CBS’ Decision

Some quick comments on this morning’s Ad Age article on CBS stepping away from networks. The “publishers vs. networks” issue has ebbed and flowed pretty consistently since I started in this business at Yahoo! in 2002.  It seems to ebb when revenue is scarce and flow when demand picks back up, with clear evidence of both trend and seasonality.  There is obviously some rationality to this pattern, but I have always thought that the “turn ‘em on, turn ‘em off” approach is a blunt instrument that doesn’t serve publishers, particularly in the long term.

For example, in this article, CBS draws a distinction between the third party networks they are turning off and agency-owned networks (e.g., Vivaki) with whom they will continue to do business. As Michael Zimbalist of NY Times points out in another recent article, from a publisher perspective these agency-owned entities have a lot in common with third party networks.  So it’s unclear how leaving them “on” makes sense if the best solution for third party networks is “off”.

Apart from this inconsistency, two other big issues with the on/off approach are lack of resolution and poor responsiveness to dynamic market conditions.  While networks overall may monetize at a lower rate than direct sales efforts, certain networks will be more or less competitive for certain inventory (resolution) and at different times (dynamics).  RTB was designed to address these two “hard coding” issues (amongst others), but neither AdX 2.0 nor Right Media are close to ready to be relied upon as sole indirect demand channels.  Internal agency network efforts are still nascent as well.  The bottom line is that vastly more demand still flows through third party networks than through of any of these channels.

So rather than bowing out of a significant majority of the quickly evolving ad ecosystem, I think the right publisher solution is a framework that coordinates direct and indirect sales efforts to create the competition for inventory that drives maximum revenue for the publisher. Based on my long experience at Yahoo!, I laid out the broad strokes of such a framework in an article for MediaPost earlier this year. Publishers that learn fastest and best how to apply such a framework in their particular circumstances will achieve levels of monetization that increasingly distinguish them from their more isolationist peers.

None of us is as smart as all of us; the key to staying on the cutting edge of monetization is coordinating the best efforts of both direct and indirect channels on a dynamic basis.  Today and for the foreseeable future, third party ad networks are an important part of that picture.

In Search of Exchange 3.0

I thought readers of this blog may also be interested in my guest post for Ad Age, where I give a brief history of the evolution of the display advertising exchange ecosystem and suggest what I believe is the next step.  This post for Ad Age follows up on my previous post here.

As always, let me know what you think!

A very smart publisher

I just read a great piece by Michael Zimbalist of the New York Times Company on paidcontent .org. He clearly has a deep and precise understanding of the substantive issues at play in the channel conflict debate.  The more other major publishers and the market at large understand the distinctions he’s helping to clarify here, the better off we’ll all be. We’ve certainly done our part to help clarify terminology and to help publishers prevent channel conflict, so it’s great to see smart publishers joining that effort.

An interesting time for Display

An insightful article by Emily Steel in the WSJ this AM, picking up on recent trends and energy in the display market.  Ms. Steel includes some broad coverage on Google’s recent announcement of AdX 2.0 and implications for the display ecosystem, along with more depth on industry concerns regarding channel conflict between publishers and networks.  A quote from Jeff Levick of AOL ends the article: “All advertising shouldn’t be managed equally and all ads shouldn’t be treated equally”.

I agree with Mr. Levick of course, but the hard part for publishers is to set specific policy and develop supporting infrastructure to make sure tradeoffs are being made appropriately such that that the combined output of direct and indirect sales channels is maximized.  This is a mouthful even to say and not at all easy to do.  Brand.net takes the issue of channel conflict very seriously and we have been focused on mitigating it since inception, to the point of offering a set of experience-based principles designed to help publishers get started.  The bottom line is that with well-designed policies and systems, publishers can enjoy mutually beneficial business relationships with networks in both the short-term and the long-term.

Readers finding this article interesting may also be interested in another recent post in which we attempted to clarify some terminology in hopes of helping readers more easily navigate discussion of some of these trends and issues.

All this energy in the space is fantastic!  It’s a very interesting time to be in Display.

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.

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.

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