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!

Another Childhood Star Meets a Tragic End

We report, you decide:

Mikey

Blagojevich

That's

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.

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.