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Fetching Back Behavioral Targeting

By Elyse Tager, The ClickZ Network, Jun 11, 2008
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In the science fiction movie, "Minority Report," Tom Cruise plays a police officer forced to flee after he's falsely accused of a murder he has yet to commit. At one point in the movie, Cruise's character walks through a mall and is personally greeted by electronic billboards and displays ads, like a Gap ad commenting about the shirts he last bought. Let's see how behavioral targeting evolves from the seeds planted in the present to the not-so-distant future.

To provide more insight into this topic, I caught up with Chad Little, chief retriever for FetchBack, a company that's developed innovative technology aimed at "retargeting" advertising and marketing toward consumers.

Elyse Tager: Explain in more detail about your patent-technology and how it can evolve behavioral targeting for the future.

Chad Little: FetchBack has developed technology from the ground up by industry veterans who had developed several other ad-serving solutions over the years. The idea was to combine our knowledge of the industry, having developed several other ad-serving solutions, and develop the ideal technology solution for delivering retargeted ads. It's our vision that retargeting will become a line-item budget for marketers. Advertisers will need the most robust solution available to meet their CPA [define] objectives and at the same time allow the mom-and-pop shop to have access to this type of advertising.

The portion of the technology that will be most beneficial to marketing professionals is the comprehensive ROI [define] reports that can be generated. It allows them to track where every advertising penny is being spent over a given time period.

The heart of our technology is to simplify the process of implementation so that everyone can use it and at the same time provide more conversions for any given advertiser better than any other product on the market, provide the most comprehensive analytics specific to retargeting, and deliver the most conversions by delivering substantially more reach than any competitive network.

Other than paid search and affiliate marketing, this is the only form of advertising that can work for any advertiser, regardless of size. We believe our technology and vision substantially evolves the behavioral advertising marketplace, as other forms of [behavioral targeting] will not work for everyone. Essentially, this is a way to democratize behavioral retargeting and level the playing field.

ET: How can e-tail sites that fail their customers with their recommendation functions refine them to better address what their customers want?

CL: Well, this is not exactly where our expertise lies. Ultimately, though, it boils down to data and learning how to interpret that data. Categorized [behavioral targeting], retargeting, and recommendation engines are all trying to give users more relevant information that can ultimately enhance their experience online.

Criteo is a company doing interesting things in the space. As they refine their algorithms and expand the breadth of factors included in those algorithms, recommendation engines will become more accurate in predicting what actually is relevant to a customer. The more experience a company has, the more data they have and the more accurate they can be in their predictions.

A lot of things go on beyond the click, but who knows whether or not the companies developing these engines are looking there. No doubt they are getting more and more intelligent, though.

Watch for companies taking relevant recommendations outside their Web site. It rained in Phoenix a couple weeks ago, and that day a friend of mine got an e-mail from Amazon about a new pair of windshield wipers. I told him he was a fool if he thought that was mere coincidence.

ET: What is the current status of behavioral targeting technology and its uses from an e-tail perspective, and how far can we take targeting in the next generation?

CL: Behavioral targeting can be put into two segments: categorized behavioral and retargeting. We believe that retargeting is significant enough to have its own focus outside of categorized behavioral targeting. We believe strongly that most e-tailers can double the effectiveness of their current ad spends by retargeting alone, with plenty of room to grow.

The only thing hindering this idea from skyrocketing is privacy concerns. We collect absolutely no personally identifiable data, but the subject is very much in the forefront of the media at the moment. If this topic can be overcome and communicated, then we really are just looking at the very beginning of the possibilities associated with [behavioral targeting].

Future growth will come from a deeper understanding of what each individual consumer is interested in on your site, something provided by current [behavioral targeting] companies. And a greater understanding of how they landed on your site will help to better target individuals based on every single action taken to get to your site.

We're seeing that retargeted impressions are having a big effect on client traffic. This data goes far beyond the click though. We've started looking at really granule data with regards to view-based conversions. Banner ads have had a bad rap in the past, but look for targeted banners to become a more valuable part of a marketing plan, as the information we're seeing starts to surface. It's literally industry-changing.

Another factor in the future success of [behavioral targeting] is the creative content that your consumers will see. So much of online advertising's focus has shifted to paid search; rich in text, lacking in creativity. To date, display advertising has been relegated to the few. Retargeting hopes to reintroduce the importance of creative online advertising to marketers who have grown very accustomed to the simplicity and ease of paid search. What becomes effective with retargeting is the ability to dynamically select ads based on the actions a visitor has taken on the Web site. It's already a challenge for companies to get quality online creative. As interest increases in targeted banner advertising, the problem is only going to become more prevalent.

Better analytics will be needed to monitor performance that goes well beyond clicks to paint a much more accurate picture of the effect on the consumer; and these analytics need to be proactive!

ET: Do you expect the type of retargeting that you do can translate well into the offline world, like being reminded of shirts you bought at the Gap?

CL: We can see the beginnings of this happening with the Amazon e-mail campaign in the example I gave earlier. Retargeting and [behavioral targeting] will expand first to every other form of online advertising. And as the Internet becomes the delivery mechanism for other media, the line between online and offline will blur.

The key to making something like this work offline is the ability to deliver messages that are timely and dynamic. The commercial printing industry has been trying to make direct mail campaigns more relevant for a while now. I could easily see an intelligent e-tailer taking the customer data they gather on the Web and integrating that into not only retargeting and e-mail campaigns but a variable-data direct mail piece as well.

Based on what we can see from our data, we see an increase in total conversion rates for our advertisers that are coming especially from those who were simply exposed to the ad. There's no question that retargeted ads influence purchasing behavior. Even if it's on a subconscious level, it would just be a matter of tying together the offline and online worlds that would be the tricky part.

SEM+Retargeting = A Match Made in Online Heaven

Time to make a prediction! I believe that the SEM world is poised to control a significant portion of the retargeting market...should they choose to start jumping now! And I mean, right now. There are countless reasons why I believe this is the case, but the major reason that stands out in my mind is the mere fact that the possibilities seem endless with retargeting! The results speak for themselves in this case, and the results are significant enough that these SEM players should be jumping on board, if they want to be the ones to prosper.

SEM and Retargeting make excellent partners for a variety of reasons. The top reasons are listed below in this nice little list:

 

o   SEM is held to a different standard - Believe me, the folks in this industry know it.  It’s testable, customizable, optimize-able, etc. etc. Plus, there are ROI objectives that expect SEM to perform precisely. The online advertising arena is to a point where there’s an attitude that no other form of advertising is worth it (“it” being risk, money, time, headaches, etc). They’ve tried many different types of ads, have been burned, and have come to a consensus that nothing works as well as paid search…until now. 

 

o    It’s Logical –It makes sense to drive the traffic to your site, convert what you can, then get back those that didn’t, and turn them into customers later. It just makes sense. Especially considering how much time/effort/money goes into optimizing SEM campaigns, when the point is conversions, right? Well only 2% of your traffic will perform the desired objective. That means 98% people that came are interested consumers, just waiting for something to persuade them. Get ‘em while they’re hot!

 

o   Bundles of Joy - SEM firms find it more and more competitive every day. It’s very difficult to stand out when everyone is offering the same types of services. We’re seeing more firms starting to offer the SEM+Retargeting package to stand out from the crowd. And guess what? Those firms that do are the ones realizing the potential that lies here. They’re the ones seeing the best results, meeting their ROI objectives, and get to report this to their joyous clients.

 

o   ROI – The bottom line is retargeting delivers the same, if not better, ROI that paid search does.  This means that retargeting is going to be the next “line-item” budget next to paid search. It’s as simple as that.

 

o    It works for anyone - Arguably this is the only form of online advertising that can be as effective for the small mom-and-pop sites selling shoe laces, to the Amazon’s of the world; sounds a lot like paid search, doesn’t it? '

 

Agencies are learning; and faster than most SEM firms at this point. This could be due to the open attitudes about experimenting with different targeting methods. They spread their risk with different forms of advertising all the time, thus enabling themselves to see what works and what doesn’t.  SEM firms seem to have a strong aversion to display ads, which, in the end, could ultimately hold them back if they don’t see the potential here…

 

…Time to jump.

 

“I don't look to jump over 7-foot bars; I look around for 1-foot bars that I can step over.” - Warren Buffett

 

Be Magical, Be Successful

“Any sufficiently advanced technology is indistinguishable from magic.” As Behavioral Targeting becomes more prevalent in the market these words written in 1961 must hold even truer.

Ever think about how some word associations are stuck in time like “far out” or “rad”? Well for our industry one of the more common words used is “creepy.” That said, agencies and advertisers alike are looking to explore the behavioral marketing frontier and exploit all the capabilities we now have. Acutely customizing creatives seems to be a hot topic. we constantly get asked about including a person’s name in an ad for someone that didn’t complete a registration form. My immediate reaction? Creepy!

When working with behavioral targeting and all its amazing capabilities, we have to always remember to avoid the creepy factor! No one truly knows where the creepy line is drawn, but I think it’s safe to say that as soon as you include (let alone gather!!) personal information, and that person has no idea how you got it, you’ve successfully crossed into Creepland!

Don’t get me wrong, it’s extremely important that behavioral ads get your prospects attention and create the ‘ah factor’, making the ad like magic in their minds. Garnering the “Oh I was just on that site,” or “Oh cool, I need one of those.”

There are four important elements that go into making a retargeting ad truly magical (and effective).

·         Make your brand prominent

·         Keep consistent

·         Speak Differently

·         Achieve the “these guys are huge” factor

Your brand has to be the most important thing, so keep your logo prominent and your brand consistent. Let’s face it, we can only store so many things in our brains and your product is probably not on the top of their list. We’re much better at recalling that which is visual vs text. So it’s important to carry over your website’s color and format to your retargeting ads. If you’re breaking down your campaigns by category, make sure the ads are consistent with the pages visited.

Probably the hardest element to grasp without crossing into Creepland is to speak differently. Your messages need to speak to a prospect in a different way than ads that would drive them to your site for the first time. Keep in mind, that at least briefly, the prospect has come in contact with your brand and was interested enough to check out your website. So using the same old banners from your RON campaign isn’t gonna cut it. And remember, people just aren’t going to read more than a couple words in your ad, so give them a reason to COME back to your website, WITHOUT being creepy!

Be magical, “Need to send Flowers to someone you Love?”  “FREE SHIPPING if you click here.”  Don’t be creepy, “Still looking for flowers?”

Finally, achieve the “these guys are huge” factor. More often than not, prospects leave your site because they were distracted, still looking or short on time. If you let them go without staying in front of them you will probably lose them for good. One of the most important lessons we’ve learned is that the return rate of your prospects is huge when you simply remain in front of them. It’s the “these guys are huge” factor, same idea as wanting to eat at the restaurant that is always crowded.

It’s a fine line that we walk, magical and creepy, but if you can do it correctly the rewards will be enormous. Be magical, and in the eyes of your prospects you’ll be that crowded restaurant and they will eat.

Bringing BT To Main Street: Reality Check

Published by Behavioral Insider 12/12/07

Written by Phil Leggiere

Like many other groups of insiders, those of us immersed in online advertising 24/7 tend to live in a professional bubble. Within this particular bubble, "everybody" knows about the inner recesses and nuances of behavioral targeting. In the conversation below, FetchBack CEO Chad Little explains why, despite all the dutiful lip service paid to the notion of the long tail, behavioral concepts have a long way to go before they become truly relevant to the middle market.

Behavioral Insider: How would you characterize the progress that developing behavioral targeting strategies, especially retargeting, has had in 2007?

Chad Little: It's always hard for those of us on the inside of this space to put ourselves into the heads of those outside the industry. We feel by now that behavioral targeting, especially retargeting, the most basic and practically applicable part of BT, should be a line item for everybody. But once you get beneath the really big advertisers, everyone on the 'inside' hears about into the mid-market of smaller or more regional businesses, you see that's surprisingly not really the case at all. So there's a lot of educational work ahead to explain what all this buzz is about, and whether and how [retargeting] can really be applied to the real world most advertisers live in.

BI: How is retargeting perceived by those businesses?

Little: People have a vague sense of what retargeting is, or more precisely that it's something they ought to know about. But when it comes to actually trying to implement it, they don't know where or how to start. There are all sorts of misconceptions and, unfortunately, some ad networks, touting the virtues of behavioral retargeting, haven't been educational. There's a lot of miseducation or just ignorance.

BI: What kind of ignorance?

Little: I liken it to the early days of search. If you recall when paid search was new, everybody bought their 50 keywords, wrote some copy and threw it out there. That's about where we are. The majority of advertisers still utilize the same creative for re-targeted ads as they do for driving people into the front door.

BI: How are you addressing that or trying to speed up the learning curve?

Little: The first step -- and I'd again make the analogy somewhat to early search -- is to make more sophisticated campaign development and management simple and accessible. Where we're trying to focus is where advertisers really are. Of course it's natural for them to start with a customer prospect who went to their home page. But once they begin that, you can show them that there's also enormous untapped value in customers who've abandoned their shopping carts or repeat customers. Getting them to focus on those most basic elements and think about varying creative, and then from there paying attention to sequencing of messaging, are the building blocks. Doing them well is as far as many, perhaps most, advertisers, will ever go, or need to go.

BI: So you don't really see a role for more granular content segmentation, the semantic web?

Little: We promote sub-segmentation of different elements and pages on the site, and by customer type, in situations where it makes sense. Comparison shopping sites, for instance, have so much rich data to leverage. Or, if you talk about the really big guys where a one-half point difference means tens of millions of dollars. But for the mid-market the value of segmentation at that level is not clear at this point. It's relatively easy to develop great technologies. The issue isn't that. It's that you need a critical mass of a million advertisers and publishers, whether it's contextual or behavioral. You can do category-based targeting if you have lots of advertisers and a critical mass of auto shoppers. But for most companies out there, these segments are just not going to be sliceable and diceable, and at the same time big enough to really move the needle.

BI: What does move the needle?

Little: The value proposition of behavioral targeting that really does move the needle for a small company is that it's a lot more efficient in terms of marketing resources to close a warm lead than it is to develop a new cold one from scratch. I'm continually surprised by the numbers I see for marketers on ROI. Certainly ROI is important for all marketers. What I push clients to do is define what it means, and that means you have to go beyond clicks or even the ratio of clicks to conversions. I think there's actually more interesting work being done in Europe now focused on the metric of impressions to clicks.

For the mid-tier marketer, clicks are everything because they can't afford display ads. Retargeting can change that. The idea is to use display as economically as search has been used. The goal is to get education to the point where the conventional premise of advertising, that 99% or 100% of your budget should go to drive traffic to your site, ignoring the 98% of prospects who leave and never come back, can be challenged. It's a premise that goes against every bit of marketing common sense.

BI: Looking ahead to 2008, what are the priorities for pushing retargeting out to the mid-tier?

Little: What's missing is a unified way of serving sequential ads across multiple sites. The way things work now, advertisers need to separately tag each type of traffic source. One way of working at serious scale is to allow advertisers to work with multiple sites and networks with just a single line of code. If we had the platform, the fragmentation and complexity which makes campaign reporting a nightmare, especially for mid-market advertisers, could be overcome. This is a priority area for us going into 2008. We're piloting a project which is designed precisely to get at this issue, an exchange-based retargeting system about which we'll have a lot more to say soon.

Behavioral Marketing - Take Notice

For years behavioral targeting has been kept in the background, almost as a secret weapon only used in times of need. Only recently has the mass market started to take note of the power and efficiency in better targeting consumers, truly maximizing marketing dollars. Did anyone catch the NPR segment on behavioral marketing?

The recent AOL purchase of Tacoda, a behavioral targeting company, is further validation of the importance of behavioral marketing. But will AOL leave Tacoda alone, allowing them to do what they do best?  Will Advertising.com, purchased by AOL in 2004, become the company umbrella, overseeing all internet marketing activities? So many questions pop up whenever giants like AOL and Advertising.com step in.

I find it interesting that when a deal like this happens I kind of take the purchased company off my list of valid competitors in the market. Almost assuming their magic will be lost- that the new parent company will somehow screw things up. Does anyone else share this opinion? 

So far AOL has done a good job of leaving Advertising.com alone so maybe Tacoda will get the same courtesy. Even so, one question remains to be answered. Will AOL/Tacoda remain innovative enough to advance in this pioneer market?

In my humble opinion, it seems that most acquired companies loose their pizzazz or at least the creative individuals that drove them to success in the first place. They stop taking risks, stop standing out from the crowd and become satisfied with the status quo. I guess that’s my whole point, it seems to me that the driving forces in this industry are independent companies that are willing to take big risks in hopes of brilliant outcomes.

Either way, the fact that AOL has purchased Tacoda is big news for behavioral targeting, it stands as a sign that the “big guys” are coming around another indication that this industry is evolving and getting closer to perfecting the art of internet marketing.

We're Changing Online Advertising!

As some might be aware, I recently stepped down as President/CEO of AdOn Network to focus full time on the growth of FetchBack. The very capable Steve Armstrong has accepted the position at AdOn and will continue to build the organization to reach new heights.

Our vision at FetchBack is really quite simple. We’re changing online advertising! We’re changing how people think about spending their advertising dollars and we’re changing the entire experience.

The majority of the market for online advertising has been focused on driving a new lead to their website. Marketers spend major bucks on TV, print, paid search and display advertising. The dollars spent drive prospects, who typically look around a bit and than leave, begging the question “What about post-visit-marketing?”

We believe that the product offerings FetchBack brings to the table will become a standard for online advertising, a must for any smart marketer. We all know that it’s far cheaper to convert a warm lead than create a brand new one.

Currently, advertising online is painful, complicated, full of misinformation and riddled with lifeless companies providing horrible customer service. We intend on changing that. We’re a purpose filled organization that strives to create a bond with our customers and provide them value beyond any competitive product.

We’re changing online advertising! We’re taking things to the next level and we’re going to have a blast doing it.

Come join us, we’d love to help you recoup some of those lost advertising dollars!

Retargeting: BT’s Last Mile

by Phil Leggiere

The “last mile” conundrum of how to deliver broadband connectivity from a communications provider to a customer’s home is famously known in telecommunications circles. Less often acknowledged but equally vexing is the last-mile challenge faced by marketers in moving prospects from initial click-through to regular customers. In the conversation below Chad Little, founder of retargeting specialist Fetchback, outlines a new orientation to marketing’s last mile, one he calls “post-visit marketing.”

Behavioral Insider: Retargeting has of late become a very fashionable term. Many, if not most, large ad networks, for instance, offer what they call retargeting. How is what Fetchback’s doing going to be different?

Chad Little: The analogy I like to make is going to a heart surgeon versus going to the family doctor. Both have their role, but one is infinitely more expert in a particular area. So as far as retargeting goes, yes, many ad networks include retargeting capability within their network — but what we aim to be is the heart surgeon, the specialist within this realm.

The main difference is that we show how retargeting can be correlated to reach. If an advertiser works with an ad network, even if they do it well, their reach is limited to specific publishers on the network. But the potential universe for retargeting is far broader than that. What’s been missing is a single interface to work across all the publishers and networks you deal with — a single interface for developing and customizing creatives, tracking and monetizing potential customers who’ve already visited your site.

BI: How specifically does it work?

Little: Advertisers add a single line piece of code to specific Web pages they want to retarget. Each visitor to the site receives an anonymous cookie, which is then tracked by FetchBack wherever they go. Based on the guidance provided by an advertiser or agency and our own proprietary technology, ads can then be customized by ad types, units, sizes, frequency and content.

BI: What are the biggest gaps you see in how retargeting is currently understood?

Little: All of the financial and intellectual resources on the buy-side have been devoted to the front end, to creating the lead. But as marketers become more ambitious and learn to demand more efficiency in their spending, it becomes obvious that it’s a lot more expensive to get that first cold lead than to resell to people you know are already interested. Many marketers only look at retargeting as a way of repurposing the same ad that brought the consumers to their site in the first place over and over again. What’s been missing in retargeting is the ability to target a more specific and customized message.

BI: What are the biggest challenges advertisers face when trying to implement a retargeting strategy?

Little: Lots of advertisers don’t know what to say, literally. They’ve never really thought through how to creatively keep the dialogue going once an original ad has made whatever impact it’s going to make.

BI: What is the ROI case for retargeting as you explain it?

Little:Post-visit targeting, as we call it, isn’t meant to be an investment used in place of front-end spending. In that sense it means advertisers do need to spend incrementally more overall. But the value proposition is compelling. The additional spending is best thought of as a way of recouping a portion of money from visitors who would otherwise be lost.

Payment is on what we call an ‘investment per visitor’ basis. So if you’ve spent, say, 50 cents a click-through to reach 10 thousand visitors. You’ve spent five thousand dollars and converted a miniscule portion, say 2% or 3%, which is actually quite good. You can stop there with 200 or 300 customers, or you can invest another few cents per visitor in trying to build a further dialogue with the other 9,700 prospects you’ve already attracted.

BI: How do you see the demand for post-visit marketing evolving?

Little: The initial goal over the next year or so is to make post-visit marketing a critical part of the planning cycle. Between here and there there’s an education curve to traverse. Right now at least a third of the advertisers are simply not aware. They haven’t yet considered how to recoup the ‘loss’ from their front-end ad spend. Another third are somewhat aware there could be another way to increase the productivity of their ad dollars, but just aren’t sure how to get started. Then finally there’s a third who are aware of the current gaps in how they deploy ad dollars and have been looking for a solution.

(This article was written for and by Behavioral Insider)

Can Google Maintain Focus? - Originally Posted Mar. 2007

In September 1998, Google officially opened for business in a rented garage with a staff of three. From that inauspicious beginning, Google quickly grew into the biggest and most powerful Internet search engine in the world. When they launched AdWords in 2002, Google revolutionized advertising on the Web with the introduction of the a cost-per-click (CPC) pricing model.

While Google has branched off into numerous other Internet technologies ranging from Gmail to maps, their core strength and primary focus has remained search technology and contextual advertising. This focus has led Google to grow from a few guys in a garage to a corporate giant with a $138 billion market cap.

In the hyper-fast-paced world of Internet technology, however, competition can cause giants to fall at the same speed that it produces new millionaires from the next “I’ve got a sweet office in my garage” genius. While Google has clearly established their dominance over contextual advertising they are facing new competition from smaller ad networks like Quigo and Industry Brains among others. At the same time they are trying to extend their dominance into the offline advertising world. As a result, Google finds itself fighting battles on two fronts.

On the Internet side, Google is facing increasing competition from smaller ‘transparent’ ad networks. In a transparent network, advertisers can place ads on specific publisher Websites and publishers have the ability to control who is advertising on their Website. The key is the flexibility and control given to the publisher and to the advertiser.

At issue is the fact that a growing number of publishers want unfiltered control over who advertises on their Website. High profile sites with strong traffic volume are beginning to command this and companies like Quigo are there to serve them. While Google is beginning to offer limited transparency they will have a hard time providing the necessary tools and flexibility because this isn’t a case of technology – this is a case of culture.

Giving up control is not a phrase that you will find anywhere in Google’s mission statement. However, with the emergence of transparent ad networks that is exactly the kind of strategic decision that Google finds itself wrestling with.

Over the past year, a number of articles have been written about smaller ad networks that have begun to challenge Google’s dominance. The NY Times, USA Today and Business Week, just to name a few, have all published stories related to the growing competition for contextual ad market that generated $2 billion in 2006.

While Google is ready and waiting to take on anyone who challenges them on their home turf of Internet advertising, they are simultaneously mounting a new offensive trying to force their way into TV, radio and print ad sales, and they’re finding quite a bit of resistance.

There are numerous reasons for the resistance, as Ari Rosenberg wrote about recently in his Online Publishing Insider article. One of the reasons I believe that poses a stumbling block is Google’s attitude as much as anything. Traditional media, and the channels that exist there, are also going to want the same flexibility, visibility and control that their online counterparts are now asking for. To date, Google hasn’t offered a model that traditional media is willing to embrace.

What Google has tried to do is leverage the sheer volume of advertisers that they control to gain access to the lucrative world of offline advertising. Advertiser volume alone, however, doesn’t appear to carry the same weight within the traditional media circles as it does online. While early returns aren’t promising in this endeavor, we can be assured that they won’t simply concede defeat and go home quietly.

That’s not to say that Google’s advertiser relationships are insignificant when it comes to traditional media. I believe that there is a way for Google to leverage those relationships and successfully cross over into traditional media.

The key is maintaining the focus that enabled Google to get to where it is at today. Google should stay focused on their core competency of contextual search and invest in businesses that focus on the offline media categories they want to penetrate. Rather than trying to force an entire industry to adapt to their way of thinking, why not create alliances with or purchase companies that are well established within the print, TV and radio industries?

With this approach, Google could utilize the expertise and old-media savvy of industry insiders and give the freedom and autonomy to do what they do best in the way that has proven to be successful. These established companies could then leverage Google’s advertiser relationships to in a way that Google has not been able to do as of yet. Google’s current approach, trying to force their brand and their technology on this market, hasn’t proven to be a winning approach so far, just ask the founders of dMarc.

This is, of course, just my opinion. While Google’s management team is probably not anxiously awaiting my next suggestion as to how they should run their multi-billion dollar corporation, they may want to heed the sound of the growing chorus of competition in the online world along with the echoes of opposition from the offline world and consider where they should be focusing their efforts in order to be successful in both worlds.

(This article was also published on ADOTAS.com)

In September 1998, Google officially opened for business in a rented garage with a staff of three. From that inauspicious beginning, Google quickly grew into the biggest and most powerful Internet search engine in the world. When they launched AdWords in 2002, Google revolutionized advertising on the Web with the introduction of the a cost-per-click (CPC) pricing model.

While Google has branched off into numerous other Internet technologies ranging from Gmail to maps, their core strength and primary focus has remained search technology and contextual advertising. This focus has led Google to grow from a few guys in a garage to a corporate giant with a $138 billion market cap.

In the hyper-fast-paced world of Internet technology, however, competition can cause giants to fall at the same speed that it produces new millionaires from the next “I’ve got a sweet office in my garage” genius. While Google has clearly established their dominance over contextual advertising they are facing new competition from smaller ad networks like Quigo and Industry Brains among others. At the same time they are trying to extend their dominance into the offline advertising world. As a result, Google finds itself fighting battles on two fronts.

On the Internet side, Google is facing increasing competition from smaller ‘transparent’ ad networks. In a transparent network, advertisers can place ads on specific publisher Websites and publishers have the ability to control who is advertising on their Website. The key is the flexibility and control given to the publisher and to the advertiser.

At issue is the fact that a growing number of publishers want unfiltered control over who advertises on their Website. High profile sites with strong traffic volume are beginning to command this and companies like Quigo are there to serve them. While Google is beginning to offer limited transparency they will have a hard time providing the necessary tools and flexibility because this isn’t a case of technology – this is a case of culture.

Giving up control is not a phrase that you will find anywhere in Google’s mission statement. However, with the emergence of transparent ad networks that is exactly the kind of strategic decision that Google finds itself wrestling with.

Over the past year, a number of articles have been written about smaller ad networks that have begun to challenge Google’s dominance. The NY Times, USA Today and Business Week, just to name a few, have all published stories related to the growing competition for contextual ad market that generated $2 billion in 2006.

While Google is ready and waiting to take on anyone who challenges them on their home turf of Internet advertising, they are simultaneously mounting a new offensive trying to force their way into TV, radio and print ad sales, and they’re finding quite a bit of resistance.

There are numerous reasons for the resistance, as Ari Rosenberg wrote about recently in his Online Publishing Insider article. One of the reasons I believe that poses a stumbling block is Google’s attitude as much as anything. Traditional media, and the channels that exist there, are also going to want the same flexibility, visibility and control that their online counterparts are now asking for. To date, Google hasn’t offered a model that traditional media is willing to embrace.

What Google has tried to do is leverage the sheer volume of advertisers that they control to gain access to the lucrative world of offline advertising. Advertiser volume alone, however, doesn’t appear to carry the same weight within the traditional media circles as it does online. While early returns aren’t promising in this endeavor, we can be assured that they won’t simply concede defeat and go home quietly.

That’s not to say that Google’s advertiser relationships are insignificant when it comes to traditional media. I believe that there is a way for Google to leverage those relationships and successfully cross over into traditional media.

The key is maintaining the focus that enabled Google to get to where it is at today. Google should stay focused on their core competency of contextual search and invest in businesses that focus on the offline media categories they want to penetrate. Rather than trying to force an entire industry to adapt to their way of thinking, why not create alliances with or purchase companies that are well established within the print, TV and radio industries?

With this approach, Google could utilize the expertise and old-media savvy of industry insiders and give the freedom and autonomy to do what they do best in the way that has proven to be successful. These established companies could then leverage Google’s advertiser relationships to in a way that Google has not been able to do as of yet. Google’s current approach, trying to force their brand and their technology on this market, hasn’t proven to be a winning approach so far, just ask the founders of dMarc.

This is, of course, just my opinion. While Google’s management team is probably not anxiously awaiting my next suggestion as to how they should run their multi-billion dollar corporation, they may want to heed the sound of the growing chorus of competition in the online world along with the echoes of opposition from the offline world and consider where they should be focusing their efforts in order to be successful in both worlds.

(This article was also published on ADOTAS.com)

YaWho? - Originally Posted Feb. 2007

At times I’ve wondered if Yahoo! should consider replacing the exclamation point at the end of their name with a question mark. In light of some of their decisions and actions over the years, it seems that Yahoo? would be more fitting, as in Ya who do they want to be?

Do they aspire to be a media giant? The leading online ad platform? An information destination? All of the above? Depending on which mission statement you come across on Yahoo!’s Webstie, their mission is either to A) Be the most essential global Internet service for consumers and businesses, or B) Connect people to their passions, their communities, and the world’s knowledge.

Where is Yahoo! going? What do they want to dominate in and why? I’m not exactly sure. If you were to ask the same questions about Google, the answer is clear. Google’s stated vision is to “Organize the world’s information” (and make enough money doing it to finance the creation of a new world). Do I agree with that statement? I’m not sure I do as a lot of their actions aren’t congruent with the statement. I find them to be a large media company looking to utilize technology to distribute their advertisers wherever and however they can…but I digress. Agree with it or not, they at least have a vision statement that is clear and concise and their performance to-date backs it up.

How did Yahoo! arrive at its current place playing second fiddle to Google? There was a defining moment in the history of these two companies that has had ripple effects that we can still see today. In a recent article on wired.com, Fred Vogelstein suggests that Yahoo! blew it during the summer of 2002 when their $3 billion offer to purchase Google was rebuffed and Terry Semel, Yahoo! CEO, balked at the higher $5 billion dollar valuation of Google.

After that failed merger Yahoo! subsequently purchased Overture. While it was a strategic move they needed to make to compete with Google, Yahoo! was already at a competitive disadvantage. Google was able to build their ad platform from scratch and seamlessly integrate it with their search technology. Yahoo!, on the other hand, had the monumental task of consuming Overture, a company I personally characterize as culturally dysfunctional.

I had business dealings with Overture dating back to their pre-Yahoo! days and one of the common criticisms shared by my peers in the industry was how difficult it was to do business with them. Their culture appeared to be dysfunctional from an outsider’s perspective. If you’re familiar with the story of the Good Samaritan, Overture would have played the role of the other guy – the one that walked past the man in need. They often gave the appearance of a company that would just as soon ignore its partners/traffic providers/customers rather than offer assistance. This isn’t to say that this type of behavior is uncommon for companies that grow to a certain size, but Overture excelled at it.

Now, fast forward a couple of years to Yahoo!’s hiring of Terry Semel, the Hollywood deal-maker. Yahoo! had its sights set on becoming the next media giant so bringing on a seasoned and accomplished Hollywood insider was the logical choice at the time. In hindsight however, one might question the logic of hiring a CEO with very limited technical knowledge to guide a company that is defined by technology. This lack of technical savvy would be an extremely difficult hurdle for anyone to overcome when leading the merger of two technology-centric companies like Yahoo! and Overture, in addition to the challenge of overcoming the cultural differences.

Here we are almost five years later and Yahoo! has just launched their revamped ad platform named Panama. While Yahoo! touts this as a strategic leap forward, the bottom line is that Panama was a task that needed to get completed just to remain in the game. Early returns have been good for Panama, as evidenced by Merrill Lynch’s positive outlook for Yahoo! stock and their 13% increase in ad-related revenue from one year ago. The response from advertisers has been positive for the most part, however, some smaller companies are finding it difficult to switch platforms and transition their existing accounts. Panama is an important upgrade for Yahoo!, but the battle for dominance in paid search has already been won by Google.

Second place in the paid search industry is certainly not an insignificant position, but the same questions still remain. Do they have the leadership, vision and focus to reassert themselves as a leader, pioneer and dominant force that they once were?

Yahoo! is an amazing company, and a brand that has defined the Internet as we know it, but they have missed the mark recently and lost opportunities to surge ahead. What’s next for Yahoo!? I have my own theories, but they all depend on who is leading the company and if those people can define a clear and concise vision for the future that can take Yahoo! to new heights. I am curious to see what that vision will be and if it will give them the ability to regain the competitive advantage they once held.

This article was also published on ADOTAS.com

Flip Fraud - Originally Posted Dec. 2006

At the recent ad:tech event in New York, one of the most common words or phrases making the rounds on the exhibit floor (other than ‘Datran Media Party’) was ‘CPA’ or ‘Cost Per Acquisition’.

The CPA auction model is a natural response to advertiser’s fear of click fraud in addition to their desire to increase the accuracy of their conversion tracking. CPA advertising is a perfect example of the inherent benefits of advertising on the Internet because no other media can match its tracking ability. CPA advertising is also one of the primary reasons that affiliate networks, like the ones that overran the exhibit floor at ad:tech, are thriving.

Along with the benefits of accurate and precise tracking, however, comes the inevitable outcry from advertisers that a percentage of the budgets are being wasted on the “Joe Mc. Hremlin’s” of the world. In case you are not familiar with Joe, he is one of the made-up names from a made-up testimonial on the website www.clickingagent.com that sells click fraud software. Not to be confused with click fraud detection software, this is click fraud enabling software. For the purpose of this article, we’ll assign the name Joe to all of the mouth-breathing types that make a living off cheating and scamming their way through life.

This Website and their product is only the tip of the iceberg. I’m amazed at the marketing copy (I use that term loosely so as not to offend anyone who actually writes marketing copy for a living) on their site: “Take your chance, try to fool advertisement companies and earn money! It only gets better - 1) Make your site more interesting to others, and/or 2) simulate that traffic and ad clicks so that advertising company thinks you’re a hell of a web-master!” Overlooking the horrendous grammar and creative use of the English language, the claims on this site are pretty clear: “Lie, cheat and steal your way to a better life…and do it all from the comfort of your living room/garage/trailer.”

While much of the click fraud that occurs is caught before it ever gets to the advertiser, the industry will always be at disadvantage. As long as the Joe’s of the world can make money by defrauding ad networks, they will continue to develop methods to stay one step ahead (or they will purchase software from more intelligent people who actually develop it).

The irony of this issue is that our ability to accurately track views, clicks and conversions is also a disadvantage when compared to traditional media. Conversion tracking for off-line media is inexact at best. Advertisers seem to have a certain degree of blind trust when it comes to magazine advertising for example.

How do they know the circulation and subscription numbers are real? How do they know the people that did purchase the magazine actually looked at their ad? Where’s the discussion on inflated subscription numbers and fraudulent page turners? What if Joe has 100,000 copies of a magazine shipped to his house and the locals all come over to flip through pages to view the ads!? Where’s the outcry for flip fraud? But I digress….

Getting back to the reality of online advertising and tracking, the solution to creating a better online advertising model is simple. In my opinion, a big portion of the market will be moving to an auction-based CPA model. Google is already moving in that direction along with a number of leading edge companies like www.turn.com. Google’s moves into analytics and shopping cart functionality play into this strategy as well.

While ad networks of all sizes will continue to work extremely hard and preventing as much click fraud as they can, I believe we should move forward with the understanding that there’s a built in cost for fraud and I also believe it’s not going to go away. There are some very smart companies out there that will help keep it in check and prevent if from growing further, but I firmly believe they’ll never catch-up to Joe and his network of fraud-perpetrating friends.

For this reason, the move to a CPA model is the most logical evolution for advertisers and ad networks alike. Alternatively, we can choose to stay on the same path and continue to supply Joe with the discretionary income he needs to purchase that new set of rims he wanted for his truck (that may or may not be located on blocks in his front yard).

This article was published on ADOTAS.com.