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.

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.

An exciting step forward in measurement

I am very excited about today’s release of yet another batch of fantastic campaign results for an Ad Age 20 CPG brand.  I am excited about this release in particular because of the use of both Nielsen and Vizu measurement technology for this campaign – an important step in establishing a link between improvement in purchase intent and improvement in offline purchase rate.

The Nielsen data establishes that this campaign, like our other SalesLink campaigns, drove a fantastic ROI as measured by offline sales compared to media investment. This metric is obviously critical because 95% of retail commerce still occurs offline. It’s easy to forget that in Silicon Valley, but ultimately advertising is about selling stuff and it makes a lot of sense to focus on the 95% rather than the 5%, regardless of medium. The Nielsen data is great in that sense, but it also has two drawbacks; Results aren’t available for 3 months after the campaign ends and those results have very limited granularity so it can be difficult to know what it was about the campaign that worked best.

Adding Vizu to the picture allows us to get granular data about what’s working best (creative, media mix, frequency) during the campaign, when we can still use those results to optimize. Vizu measures purchase intent not actual purchases like Nielsen, but we saw a very intuitive relationship between the two for this campaign. If this relationship holds reliably through further studies, then Vizu can be a very important tool in improving campaign impact. We don’t stop measuring offline sales, we just know a lot more a lot faster about what makes those results better.

Brands repeatedly tell us they want to be confident their vendors are doing what they say, but even more important are a) proving that their campaigns are effective where it really matters and b) helping them understand why.

Say what we do, do what we say and drive proven results. That’s our business.

The (Ad) World is Flat

I wrote a recent post in which I outlined our view on convergence in the online media market.  At a high level, we believe there are two major forces at play in the media market:  (a) increasing standardization of “online” media formats and (b) device convergence blurring the lines between what are today thought of as “online” and “offline” media.  Because of these forces working in parallel online display, online video, mobile display, TV, print and even billboards end up not that far down the line as one big (huge) 12-figure market.

In addition to expanding the market for online players, these twin consolidating forces will drive several broad and related trends:

  • Trend 1: Niches Vanish. Differentiated solutions for big, general problems will drive the most value (for customers, companies and investors) in this future, merged media marketplace.  That means focusing less on the medium and more on the customer’s business objectives, solving problems that exist in and across all media.  Solving format-specific problems will mean limited opportunity, as it will increasingly be the case that relatively small improvements within the pool of media that has already converged will be more important than even a major breakthrough in a specific medium that has yet to be “plumbed to the main line”.  And while we’re on the topic, that plumbing itself is more trade than investment.  It can create speculative value in the short-term, but gets marked to zero quickly as industry-driven, open standards emerge.
  • Trend 2:  “Good” gives way to “Best”. Building on the notion that niches vanish, the bar will quickly rise for what capabilities qualify as “differentiated”.  This dynamic echoes globalization.  In a global market, the best athletes (literally and figuratively) can earn dramatically more than the best athletes from previous generations.   However, those with less differentiated skills are increasingly marginalized – there’s a reason why millions of manufacturing jobs have moved to China.  As best of breed vendors in each medium begin to jump format boundaries and compete aggressively in a converged media pool, only the strongest, most customer-centric solutions will survive.
  • Trend 3: Higher Technology Hurdles. Scalable differentiation requires technology, so this rising tide of convergence also raises the bar sharply for technological sophistication.  As Warren Buffet famously said, when the tide goes out you see who has been swimming naked.  Well, as this tide comes in you’re going to see a lot of folks who can’t swim at all sink to the bottom, surprised by the speed at which the water rises.  For example, there was a time when a network could be run as a bucket shop, substituting hustle and excel for real technology.  That model won’t float in the media mainline.

So who wins in this world?

  • Data and Data Infrastructure. Information and insights are always valuable, and become ever more valuable as size of the spend across which you’re deploying them expands.  As more and more media becomes effectively “online” media and thus more dynamically targetable, the value of targeting technology and data itself increases.  This will benefit targeting technology providers like Blue Kai and Exelate, but will also benefit data owners like Acxiom, Facebook and Expedia.
  • Measurement. While I believe online media have over-emphasized measurement relative to other elements of the online media value proposition, this is a moot point in a converged media world.  It is true that measurability is a particular strength of online media so as more media comes “online” it will create opportunities for measurement vendors like Nielsen, comScore and Vizu to innovate, expand and drive increasing value for customers.
  • Supply  Side Platforms (SSPs). The fact that it will be technically possible for an increasing number of players to join this media mainspring does not mean each of them will have the knowhow and capability to do so competitively.  There is a space to help the “supply side” players– content owners and media companies – connect into the media mainspring, and make the most of it.  Folks like Rubicon and Yieldex have opportunities here, although the technology bar will be particularly high in this space.
  • Demand Side Platforms (DSPs).  Finally, we come to the “demand side” – the buyers of media. Last, but by no means least as demand drives the market.  Similar to the supply side there is a space for broad platforms to help manage and optimize campaigns over a diverse and complex online media inventory landscape.  As I have previously mentioned, there are fundamental differences between technology required to service DR objectives in the spot market and technology required to service Brand objectives in the futures market.  Most of the energy here has been focused on the DR/Spot side, but we’re going to see that change rapidly as major consumer brands get into the game for real.   For DR/Spot, Turn and Efficient Frontier are well-positioned and aggressively pursuing this opportunity.  Appnexus also has an interesting “meta-DSP” play.  For Brand/Futures, Brand.net is the clear leader, with market leading technology and strong customer traction.

Winners mean losers and the main theme in the “loser” category is the ad network shakeout – widely and frequently predicted over the last 5 years – finally materializing.  Here we go:

  • Single-Format Players. Those players whose businesses are built primarily on execution in one format and who don’t have best of breed capabilities that are broadly applicable to all media will wither without the shelter provided by format barriers.
  • Naked Swimmers. Demand side players that have substituted people for technology will get increasingly squeezed between agencies and exchanges.  Supply side players will find themselves with stiff competition from large exchanges in providing more/easier functionality for publishers.
  • Non-Aligned Exchanges. Between Google and Yahoo!, the market already has more than enough basic spot-market transactional capability.  Microsoft will likely also make an additional acquisition to accelerate their internal efforts, but once it does the music will have stopped.  With these huge, technically sophisticated, players already ramping quickly it’s too late for new entrants.  Only one current player will get picked up, and the rest better have a very strong DSP or SSP option or they’ll find their game over.

While this next wave of evolution poses serious challenges to many current players, it unlocks tremendous opportunities for those players with the right capabilities to ride the wave.

As always, I welcome your thoughts and comments.

Is BT Just a Sales Tool? (Redux)

This post is a continuation of my article in last Monday’s AdExchanger about some serious challenges with BT for Brand marketers.  Interested readers should start there and then continue reading below, as I make some of my points here in the context of the example presented in that original article.

As I mentioned, BT does not outperform other approaches in driving offline sales.  Specifically, Brand.net’s studies with Nielsen have proven that our campaigns deliver impressive offline sales impact.  These results were achieved without BT;  instead Brand.net uses high-quality media with contextual, demographic and geographic targeting managed to high composition, with controlled frequency and cost.

The average ROI of 141% on these Brand.net campaigns is roughly comparable to the average ROI generated by Nielsen’s largest offline measurement partners over hundreds of studies using the purchase-based / look-alike targeting approach I described in my original article, refined over nearly a decade.  The Nielsen-powered BT those others use is state of the art; BT doesn’t get any better for branding.  If it fails to deliver substantial ROI upside to other approaches in driving offline sales – we as brand marketers really need to question the utility of BT in general.

In addition to this fundamental problem, BT poses a variety of other important problems that brand marketers should consider carefully.

First, there are no standard definitions within the industry for behavioral categories so there’s a huge degree of subjectivity in defining which users are a close-enough match to the core users to qualify as “look-alikes.”  This is a big deal because, as I outlined, 99.9% of the users in a typical BT campaign are based on look-alike modeling.   In the context of the specific example I used, how similar does a user need to be to an actual CPB Baker to qualify for inclusion the behavioral category?  What’s to keep the network doing the modeling from stretching that definition to create more inventory, particularly if there’s no direct measurement on the campaign?

Another related issue is lack of portability.  Since there’s no consistent definition for any behavioral target, if an advertiser does find something that works with a particular vendor, the advertiser is stuck with that vendor.  They can’t say, “CPB Bakers work great.  Let’s figure out the best way to buy them.” because the CPB Bakers from one source could be completely different from the CPB Bakers from another source due to different look-alike definitions.  Furthermore, if the vendor whose CPB Bakers “worked” changes look-alike definitions, loses access to data or goes out of business, the advertiser must start from scratch.  BT can’t be used as a basis for a scalable, repeatable, progressively improved strategy driven by the advertiser/agency unless the advertiser is the one building the profiles from scratch – something that is far beyond what most advertisers today are willing to do.

Due to cookie churn and simple inventory volatility, impression delivery is extremely hard to predict for any reasonably focused BT target (and forget about reach or pricing).  This makes forward delivery guarantees almost impossible – another barrier for scalable use by large brands that typically plan a significant portion of their spend in advance.

BT can also be used by networks or publishers as a way to mask inventory quality issues.  Would an advertiser/agency want the media included in a BT buy if they actually knew what they were purchasing?  Would they be willing to pay the same rate?  I doubt it, but the glossy BT story effectively launders this sketchy inventory into a desirable commodity.

Finally, there are obviously high-profile privacy issues swirling around BT, and it’s anyone’s guess where those will settle out.  I would hate to have a platform or media strategy built around BT if (when?) our friends in Washington decide that “opt-in” will become the law of the land.

Marketers considering significant or sustained investments in BT would be advised to think carefully about all of these issues and ask tough questions of their partners before proceeding.

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.