Author: Andy Atherton

I am currently COO at Regher Solar. Complete background on LinkedIn...

Holy Grail Found!

My team forwarded me an article from yesterday’s Merc’ on the trend of large cap tech companies loading up on economics talent from academia.  It’s an interesting trend, if not exactly a new one.  Hal Varian’s high-profile hire by Google occurred in May 2002.  Yahoo! began building a team of economists around the same time.

The thing that really caught our eyes though, was this sentence:

“For instance, Yahoo’s economists have been searching for a holy grail of advertising — tangible evidence that online ads actually make people buy stuff in a real-world store.”

Not only does this evidence exist, but it is abundant.  Exhibit A is our fantastic SalesLink results.  For every $1 spent on Brand.net media in these campaigns, our clients drove >$4 in incremental sales (primarily in “real-world” offline stores).

Our most recent result – a campaign for a major national dog food brand – was even more impressive, driving >$1.5M in incremental offline sales on a $200K media investment.  That’s an additional 2.2 million pounds of dog food sold due to this campaign.  In case you’re wondering, 2.2 million pounds of dog food is enough to fill about 100 standard 20’ intermodal shipping containers.  If these containers were loaded on semi-trailers bound for a real-world destination, it would create a bumper-to-bumper caravan that would stretch more than half a mile.

I am no economist, but this would seem to qualify as “tangible evidence”.

Ironically, the very same Nielsen measurement capability that proves this offline impact was originally created in partnership with Yahoo! and launched jointly…in 2003.

If the Merc’s reporting is correct, Yahoo! may want to add a few archaeologists to the mix.

A Housewarming for Procurement

There was a really interesting article in Ad Age last week that underscored the increasingly important role of corporate procurement, or strategic sourcing, groups in the media buying process.

This is not a new development by any means.  We first referenced this trend on this page last year and it began years before that.  However, the appointment of a formal ANA task force designed to improve the relationship between procurement groups and their partners – in this case marketing teams and agencies – shows how far this trend has gone.

The boxes are unpacked and the renovations have started.  The new neighbors are here to stay.

One might ask why such a task force is necessary.  One study, for example, presents a pretty stark picture of the need.  There’s clearly a significant perception gap between procurement groups, marketing groups and agencies; each has a very different perspective on the role and value add of the others.

Procurement teams see their role as constructive.  Their involvement helps improve the return on a critical corporate investment with a focus on increasing value rather than reducing cost, a view clearly expressed in this Q&A with several prominent procurement executives.

But according to the study results, agencies and marketing teams apparently do not unanimously agree.  Marketing teams and agencies clearly feel that procurement can err on the side of the numbers, ignoring important qualitative, creative or relationship factors.  There are also perceived skill gaps; only 14% of agency executives, for instance, said procurement “is knowledgeable in advertising/marketing”.

The ANA task force appears dedicated to ironing out these differences in perception to improve the efficiency and tranquility of the “neighborhood”, if you will.  Part of their remit is to help procurement teams get up the learning curve quickly on what for some is a new domain – marketing.  There will also no doubt be attention paid to focusing procurement efforts on areas where they can add the most value the fastest.  Getting points on the board quickly is a key ingredient to successful change management.

To that end, I think there are some helpful suggestions in another Ad Age article.  The author casts procurement as a tool to help marketers and agencies build working budgets by improving efficiency, accountability and control.  That’s a state I think all constituents would agree represents success.

Renegotiating agency compensation is one thing on which the three constituencies could reasonably have tension.  But there are many issues on which agreement should be fairly straightforward.  Would anyone argue against a lean, streamlined briefing process, or for travel when Webex would suffice?  Does one account really need a sprawl of different agencies?  These seem like relatively obvious areas where experienced procurement practitioners can leverage experience from other domains to deliver significant savings that could be channeled back into working media budgets.

Even more strategic would be leveraging procurement’s experience in sourcing other direct and indirect materials to drive improvements to the processes for planning and sourcing media – particularly in digital.  As the author mentions, this is an area of great potential due to its rapidly growing share of budget and the extreme complexity in today’s digital process/ecosystem.

I couldn’t agree more, but as I mentioned in my own Ad Age article, procurement teams need new technology to help them add this value.   Accurate forecasts, meaningful delivery commitments, guaranteed quality – these are all indispensible tools to help procurement teams do what they do best in other domains.  These capabilities are just as critical in digital media, but the solutions have been sorely lacking.

One author goes so far as to suggest we replace the entire process (procurement, agencies, marketing – apparently the whole kit and caboodle) with what would have to be the worlds gnarliest optimization model.  You know when you’re comparing the complexity of your model to those that (attempt to) predict the weather you’re off to a bad start.  But even if all the neat stuff described in this futuristic piece was possible today, you’d still need accurate forecasts of capacity and price, and the ability to reliably deliver against forecasts to get real value out of this magic box.

My personal advice is for the incumbents in the media value chain to welcome procurement.  In my experience, procurement teams are very much aligned with the objective of helping marketers and agencies build working budgets by improving efficiency, accountability and control.  These new partners are smart, focused, disciplined allies that understand that advertising combines art and science.  They are here to help.

We’re proud to offer MFP On Demand to all of our customers, particularly the client procurement teams whose needs have largely been ignored by the Silicon Valley (and ‘Alley) technology communities thus far.

Old habits die hard

There was another installment yesterday in the seemingly endless series of articles on the counter-productivity of CTR optimization.  This “billion-dollar mistake” has been covered on this page in depth and repeatedly.  With the ever-growing abundance of research on the topic you’d think that more buyers would stop focusing on CTR “optimization”.

It’s surprising how hard old habits die.

I thought this particular article was worth calling out because it suggests that the ultimate answer to the evil of optimizing for CTR is optimizing for conversions instead.  That’s right of course, if it’s possible (and assuming your attribution models are correct – not a trivial assumption).

But what about the vast majority of valuable commercial activity that can’t be cleanly tracked with a pixel?  Like, for example, the 95% of retail sales that occur offline?  As I discussed in a recent post on the trillion-dollar O2O opportunity, this is a huge gap in the thinking behind and the capabilities of most online advertising solutions today.

Brand.net’s ground-breaking Media Futures Platform was designed specifically to attack this opportunity, driving profitable offline sales measurably and scalably.

These are the results that really click for our customers.

The Internet is not Magic

Regular readers may remember my post a few months back commenting on an interesting DataXu article about high price volatility in the RTB-driven spot market for online advertising.  They put up another really interesting article Monday.

It seems their research has shown that (what I will call) “overtargeting” is bad for performance.

Regular readers will certainly remember my frequent commentary on this issue in the context of driving offline sales.  Many targeting techniques sound hyper-precise (great!), but don’t deliver the goods when impact on key attitudinal indicators like purchase intent, or more importantly impact on offline sales, is measured.  Better sales tools than success tools indeed.

Imagine my interest as I read this new research showing excessive targeting doesn’t even work for the DR metrics they studied.  If this stuff doesn’t work for branding or DR, what does it work for?  Does it serve any other purpose than as the shiny object that helps burgeoning hordes of venture-funded media sales people to convince increasingly overwhelmed media buyers to further fragment their media budgets?

Clients: Don’t take privacy risks or pay premiums for targeting that doesn’t deliver results.  Listen with a skeptical ear.  If a targeting tactic sounds too good to be true it almost certainly is.  The internet is a fantastic marketing channel, but it’s not magic.  Anyone that suggests otherwise is either a fool or takes you for one.

Creativity *and* scale is the objective

The discussion during my IAB MIXX panel last week reminded me of a recent article by Tod Sacerdoti of Brightroll.  Tod’s high-level point was that there is too much relative focus in online advertising on the sizzle vs. the steak, which creates a variety of downstream problems.

Tod took some lumps in the comments, but he was and is right on with this piece.  There’s way too much time spent today selling shiny objects vs. selling scalable, repeatable results.  I have written on this previously in the context of BT, but I see it over and over.

The interesting thing from the panel was that my ostensible adversary in the “debate”, Calle Sjönell from BBH New York, and I actually agreed strenuously on a) the need for and b) the possibility of *both* creativity and scale.  Both sizzle and steak.

One specific example Calle gave was Apple’s iAd initiative.  iAd offers an extremely compelling creative environment, but one that is highly prescribed.  Controls for the ad must be in certain places and do certain things.  The ad itself has fixed sizes and specifications.  The creativity (to paraphrase) is in using the box provided creatively, not in coming up with a new box every time.

One could argue that iAd itself is a shiny object at this point, but Calle’s message was clear.  For the truly innovative, the specs of the box don’t matter.  It’s what’s in the box that matters.  E.g., you don’t need 35 seconds to make a compelling TV spot or as Tod points out, you don’t need Superman flying across your webpage to influence attitudes and/or drive offline sales.

If Calle’s award-winning creative mind can work happily and effectively within a fixed canvass, then I would submit that others should be able to as well, which would have tremendous benefits to the industry at large.  Standardized web advertising is now capable of phenomenal scale.  Getting better at combining that scale with creativity, rather than arguing for one or the other, should be the priority.

DVRs will cut TV advertising in half over the next 5 years

More evidence of the large and growing holes in the TV advertising dike passed with little fanfare a ways back.  I continue to be surprised at the relative lack of coverage (that is, other than mine) of what appears to be a huge story in media: the rapid and inexorable infiltration of the world’s living rooms by DVRs and the implications for TV – today’s workhorse branding medium.

This latest data (not as fresh as I’d like, as I’ve been a little busy) is from a Comcast-sponsored poll, so should potentially be taken with a grain of salt.  However, even with salt, it presents a pretty stark picture.  Some highlights:

•    Time-shifted TV has more than doubled in the past year alone
•    >40% of Americans now make plans to record their favorite shows for later viewing
•    74% of viewers have watched prime-time TV using video on demand, DVRs or the Internet

Estimates vary, but some sources report up to 2/3 of viewers skip commercials in recorded programming.  Combining that figure with the usage stats above means that more than 20% of TV commercials will be skipped this season.  Not only that, but researchers believe that commercial skipping increases as users become more familiar with the technology; that 2/3 will likely increase.

These data have fairly dramatic implications for the mid- to long-term value of the TV ad model.

Perhaps this story hasn’t gotten much attention because the Nielsen “C3 ratings” – launched in 2007 and designed to take into account both time-shifting and commercial skipping – didn’t look much different initially.  What seemed a little strange (at least to me) is that they still don’t look much different – most shows actually fare better under C3 than the “live” ratings.

This was counter-intuitive until I actually did the math.  Because C3 includes both time-shifting (incremental to live ratings) and skipping (decremental), C3 will always be equal to or greater than live ratings because skipping cannot be greater than time shifting by definition.  However, this can (and does) occur even as the size of the audience viewing TV advertising shrinks dramatically.

Consider the (highly simplified1) example below:

In rough terms, a show watched by an audience of 20M people goes from a C3 rating of 6.7 pre-DVR, to a C3 rating of 3.3 in 10 years under perfectly realistic assumptions flowing from DVR penetration projections and usage research cited and linked above.  Total viewership of the programming, including time shifting (Live +7), can stay the same or even increase, but ratings for the commercials themselves (C3) plummet under any reasonable scenario.

So DVRs will cut the effective reach of commercial TV advertising in half, absent some dramatic changes in consumer behavior, TV advertising models or DVR devices themselves.   This represents nearly $40 billion in advertising spend simply being “skipped”, i.e. wasted, or a doubling of cost per GRP which amounts to the same thing.

That seems like a newsworthy headline.  I wonder why I haven’t seen it before today.

Incidentally, that $40B in TV money coming into play makes me especially excited that Brand.net offers the best and most scalable web-wide media forecasting, buying and delivery management platform available today, with cutting-edge tools for agencies to drive measurable, profitable offline sales with online advertising.

1 In the interest of simplicity, this commentary and analysis ignores some edge cases related to different measurement methodologies between live ratings, which measure viewership of content and C3 which measures viewership of commercial pods only. These simplifications do not materially affect the conclusion.

See what all the fuss is about!

Another quick post today to encourage those of you that haven’t read today’s Q&A on AdExchanger to check out the demo for MFP On DemandTM.     Also see more coverage of Thursday’s press release on Fast Company.

Announcing MFP On Demand!

We’re very excited today to announce the launch MFP on DemandTM, the demand-side interface to our Media Futures PlatformTM, in partnership with Digitas.  Read the coverage in Ad Age here.

Scalable forward buying is a critical gap in the digital media ecosystem and Brand.net has been focused on this huge, unaddressed opportunity since inception.  MFP On Demand represents a big step forward towards the long-term goal of a futures market for digital media.

We’re truly thrilled that Digitas shares our vision!

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