Floors are not Fraud

Hi all.  I have been thinking about cracking my knuckles and getting back to the literary salt mine for a while now and I saw an article yesterday that just I couldn’t resist.

Right off the bat, the headline “Are Artificial Price Floors The Next Iteration Of Ad Fraud?” almost audibly screamed Betteridge’s Law. (OK, I had to Google the name, but I swear I remembered there was such a thing).  So, in honor of Mr. Betteridge and his predecessors, let me state clearly that with respect to this headline, “The answer is no.

I can certainly understand why the buy side might not like price floors, but a buyer calling floors fraud is like King George III calling George Washington a terrorist.

Would it be fraud if one bought for 25¢ CPM an impression that’s worth $25 CPM from an ROI perspective? That’s a much bigger disparity between “true” value and transacted price than the example in the AdExchanger byline. Yet this sort of transaction happens all the time because, leveraging technologies like re-targeting, a buyer often knows much more about user value in the context of a particular campaign than a seller does. If they were being candid, many (if not most) buyers would tell you this is kind of the point of sophisticated, RTB-based buying strategies.

So, then, Is Precise, Data-Driven Targeting The Next (Next) Iteration Of Ad Fraud? Of course not.

What would a “true” or “real” floor price for an impression even be, as opposed to the “false” or “artificial” floor to which the author objects? Would it be the small fraction of a cent that it costs the seller to serve the impression? Would it be the seller’s operating expenses divided by its impression volume? Maybe add some margin? What’s a fair margin? Would it be opportunity cost, which the author implies would be his choice? (Second price approximates opportunity cost if one makes some reasonable assumptions.) Something else?

It’s not like I have written a book on this stuff or anything, but I have to tell you that I don’t see any reason why one of these options is more “fair” or “true” than the others. On the contrary, I see all kinds of reasons why all of them are less fair than the outcome of a voluntary transaction between two independent and accountable market participants.

To be clear, the seller has an obligation not to misrepresent what she is selling; misrepresenting what one is selling is bad (just ask Volkswagen). But where else in commerce do we even expect, much less require, a seller to disclose their reservation price transparently?

Do we get mad at the person who sold us our house because they didn’t tell us their brokers’ open was poorly attended and they really need to move immediately? Do we get mad at the car salesman who bargains harder because we forgot to take off our nice watch? Do we get mad at the movie theater because there were empty seats and so their opportunity cost on our ticket was $0? For that matter, do we even get mad at the movie theater for the $10 bag of stale popcorn? No. We expect that behavior and we do our best to counter it, but at the end of the day we decide whether the price offered is worth it to us in context and we buy or don’t buy.

The bottom line is that sellers should be free to use any and all (legal) tools available to them to manage their businesses in any way they think will meet their business objectives. Buyers are free to change bidding strategy, negotiate special terms or look elsewhere if economics on a transaction don’t work for them. Reasonable people could debate whether or not price floors are good for the efficiency of the market overall, but thankfully nobody is setting policy for the market overall – this isn’t 1950s Stalingrad.

Floors, “artificial” or otherwise, are a valuable and perfectly legitimate yield management tool for sellers.

Programmatic Reserve: Let’s Solve The Right Problem

Just a quick post today, to steer readers of this page to AdExchanger for some thoughts on programmatic reserve.


Google: “Programmatic” is all about the buy-side

Did anyone else think yesterday’s virtual “hang out” with Google’s Scott Spencer was fascinating?

First of all, where was he?  Was that a jungle or a conference room?

More importantly though (much more importantly), did anyone else find Google’s definition of programmatic a little lopsided?  According to Scott:

  • “We define [programmatic buying] based on the fact that the buyer gets to define the targeting”
  • “The ability to not buy is a critical attribute to programmatic buying”

This is a fair characterization of RTB as it exists today, but defining the entire Programmatic market this way isn’t exactly seller-friendly.  The real eye-opener for me though was the response to a question from the audience on delivery guarantees (good question, Tom!).  Scott made it clear that in the context of Programmatic Reserve, any delivery guarantees should only go one way.  So for Google, a programmatic delivery guarantee means that the seller guarantees they will provide the inventory, but the buyer doesn’t guarantee they will buy it.

Huh?  You have to admire the frankness, but if I was a publisher I’d be very concerned about that perspective.  I think for programmatic reserve to “really happen” it’s going to take a much more balanced approach that addresses both buy-side and sell-side needs.

What do you think?

Great Creative from Merrill

I just saw this campm2aign on Y! Finance and it caught my eye, half as a consumer and half as an ad guy.  Clicks through to microsite here.

As I have mentioned before, the creative really matters and this is a great example of what’s possible when creative is designed around an online, 2-way experience.  Fantastic way to ingrain the brand impact and the social sharing feature at the end of the process is a great earned media idea (although I personally am too vain to broadcast my 80-year old face).  Great campaign, and I bet they will see great response.

Banners don’t work?  BS.

How do we make Programmatic Reserve really “happen”?

Interesting article last week on Programmatic Reserve by Jay Sears in Ad Age (call it “‘guaranteed” if you want – just don’t call it “premium”).  Jay’s a smart guy and right on the money with respect to the potential for a broader definition of “programmatic” to fundamentally change the online ad landscape and dramatically expand the pie.  So from that angle I was in violent agreement, but two things still kind of grated on me as I read.

First was the shifting tense and implied timing.

Seemed to me that we went freely back and forth between present and future tense as the article unfolded.  We were talking about a ripe opportunity for Programmatic Reserve, then something that was happening now, then sorting out the technology to make it happen.  Those of you who know me (and/or read this page) know this is a topic near and dear to my heart.  It’s most certainly a ripe opportunity.  But it isn’t happening now to any meaningful degree.  Lots of talk.  Maybe almost that much work going on too, but not a lot of real money moving yet.  Perhaps what he means is that this is the year that the work bears fruit and Programmatic Reserve becomes real.  Possible, but we really have our work cut out for us.

Which brings me to my next issue – what needs to happen to make it real?

Jay outlined a vision including structured electronic RFPs on the buy side, structured electronic catalogs on the sell-side, even index funds.  This was a good synthesis of many of the ideas that have been discussed over the years.  So I love the aspirations, but I think the harder part is how to get there.  That’s what folks haven’t been able to figure out yet (yes, that includes me when I was at Brand.net).

Exactly what problem are we trying to solve?  Are we (as this article’s subheader suggests) trying to get up front budgets running through RTB?  Not really.  Are we trying to compete with excel as some others have suggested?   I’m not sure that’s exactly right either.  Is this primarily a buy-side problem or a sell-side problem?  Seems to depend on who you talk to.

I think we’d be most productive as an industry to answer these questions once and for all, rather than spilling more (virtual) ink on the high-level vision for the future. So I am going to do my best this year to do just that.  I.e. figure out what’s the right path to get us to this future we all see and frankly must create to keep growing long term.

I’ll keep you posted, and I’m very much looking forward to your input!

Can we please retire “Premium”?

I spent some time on Wednesday talking with John Ramey over a couple of the delicious finger sandwiches we were serving after our latest AppNexus Summit.  During that conversation, he and I agreed that we hated the term “Programmatic Premium” to describe the process of using technology to enable media buyers to buy, in an efficient way, specific packages of media from specific sellers that guarantee delivery.

He and I are not exactly spectators in this arena, so I think this convergence is worth noting.

Unfortunately, the label “Programmatic Premium” is gaining traction as the broader online ad industry’s attention turns to the simply huge opportunity presented by [whatever we call it].  I think it’s important we get the terminology right before we’re stuck with the current kludge by default.

Here’s the problem: nobody agrees on what half of this unfortunate handle – “premium” – even means.

A recent Digiday article is typical of the debate.  Group of informed grown-ups, simple word, complete lack of convergence on definition.  If we can’t agree on what this term means, we’re not going to make the progress we need to in this area.  As I mentioned in a post a few years back, I think a big part of the problem is that folks are conflating the “quality” dimension and the “reservation” dimension.  These dimensions are correlated, but distinct.  The very fact that we are still having this confusion/discussion 3 years later pretty much proves that this term is a problem.

I believe when folks talk today about “Programmatic Premium”, they are essentially talking about automating the planning and guaranteed allocation process that today most often occurs through a direct sales interaction (reservation dimension).  Indeed, this process often deals in higher quality inventory at higher prices (quality dimension), but that is secondary and using the “premium” term invites unnecessary confusion precisely because of its subjectivity.

This is too important to keep getting confused about.   85% of the money in the display ad ecosystem is still transacted, inefficiently, “the old fashioned way”.  If we use a different term, we can avoid muddying the the water by grafting the irrelevant “what is ‘premium’?” debate onto a critical, urgent conversation about how technology can be used to streamline the process between buy side and sell side for media that cannot, should not or simply will not be traded via RTB.

Can we please all just say “Programmatic Reserve” instead?  “Reserve” focuses on the notion of a delivery guarantee or reservation, while retaining the positive associations with quality and supply-side control (think “reserve wine”).  And it gets us away from the all-too-squishy “premium”.   At least give me “Programmatic Guaranteed”.

Anyone care to second?

Programmatic Branding

Today’s AdExchanger roundup highlighted a great presentation by Bob Arnold of Kellogg Company.   His talk was on brand marketing via programmatic buying.  We obviously hear a lot about programmatic buying (primarily RTB) for DR campaigns, but this is a great reminder that we’ve still just scratched the surface of what programmatic buying can offer.

First of all, there’s much more that can be done with RTB to help brands increase efficiency.  Given the size of Brand budgets, this is a big (huge) area for growth.  Bob shares some great case examples from Kellogg’s experience:

1)    Having the right measurement framework is critical.  Bob’s not talking about CPA and conversion attribution here.  He’s driving long-term changes in purchase behavior through an offline channel.  So he divides metrics into short-term (brand safety, viewability, composition and frequency), mid-term (attitudinal lifts like awareness and purchase intent) and long-term (offline sales lift as measured by Marketing Mix Models).  This is all stuff I’ve discussed before, but we in the tech community can’t hear it too often and it’s particularly great to hear it from a big marketer explicitly in the context of RTB.  Nielsen for one is listening.  They already had a big presence in the first and last buckets, and they recently doubled down on the middle with their Vizu acquisition.   Vizu and Nielsen work great together, so this is a very smart deal.

2)    Creative is fundamental.  In Bob’s words: “Creative quality is paramount…the media plan simply amplifies the creative message.  Studies from comScore and Dynamic Logic [show that] 50-80% of the value of a branding campaign comes from the creative…it’s imperative you get that right.”  Great creative is altogether too rare online, but there are some great examples out there, like this one.  This ad made me stop and think.  And the more I thought, the more it took me away.  I will remember it and it will make me more likely to buy Legos for my kids.  Bob’s comments and creative like this are a reminder that while advertising – the activity – will be an increasingly technical pursuit for the foreseeable future, the best advertising – the thing – will continue to be driven by great creative that leverages this technology to connect people with products in a way that creates a lasting impression.

3)    Doing it right drives great results.  Bob claimed that programmatic buying for Kellogg doubled targeting accuracy while increasing viewability to >70% (higher than direct buys).  It also cut eCPM (CPM adjusted by comp & viewability) by >50% from their starting reference point.  The combination of these factors (assuming creative was comparable before and after) drove improvements in ROI (via MMM) by ~5X.  Just a stunning impact.

These examples demonstrate the power of RTB, in the hands of a savvy marketer, to drive Brand results.  Good news for all of us.

But I also want to point out that there’s more to programmatic buying than RTB.  There’s a whole set of programmatic premium, automated reserve (or whatever else you want to call it) capabilities possible on which the ecosystem as a whole as has barely scratched the surface.  A couple of the pioneers in this area include Brand.net and isocket, but I assure you there will be other, larger players down this path after them.  These next-gen programmatic capabilities are a great complement to the current set of RTB capabilities and they are tailor-made for branding.

It’s exciting to see a large marketer smartly leveraging the available technology in a new way to drive such great results.  It will be even more exciting to see what’s possible as the market begins to deliver more technology focused on this important class of use cases.

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