Category: Branding

Misconceptions about Yield Management and Channel Conflict

Another interesting article from Forbes.com’s Jim Spanfeller yesterday.  I wholeheartedly agree his point about the online ad industry focusing too much on demand fulfillment and too little on demand creation, as evidenced by my previous posts here and here.  That’s exactly why we built Brand.net from the ground up — to help advertisers with demand creation.  I also agree with his point about ad networks that offer some types of user-based targeting  representing a potential “data drain” and a legitimate privacy concern for publishers.  This is an important issue and just coming to the fore for the publishing community overall.

That said, I disagree with two major points Jim makes in this article.

First, he seems to be perpetuating industry confusion on the definition of “remnant”.  In the context of online ad inventory, “remnant” is commonly considered to be the opposite of “premium”, which is often used interchangeably with “high-quality”.  Thus if “premium” = “high-quality”, then “remnant” = “low-quality”.  Unfortunately this is often untrue.  When used correctly, “remnant” actually means “available to the spot market after forward commitments have been fulfilled”.   So the opposite of “remnant” is not “premium”.  The opposite of “remnant” is “reserved in advance”.  There are really two distinct axes at work here:  one describes quality of the inventory, while the other essentially describes the terms or process under which the inventory was purchased.  There is some correlation between the two axes, which I believe is at the heart of the persistent confusion; it’s a fact that remnant inventory is often of lower average quality than inventory that is reserved in advance.  However, due to traffic volatility, forecast errors, suboptimal pricing, supply/demand imbalances, etc., there is often significant volume of high-quality or “premium” inventory available in the “remnant” market. The airline standby example he cites is actually a good illustration of the correct definition of remnant, not (as I think he suggests) the incorrect one that has done so much mischief.  The standby seat has exactly the same physical characteristics (“quality”) as the seat sold in advance, but the difference in timing and deal structure results in a difference in value to both the airline and the passenger, which manifests in a difference in price.

This brings me to my second point: Jim’s position in this article on airline yield management practices shows some pretty fundamental misunderstandings.  Airlines’ lack of profitability has a lot more to do with unions, over-capacity and sub-optimal product offerings than it does customers risking their vacation plans or business objectives to save money on a last-minute ticket.  So I would echo Jason Kelly’s well-informed comments on the thread and add that to suggest yield management practices are somehow to blame for the poor financial performance of airlines is like suggesting that ERP systems and supply chain optimization practices are responsible for the poor financial performance of the American auto industry.  It’s simply not true.

The bottom line is that ad networks and publishers can work together for mutual benefit over the long haul, but to do so requires careful management of channel conflict, an issue we take very seriously.  This discussion is a valuable and important one, but I think we need to be more careful and rigorous in our thinking – the more so, the better off we’ll be as an industry.

Thoughts on the latest OPA report

A blockbuster report from the OPA late last week, at least if one were to judge by how it lit up the blogosphere (as AdExchanger humorously put it, “Is the OPA the greatest link baiting organization in advertising, or what?”).  I reviewed some of the coverage and the report itself over the weekend and I have to say, with all due respect to the OPA and its members, this report doesn’t measure up to their previous efforts.

Here’s my take:

1) Most networks are focused on DR metrics and not the upper-funnel branding metrics that are the focus of the OPA study.  So even if we stop right there, it’s not shocking that that the study shows weaker results for networks.  This difference in focus is fundamental to Brand.net’s business by the way.  Unlike other networks, the Brand.net platform offers a  full suite of capabilities designed from the ground up to help brand marketers leverage the web to reach their audience efficiently and effectively drive these upper-funnel metrics.

2) The OPA report didn’t include or consider cost data.  If you believe the >10:1 spread between publishers’ direct and network deals cited in last year’s IAB research, this is a critical omission.  OPA pubs performing 50% better than networks doesn’t look so good in the context of a >10:1 price ratio.  Obviously the devil’s in the details here – the IAB research isn’t perfect either for reasons I have discussed previously on this page – but it’s clearly perilous to draw the sweeping conclusions OPA is going for without considering costs.

3) I don’t wish to cast aspersions on the study or methodology overall, but a couple of the data points just seemed counterintuitive to me.  For example, slide 19 of the OPA results deck states that ad networks deliver insignificant improvements in purchase intent for the financial services category.  This particular point caught my eye, because I know that well over $1B has moved through ad networks from hundreds of financial services companies over the past 5 years, the vast majority of which has been measured on a CPA – as in actual purchases, not just purchase intent.  It’s extremely hard for me to believe this money would have continued to flow in such volume over such a long time period if it wasn’t actually driving purchases.  If you agree, then we’re left with only 2 possible explanations: a) the data referenced to make this point is somehow not representative or b) purchase intent as measured by DL was not correlated with actual purchases.  Neither is particularly comforting.

4) In addition to the metrics OPA focuses on in this report, I would have liked to see an analysis of actual sales lift – i.e., the ultimate result that improvement in the attitudinal metrics discussed in the report is intended to drive over the long term.  This certainly isn’t easy for every client on every campaign, but it’s a powerful capability that proves real business results for many.  For the next study I would be interested in seeing similar data from OPA.

Some of these thoughts have already been expressed by others, including some who commented directly on WSJ’s coverage of the report, but I thought there was enough new here that it was worth joining the discussion.

Let me know what you think.

Microsoft continues its push into online branding

As I work through my current events backlog after coming back to the office, I wanted to call out this press release from  Microsoft re: their recent deal with comScore to provide enhanced R/F and audience composition tools for branding-focused media buyers.  The release highlights a theme we are passionate about at Brand.net and have mentioned time and again on this page:  online advertising lacks brand-friendly metrics and tools, which makes it too difficult for brand buyers to plan and manage campaigns in a manner consistent with the rest of their (primarily offline) spend.   These metrics and tools position brand marketers to deliver real business results and are essential in helping brand budgets follow audiences online.  Our friends at Microsoft were even kind enough to quote our analysis estimating only 5% of brand budgets have yet made this transition.  As today’s Wall Street Journal also observed, this represents a major opportunity for all the players in the space.  It’s great to see the online ad industry increasingly recognizing the brand challenge/opportunity and mobilizing to address it!

Purgatory for Ad Exchanges

Thoughtful MediaPost article from Cory Treffiletti of Catalyst while I was out.

His basic point is that Ad Exchanges in their current incarnations have failed to live up to the promise of “ad exchange” as a concept.  I agree.  As Cory points out, current exchanges require too much effort and involve too many compromises for both advertiser and publisher for them to become a critical piece of the advertising technology “stack”.  Current exchanges can be effective for some direct marketers where CPA is essentially their only requirement, but they fall far short of many advertisers’ – particularly brand advertisers’ – requirements.  Without some changes for all parties in the value chain, unfortunately I think Cory may be right; the pendulum may swing back towards more custom solutions.  I think that would be lost opportunity so I’d like to make some suggestions about how to improve from the status quo.

Here’s what needs to change:

Exchanges: Embrace the reality that brand marketers are essential to the health of the online ecosystem.  Many, most campaigns cannot be reduced to a CPA – an issue I have discussed at length.  In order to become critical infrastructure, exchanges must build for brand requirements as well.  This means content quality filtering, R/F management, composition management and smooth guaranteed delivery.

Publishers: Open inventory to competition from multiple sales channels.  Remove barriers to revenue and efficiency in the form of advertiser block lists.  Manage channel conflict using other tools.

Advertisers: (yes, you’re part of the problem) Embrace efficiency for some portion of your buy.  Consider that a streamlined, scalable operational process for a more standardized buy may deliver better results when considering all costs (media, headcount, serving fees, etc) than a less efficient process for a more customized buy.  For example, consider whether non-standard creative (integrations, expandable units etc), fine flighting, custom targeting with limited scale are delivering results in-line with the significant operational friction they create.

These steps are not easy, but they are essential to building a long-term scalable advertising ecosystem.  Let us know how we can help.

DVRs are coming

Some new data points last week on the inexorable march of DVRs into US households.

I am obviously quite focused on brand advertising (the majority of which is still done on TV), so I have been closely following DVR penetration and its impact on advertising ever since I got my own DVR in 2005.  At that point, my TV consumption increased significantly (taking share from DVDs), but at the same time I stopped watching commercials.  I would estimate I only watch 10% of the commercials embedded in the TV content that I consume.  So more TV, but largely free TV; the only one getting compensated for the content I consume is Comcast.  Great news for them, but not so great news for the (largely brand) advertisers who paid top dollar for my attention and whose advertising I saw at 20X its intended speed, on a different day/daypart, with no sound.   So much for “sight, sound and motion”.

I am not alone.  As I have written earlier, DVR penetration of all US households is now >30% and going to 80% by 2016.  Articles like this one in MediaWeek make it seem like the level of conversation / realization is increasing.  However, when we consider the current market projections and new, penetration-driving technologies like “Virtual” DVR, it’s hard not to feel like the brand advertising community as a whole should be a bit more concerned and thus a bit more active in its search for TV alternatives.

Stay tuned.

Branding needs the web…and the web needs branding

Solid article on ClickZ last week with some insightful commentary from Nielsen Online CEO John Burbank.  Mr. Burbank correctly identifies lack of brand dollars online as the source of current downward pressure on rates and publisher revenue.  He’s 100% right that without these dollars following audiences online, the online publishing ecosystem will degrade and that users will not like the results.  This second theme was echoed by Omar Tawakol, CEO of BlueKai, in another insightful piece for AdAge.  So without a robust online ad market online, online publishing will suffer.  And if that ad market doesn’t include the large brands that funded quality content in other media, online content quality will degrade to the detriment of users, advertisers and publishers alike.  A tragedy of the commons of sorts.

Mr. Burbank went on to make the important point if publishers want to attract brand spend, they need to help brand advertisers measure results using metrics that are appropriate to the objectives of brand campaigns.  He suggests that rather than focusing on clicks, brands should be focused on “whether their ads reach the desired targets, change the way consumers think about their brands, or help sell products.”  Couldn’t have said it better myself.  This is something we discuss with our clients every day.  We actually partner with Nielsen to help our clients in CPG measure the extent to which their online campaigns sell product offline.  The results speak for themselves.  Online advertising works.

I do disagree with Mr. Burbank on one important point, however.   He seems to suggest that ad networks are responsible for the current challenges online publishers face.  It’s true that ad networks can put downward pressure on CPMs for a publisher, but that is primarily driven not by the fact that a network is doing the selling, but that the vast majority of networks sell almost exclusively to DR buyers.  Those buyers are extremely price sensitive and thus the downward pressure.  If there was a healthy level of demand by brand advertisers for online content, this downward pressure would be balanced and the online publishing ecosystem would be much more stable.  Unfortunately, online branding today remains too inefficient for brand dollars to follow audiences online easily and balance this equation.  So an ad network focused on branding, such as Brand.net, actually helps matters, increasing efficiency for brand buyers to help move budgets from other media, while not undermining the economics of the premium publishing model.  This is another topic near and dear to my heart, which I addressed at some length in an iMedia post earlier this year.

Northwestern’s Eric Anderson on Brand Loyalty

Great piece on NPR’s Marketplace last week.  Northwestern marketing professor Eric Anderson spoke with Marketplace host Kai Ryssdal about the impact of the current recession on brand loyalty.  Anderson made some important points about balancing the need to show short-term tactical results with consideration of the long term strategic impact of advertising.  In particular, he recommends investments in building equity by aligning brands with themes that consumers are concerned about (e.g., the environment) rather than focusing on short-term promotional initiatives.  Good advice for those concerned about the long-term health of their brands, as Anderson cites decades of research that shows share loss to private label brands tends to be permanent – a topic that has received a lot of attention recently.

ClickZ: CPG Companies Crank Up Display Ad Spend

Quick note on the ClickZ article last week about CPG companies ramping up online spend.  Branding is tremendously important in this category, which includes many of the largest advertising spenders on the planet (P&G, Unilever, etc.).  Companies like these are increasingly realizing that their customers are consuming a greater and greater share of their media online, so if they want to protect their brands they need have their ad budgets track that shift in behavior.  The alternative is to risk losing share to new brands or – particularly as wallets tighten through the recession – private label products.  Research indicates that such share losses can be permanent, so continued investment is critical even in “this economy”.  Glad to see them staying sharp.

OPA branding research

Interesting article last week on Silicon Alley Insider, commenting on recent OPA/comScore study designed to help the advertising world get beyond the click. This topic is near and dear for me and I have written on it previously. Now, I don’t always agree with the OPA (for example, I’m not sure I would have gone with “The Silent Click” as a title for the research – sounds like a bad Meryl Streep movie), but in this case they are right on. Clicks don’t equal sales. Period. (Sales don’t equal ROI either, by the way). The research (slide 11) showed online ad exposure increased online sales by 7%. We’ve seen the same dynamic looking at offline sales as well; those exposed to online advertising buy more of the advertised product in offline retail stores. This is an even more powerful result than the online data presented by OPA/comScore because nearly 90% of all retail spending still occurs offline, even higher in key brand categories like CPG. Interestingly, the OPA deck stops short of presenting any actual correlations (or lack thereof) between CTRs and the other variables they discuss. So I will pick up where they leave off – in our offline sales lift results to date we have seen no correlation between CTR and ROI (offline sales lift vs. media spend). What drives ROI is a mix of Cost/HH reach and quality of content environment where ads are shown. Clicks might be useful for something, but not as a proxy for ad effectiveness.

P&G’s “Passion for Digital”

P&G is the largest marketer in the world.They are also one of the most successful. This recent article in Ad Age gives us some insights into why.

The article quotes Marc Pritchard, P&G’s global CMO:

“I’ve got a lot of passion for digital. It really is such an incredible way to connect with consumers and really have much deeper ongoing relationships with them… Our media strategy is pretty simple: Follow the consumer. And the consumer is becoming more and more engaged in the digital world.”

It’s that last part that’s most insightful for me. Keep it simple, follow the consumer. This is very good advice, as it seems too often marketers can get so focused on the dizzying array of niche products and capabilities online that they lose sight of what they are really trying to accomplish, which is exactly that: reach consumers. Lots of them. In the right environments and with the right messages. This is something near and dear to our hearts at Brand.net, because when done well it drives strong, measurable results.

The discussion of online spend ramping to the point that marketing mix models can begin routinely reading it is also an important one for 2 reasons.  First because the 5% threshold they mention for an MMM read can represent a real inflection point for online spend for the CPG category – an extremely important category for the long-term health of the online ad ecosystem.  Secondly, the discussion highlights that fact that marketers want to think of online as a medium in line with other media at their disposal.  Online media is often sold as “special” or “different”, but the path to higher spend isn’t in forcing marketers to learn and embrace new technologies and metrics.  Nor is it in driving marketers into niche strategies like BT or custom executions that are flashy, but have negligible reach and impact.  Increasing online spend will undoubtedly involve new technology and learning on both the buy-side and the sell-side, but to focus on technology for technology’s sake is to miss the point.  The path to long-term, significant, sustainable increases in digital spend will be paved in large part by helping marketers leverage the skills and tools they already have to better follow the consumer – a consumer who is becoming more and more engaged in the digital world.