read based on earlier things you’d read. Click analysis would be impossible, so retailers and brands would not be able to understand how their customers are using their sites. There could be no logged-in state beyond a single session, making it necessary for a user to log in to every site each and every time he or she visited. For retrieving email this wouldn’t be a big change, but for any news or entertainment sites that require a registration, any blog, any social media site, this would change the experience dramatically.

“IP addresses can't be stripped out,” Fain continues. “They are fundamental to the delivery system -- both client and server must know where to send the information. User agents – which are basically the identification of the browser type -- should not be stripped out, either. Besides being fundamental to conducting any business online -- they are the best way to distinguish human activity from machine-generated activity, and accurately count how many times content was delivered to real people – user agents are essential to delivering better experiences. At first glance, user agents may seem tangential to the consumer data and information discussion, but decisions are made by Web sites based on a consumer’s user agent strings all the time. A person using the Safari browser will regularly see something different from someone using Internet Explorer.” (An excellent example of the importance of user agents is the mobile Web: Page views will be optimized for the smaller screen based simply on the server’s ability to know that the consumer is using a mobile-device browser. )


“This is behavioral information,” Fain says, “but if companies cannot collect or store it, they cannot make business decisions on how to optimize their sites for their viewers. “


In other words, the Internet runs on behavioral data. When a user launches her browser, behavioral data is generated that gets her to her designated home page. When a user clicks on a de.licio.us bookmark, behavioral data is generated that whisks him to the site. When users click on an article’s “go to next page” button, behavioral data is generated that positions them on the next page – in pretty much the same way a click on a “skip this ad” button will assure they don’t get the advertisement they don’t want to see. Under no normal circumstances is this behavioral data connected to an individual’s name, address, Social Security number, or other information we would conventionally associate with personal identity.


Government Control

Sadly, this doesn’t seem to matter to the activists, because under the rules they are pushing in Congress, this impersonal string of otherwise meaningless symbols would still be classified as “their data,” and subject to Government regulation. And with that change, control of media and commerce would pass from the private sector to the Feds.


Think I’m being overly inflammatory? In addition to the obvious damage to interactive content customization and relevance, consider what else would be placed at risk if this de facto, all-encompassing definition of “behavioral data” were to become de jure:

  • Bar-code scanners used at checkout counters. With ownership of impersonal consumption data legally enshrined as consumer property, this crucial component in retail supply-chain management could become unusable – at least if the data they collect is transmitted over the Web. Internet-based supply-chain management systems employing RFID tags could similarly be compromised.
  • Lists of “most e-mailed stories” in newspapers and magazines. These popular features – and vital editorial management tools – could become illegal under the proposals floating around Washington and the states, for they depend on aggregated behavioral data.
  • Search-engine competition. Kiss goodbye any efforts by its competitors to compete with Google. Whether small fry like Cuil or giants like Microsoft, their ability to take data to optimize their own processes or experiment with new algorithms would be gone. So would the search-engine optimization and search-engine marketing industries, too.
  • Social science research. Academics interested in observing, say, the effect of health communications on Americans’ behavior would be restricted from utilizing the anonymous data generated by the billions of interactions daily between Web users and content. Even the American Psychological Association, which recommends “informed consent” as a standard in most research, recognizes that some forms of research, including anonymous questionnaires and “naturalistic observations” in cyberspace, don’t necessarily require it. Some legislators and activists, though, want their judgment to supersede the scientists’.
  • Journalism and commentary. If people own “their data,” publishing observations of their activities online – how many times a video was watched, how many members of a social network enjoy Cream of Wheat for breakfast, what people are saying about that new Carmen Diaz movie – would fall into a legally murky area. Remember, California , for 20 years, has accorded people “personality rights” that prevent the unsanctioned use of anyone’s “name, voice, signature, photograph or likeness on or in products, merchandise or goods.” Extending this right to “their data” is basically what the anti-Internet proposals envision. In a profound, First Amendment-grounded critique of the FTC's proposals against behavioral marketing, the Newspaper Association of America wrote, "The fully protected rights of news publishers are at stake. A limitation on behavioral targeting would directly affect the selection of content that is presented to readers."
  • Branded-media and small-publisher growth. Many major media companies are hooking their futures on the opportunity to gain more reach by constructing large networks of affiliated sites, whose content and demographic affinities would be abetted by network-based ad delivery. Ban the use of anonymous behavioral data, and these enterprises comes tumbling down. So does network-based advertising support for small publishers, which underpins the economics of tens of thousands of sites.
Real Crimes

It’s ironic that I’m writing this only a week after the U.S. Government broke what The New York Times described as a global, criminal “cyber-ring” that “plundered the credit card numbers of millions of Americans.” Such threats – to family information, financial records, health data – are real. In fact, exposure of such crimes pretty much requires the retrieval and storage of user string agents and other behavioral data by e-commerce providers and other sites. But instead of zeroing in on real crimes and real harm, aggressive legislators, regulators, and their champions seem hell-bent on grouping under the same regulatory regime sensitive identifying data and the kind of impersonal behavioral data necessary to run the Web.


I – and my colleagues at the IAB – have been sounding these alarms for more than a year. I’ve testified before the Federal Trade Commission, and the House Small Business Committee. Yet the call for regulation grows bewilderingly louder, from elected officials who have specified no harm and conducted little research. Even the militant Center for Democracy and Technology, which has declared that “concerns about behavioral advertising practices are widespread,” recorded zero consumer complaints filed with states’ attorneys general in 2006-2007 over privacy violations involving behavioral targeting. Zero! Indeed, in its just-released 37-page report Online Consumers at Risk and the Role of State Attorneys General, which documents thousands of cases of Internet-related sales fraud, spyware, phishing, data security breaches, and child solicitation, the word privacy comes up only once – in a Texas case filed against two Web sites that allegedly failed to protect “the privacy and safety of minors.”


Such violations are already covered by existing law (in this case, the federal Children’s Online Privacy Protection Act, or COPPA) but the CDT, asserting that “behavioral advertising poses a growing risk to consumer privacy,” wants “a new general privacy law backed up by regulatory enforcement.”


It’s time for CMO’s, media company CEO’s, technology entrepreneurs, free-press advocates, independent Web publishers, retailers, e-tailers and others who depend on robust Internet communications and a thriving free media to stand up and let the world know where these recommendations are explicitly heading: Toward a Government takeover of the Internet, and a silencing of the diverse voices that make up the Web.

Monday, July 21, 2008


MOBILE BITS, OR "WHY I NEED A LARGER SCREEN"

More Live Blogging From the IAB's Mobile Leadership Forum


Some random factoids from this morning that I've found fascinating:
  • Hispanics' use of mobile for media and marketing purposes exceeds that of the general market by as much as 50 percent, according to Jupiter Research's Julie Ask. "You're making a big mistake if you're overlooking the Hispanic audience," said Eric Bader of Brand In Hand.
  • It ain't just for kids. The average demo for the Food Network's recently launched mobile application is 42-year-old women. Average impressions: 50,000 per week -- so says Jeff Arbour, vice president for mobile integration at The Hyperfactory.
  • Client budgets are creeping up, with marketer investments moving from the "experimental" or "R&D" budget line into a defined mobile line. "Going into mid-year, we're seeing $500,000, $750,000 budgets becoming the norm," said Ansible Mobile CEO Vladimir Edelman. "And going into 2009, we're seeing seven-figure budgets."
  • Marketers are transferring funds from underperforming media. "Some budgets that are easy to beat up on are email and direct mail," said Mr. Bader. "Search is killing, so you won't get dollars from there. I look at underperforming CTR's, and I beat up there. That doesnt mean if someone has a $20 million direct mail budget, you will get $18 million. But I target ROI, branding, other metrics, and show how mobile can outperform, and I do get $500,000. And it does outperform."
  • Will older folk grok to short-code campaigns? Only if you give them a reason to. "I knew a watershed moment had arrived when my mother started texting me," Mr. Edelman said. "On the one hand, that's good news. On the other hand, that's very bad news."
By the way, IAB is now mobile! Thanks to Crisp Wireless, this entire conference program is available on the third screen -- go to www.iab.net/crisp.

And thanks to Polar Mobile, the IAB for Blackberry app can be downloaded at www.iab.net/blackberry. It's incredibly cool -- it gives IAB news updates (such as today's launch of the "Mobile Advertising Overview Whitepaper," the latest in the market-making Platform Status Reports IAB has published this year); and also allows you read our live conference blogs. (If you want those on your larger screens, just go to www.iab.net.)
THE MOBILE WEB HAPPENED, SO DON'T ASK!


Live Blogging From the IAB's Mobile Leadership Forum

There hasn't been a conference, event, webinar, or bar fight this year at which someone at some point hasn't stood up and asked the question du jour: "We've been hearing for 10 years now that mobile is the next big thing -- so when's it gonna happen already?"

I'm sitting at the Roosevelt Hotel in midtown Manhattan. It's a bit after 11 a.m., at the end of the first break at the Interactive Advertising Bureau's first-ever "IAB Leadership Forum: Mobile." And the answer is becoming clear: It's already happened, so let's get going and adopt already.

The centerpiece of the morning was a series of mobile marketing success stories, featuring quick cases involving major consumer brands from a succession of service providers, agencies, and publishers. And as many cases as I've absorbed during the past year or two, even I was surprised at how far beyond experimental mobile advertising has evolved.

Eric Bader, newly ensconced as managing partner of mobile marketing and media company Brand In Hand after his successful stint as managing director of digital at Mediavest, rolled out a wagon train of Procter & Gamble mobile cases. And in many cases, they were reminiscent of the early days of cable television, when marketers and agencies needed to be bopped on the head to become aware of the segmentation and engagement opportunities in a new and unfamiliar medium.

For example, Eric noted that Vick's Dayquil had been successful in tying mobile ads to weather reports (a tactic that moved targeted campaigns for, say, automotive marketers onto The Weather Channel, back in the day). But what was so provocative in Eric's report was that the mobile component of cold-medicine's effort was that it outperformed the online component, with more downloads and more registrations collected.

"It's not to disparage online," Eric said, "but at scale, mobile was more successful."

Another creative Procter case he described was for Pringle's potato chips. Because snack foods rarely end up on written shopping lists, they are heavily dependent on impulse and in-store positioning. To drive Pringle's awareness, Brand In Hand helped develop shopping lists, sponsored by the snack brand, that could be accessed on the Web and through mobile handsets -- an opportunity to be on the list without having to be written on it.

"I have heard comments like, 'mobile is really for direct marketing, but not branding,'" Eric said. "I think that's mythology."

Vladimir Edelman, chief executive of Ansible Mobile, noted that the immediacy of mobile had broadened the landscape for branded marketing experiences -- in effect, creating engaging brand intersections in venues not previously thought of as brand-enhancing environments. He described an effort his company undertook for Babycenter, to create opportunities for mobile alerts and interactions for the new and expectant mothers who are this Johnson & Johnson-owned sites core audience.

"When we analyzed this audience's concerns, as expressed in their postings, it boiled down to three things: 'Is it dangerous? Is it normal? Can I eat it?'" Vladimir recounted. So Ansible developed a system that would allow for "call and response," via mobile devices, to such questions as, "I'm in a restaurant, and I need to know now whether I can eat shellfish in my second trimester?"

Babycenter's mobile alerts have grown an average of 263 percent per month. "If you need an answer now," Vladimir said, "mobile is a great medium."

Maybe artificially great. All the morning's speakers noted that mobile advertising clickthrough rates are much higher than online clickthrough rates -- as much as three times as high right now, reflecting the still-uncluttered mobile ad environment, and the novelty of mobile advertising.

Perhaps for that reason, prices for mobile ads are high. I anonymously texted a question asking about average CPM's -- thanks to Impact Mobile, IAB was able to debut a text-querying function at this conference -- and discovered that mobile advertising CPM's are averaging about $25, according to Julie Ask, the Jupter Research research director.

Ansible's Vladimir Edelman said his company is seeing CPM's as high as $125. "That will change over the next 18 months," he cautioned, "as the big money moves in and beats it down."

Tuesday, June 24, 2008

SMALL PUBLISHERS UNITE!
YOU HAVE NOTHING TO SAVE BUT YOUR BUSINESS

If you are a Web publisher earning less than $1 million annually in advertising revenue and with five or fewer employees, you can help save the ad-supported Internet. I urge you to join the Interactive Advertising Bureau and become part of the small business army we are mobilizing to stop politicians from unfairly and inappropriately regulating digital advertising.

The threat is very real. As I have outlined in previous postings,
forces arrayed in Washington and multiple state capitals are specifically targeting the business infrastructure that enables small Web sites to support themselves through advertising sales. Although these advocacy groups have provided no evidence of public harm, their efforts have resulted in a flurry of regulatory proposals which, if enacted, would severely hinder the ability of small publishers to support themselves with advertising sales, and impair the ability of small businesses to use interactive advertising to market themselves.

I believe these proposals have received little attention from marketers, media and publishers because they have been hidden on legislative calendars in Albany, Hartford, and Springfield, or been negotiated behind closed doors in Washington, away from our ecosystem's business leaders. Moreover, because the proposals state that they seek to control "behavioral marketing" or "third party networks" or "online preference marketing," publishers that do not engage in such practices or with such practitioners believe they are safe.

But in fact, these proposals are so broad, they will put virtually all interactive advertising practices -- and even many mainstream marketing practices -- under a strict regulatory regime. Business leaders need to start paying attention now, or the underpinnings of the "free" -- which is to say ad-supported -- Internet will come undone.

Undermining Advertising Research

Consider a bill that has been before the New York State Assembly, which aims to curtail “online preference marketing.” It defines “online preference marketing” as “a process used by entities whereby data is typically collected over time and across web pages to determine or predict consumer characteristics or preference for use in ad delivery, including the use of non-personally
identifiable information.” But employing non-identifiable data to predict consumer preferences for use in ad delivery is, in fact, the very definition of advertising research. Were the New York bill to pass, a mainstay of business development for 120 years would, for the first time, fall under a strict regulatory regime – forcing small Web publishers and their advertisers to incur legal and lobbying expenses they cannot afford, and just for New York State.

Or look carefully at Connecticut
General Assembly Bill 5765. It offers the same, sweeping definition of “online preference marketing,” and goes on to say that any publisher offering it through a “third-party advertising network” must additionally give consumers the opportunity to “opt out” from receiving it. This means consumers, for the first time, would be able to force advertisers to stop providing them ads – but only if those ads are relevant to their interests! Presumably, mass-distributed “spam” advertising would still be protected.

The Connecticut bill also would allow consumers to pull non-identifying data they generate out of the aggregated databases that are commonly used in market research to improve products, services, and marketing. To put this in perspective, this is the equivalent of allowing you, me, or anyone to demand that a grocer not use our anonymous checkout-counter scanner data to determine when to restock a product.

These state bills have been tabled -- for now. But consider the Federal Trade Commission’s recommendations for self-regulatory principles for “online behavioral advertising.” The FTC has been a good partner with the interactive media and marketing industries, and has encouraged us, for the most part beneficially, to develop an effective self-regulatory mechanism to guard consumers’ legitimate interests in identity protection and data security. Yet even the FTC has succumbed to the fear-mongering of anti-business advocacy groups, and HAS offered breathtakingly broad definitions that could severely hamper the activities of small publishers and marketers.

The FTC defines “behavioral advertising” as “the tracking of a consumer’s activities online,” and would give consumers the right “to choose whether or not to have their information collected for such a purpose,” apparently even if it is anonymous and non-identifying. Yet one such “tracking activity” is the measurement of Web site audience traffic – the central measure by which advertising prices are established. Another such “tracking activity” is the measurement of advertising delivery – the core determinant of whether the publisher gets paid by the marketer for running its ads! Thus, in its recommendations for the self-regulation of what it calls “behavioral advertising,” the commission has made suggestions that would break longstanding processes essential for the management of media companies in the U.S.

The most unfortunate aspect of these proposals is that they are utterly unnecessary. The IAB and its members vigorously support the principle of consumer control over their media consumption. Indeed, consumer control is one of the fundamental reasons interactive media have grown so quickly in popularity. And consumers have all the tools they need to control all forms of data collection in online media and advertising, built into their browsers and into security packages, many of them available free online.


Small Business Boon

As I told the House of Representatives Small Business Committee in Washington earlier today, such regulations would have a disproportionately negative effect on the small publishers and small marketers that are the backbone of the interactive media and marketing ecosystem.

Because so much attention in our industry recently has focused on multi-billion-dollar consolidation battles, it's easy to assume that we lives in a land of giants. But nothing could be further from the truth. Interactive media is a dynamic field suffused with small entrepreneurs with big dreams. When you think of IAB’s 375+ members, you may conjure up the great names of the online and offline media world – Google, Yahoo, AOL, MSN, The New York Times, Time Inc., CBS, and Walt Disney among them. But the majority of our members – 61 percent – are small businesses, earning from $0 to $8 million annually in advertising revenue.

Evidence that the Internet is a small-business engine abounds. For example, research done by the consulting firm Booz & Co. for the IAB, the Association of National Advertisers, and the American Association of Advertising Agencies shows that 40 percent of IAB members’ revenues comes from local businesses.

Interactive advertising revenues totaled more than $21 billion in 2007 and were estimated at nearly $5.8 billion in the first quarter of 2008, up 18 percent over the first three months of 2007. Of that total, search is about 40 percent. And small companies' share of online ad spending in search engines is more than double the share of medium or large companies, according to the research firm Outsell, Inc.

According to the Pew Internet & American Life Project, more than 32 million American adults have used online classified ads for selling or buying. eBay -- which is both an advertising vehicle and a retail mechanism for its sellers -- says 768,000 small businesses across the U.S. use this online marketplace as their primary or secondary marketing channel. Blog networks, supported by advertising, helped would-be media moguls generate 112 million blogs worldwide; in the U.S., as of July 2006, some 12 million American adults, about 8 percent of the American population, were publishing their own blogs, which were being read by 57 million others, according to Pew.

Publishing's Long Tail

Those blogs are part of the most remarkable communications phenomenon since the invention of the printing press: the explosion of small interactive publishing businesses, untold thousands of which support themselves through advertising sales.

While many of these businesses employ direct sales forces, I pointed out at Congress yesterday that an essential aid to them has been online advertising networks
consisting of hundreds, thousands, even tens of thousands of sites. These online networks are the moral equivalent of the broadcast radio and television networks with which we grew up; they have technological infrastructures that can get contextual or behavioral advertising and ad revenue to these small sites, wherever they are located.

But there’s one crucial difference: Instead of delivering the same programming – and for the most part the same ads from the same giant marketers -- at the same time across groups of local affiliates, online networks allow myriad voices to flourish, serving myriad interests and needs, in the tiniest nooks and crannies of our culture.


No one knows how many of these "long tail" publishers are in the U.S., but here’s a sample gathered by the ThinkPanmure equity research firm. The 24/7 Real Media network sells and places ads for 1,000 Web sites. The Blue Lithium Network, owned by Yahoo, reaches 119 million unique U.S. users through 1,000 publisher sites. Burst Media has 4,200 ad-supported sites in its network. Tacoda, a network acquired last year by AOL, delivers behavioral ads to half the U.S. population, across 4,500 sites. The Adbrite auction-based ad marketplace represents 19,000 Web publishers.

How diverse are these publishers? We don’t have a census of the whole, so to prepare my Congressional testimony, I asked my IAB team and some of the networks among our membership for examples of their favorite small, ad-supported publishers. Interestingly, many of them are mothers who are using interactive tools and services to develop home-based businesses around their passions. Here are a few examples:

  • Baristanet.com is a community site started by three local women for the area of northern New Jersey where I grew up. Its advertisers include a local hospital, Montclair Family Dentistry, and Dial Pest Control of Roseland.
  • Dooce.com is a blog started by a stay-at-home mother in Salt Lake City, who was the valedictorian of the Class of 1993 at Bartlett High School in Memphis, Tennessee. She carries ads from the Disney Vacation Club and Verizon.
  • Bakeorbreak.com is run by a woman in northeast Mississippi, who subtitles her Web publication “Adventures of an Amateur Baker.” It’s filled with recipes, sells cookbooks, and carries ads for M&M’s, Perdue chicken, and Bertolli olive oil. Some of those ads are sold by Martha Stewart Living Omnimedia, an example of the growing symbiosis between small and large publishers on the Web.
  • Here are three political sites that cover the spectrum of opinion. Many of you know Dailykos.com, the famous liberal political blog; look closely, and you’ll see that it’s supported by ads, many of them placed by the Google Adsense network, from PBS, the online t-shirt maker Café Press, and others. Latino Issues, by contrast, is a conservative Latino blog, with some ads also sold by Google. Its advertisers include the dating service LatinoAmericanCupid.com. And Confederate Yankee is an ad-supported site, via the Pajama Network, that’s a hybrid of conservative and liberal, Northeast and Southeast sentiments and values: Advertisers include Omaha Steaks and FTD, the floral company.
  • Womenslacrosse.com is the central meeting place for women who participate in the oldest American sport. It’s a family business run by Founder and CEO Cathy Samaras of Annapolis, Maryland, and its advertisers include the Kaplan test preparation company, and the Bowie Baysox Class AA minor league baseball team.
  • Scienceblogs.com is a collection of 90 ad-supported science sites covering fields from neurophilosophy to quantum mechanics to tetrapod zoology. Its offices are in LA, Washington, New York, London, Munich, and Shanghai, but its bloggers come from all over: Iowa, Colorado, Massachusetts, New Jersey, and Virginia, among other places. Its advertisers include PerkinElmer and Dow Chemical.
  • AfricanSisters.com was formed in 1999 in Garland, Texas by a group of black women to help women of color build businesses, increase employment and build revenue. Its advertisers include the iGourmet.com “tea-of-the-month club,” Crockpot cookery, and Kmart.

IAB Thinks Small

As the IAB team surveyed the regulatory landscape this past year, it occurred to us that few regulators or legislators are aware of this small business landscape, and how interactive media and advertising have served, in essence, is its railroad: the network that enables these tiny markets to exchange value within and among themselves. So we asked our Board of Directors and then our entire membership to approve a change in our bylaws, and allow small publishers to join the IAB at an advantaged price -- $500 in annual dues, or 1/20th the minimum dues tariff we charge General Members.

I'm pleased to say our membership approved this Small Publisher Membership category by an overwhelming majority last week. So if you think small (or work with publishers who do) please let them know about our offer. (I'm equally pleased to note that when we canvassed about a dozen of our network-oriented members and asked if they would help us market this new membership to their publisher affiliates, each and every one enthusiastically answered in the affirmative.)


IAB Small Publisher Members will have business insurance and services discounts; preferential pricing for IAB events; special webinars and seminars designed to teach small publishers the contours of the advertising and marketing industries; and membership in the IAB's new Small Publishers Committee. And, of course, there is representation by the IAB in Washington and across the U.S. Like our Associate Memberships, these will not carry voting rights -- but any Small Publisher Member that grows large enough (or otherwise wants advanced participation) is free to join IAB as a General Member at the normal dues rates.


Our first signup was Tim Carter, the founder and proprietor of
Askthebuilder.com in Cincinatti, Ohio. I wrote about Tim -- and his remarkable development from a self-syndicated, hand-to-mouth newspaper columnist to an online media mogul earnings hundreds of thousands of dollars in ad income a year, thanks to network-based sales -- in an earlier "clog" posting. When I asked Tim (who also testified at the House hearings yesterday) why he was joining the IAB, here's what he said:

“I decided to join the IAB for any number of reasons. Primarily, I want to be connected with an organization that’s ahead of the curve, and gives me an enormous competitive edge in the marketplace. I also enjoy being surrounded by other successful people who help me to achieve goals I set for myself. I also love the fact that the IAB represents small digital publishers like myself in Washington. I don’t have the time nor resources to be heard, but politicians need to know the facts about what is happening in the Internet world I work in. The IAB delivers a fair and balanced perspective to these lawmakers."


I'm incredibly proud to have Tim Carter as a member of the Interactive Advertising Bureau. But we should aspire to make sure that hundreds of thousands, even millions, of Tim Carters can flourish in this country, building businesses through the communications, advertising, and services available online. We can do that by assembling together, to learn each others' best audience-building and marketing practices, and to ward off the ugly and unnecessary hand of anti-Internet regulation.


Put simply, IAB WANTS YOU!.
Click here and join today.