PubMatic has made its excellent report, distributed to attendees of its Ad Revenue 2009 Conference on October 8, available to all. Beginning on book page 36/pdf page 39 and running more than 20 pages is “The 2nd Channel Ecosystem,” a special section that I researched and wrote.
AdRevenueReport_PubMatic
Attention, watchdogs. You are sniffing up the wrong butt!
Mark Rogers Photography on dogster.com
Consumer watchdogs, privacy advocates and others who prefer government regulation to industry self-regulation of data collection, cookie tracking and behavioral targeting put entirely too much faith in government.
Ironically, they’re even more wrong about how well any of this actually works in practice today on the web.
As an industry insider, I do all that I can within the bounds of safe computing to optimize my computer to allow cookie-setters, data gatherers and targeters to show me what they can do. Most often, the results are only fair or poor. On rare occasions, a truly relevant message appears that surprises and delights me and, more important, offers me something I’m actually interested in at that moment.
If it’s usually difficult for me to see the effects – good or bad – from the use of my data for commercial purposes, how is it possible that people with no inside knowledge are dead certain that malevolent forces are out to destroy our privacy via online targeting?
1. It’s not easy to be targeted. 
Every browser, anti-virus and pc optimizer program, among other widely-used applications, makes it increasingly difficult specifically to allow your machine to be targeted. This simple example comes from a routine scan (AVG, free version) of a machine which has been set and reset numerous times to ignore every one of these widely known, safe sources of ad deliveries and/or audience analytics. A typical consumer would take the virus warnings seriously and would promptly remove and prohibit such common cookies, which help make browsing more convenient and relevant.
2. On the internet, nobody knows you’re a dog.
The New Yorker cartoon by Peter Steiner generally is still true 12 years later. Sure it’s possible for hackers, law enforcement and others to piece together a story from your many web activities. Since you purposely leave your life’s details all over social networks, it hardly requires a visit from the internet czar to figure out what you’re up to. You can still choose not to reveal anything about yourself online by, well, refraining from using the web, email, IM, etc. Then only your supermarket, credit card issuers, banks, department stores and cataloguers, U.S. Postal Service and many, many others will know all your details. Just unplug your computer and you’re safe at last.
Do you worry that we’re only a step away from Orwell’s omniscient telescreen? I choose to obey the law and not worry. I’d rather enjoy the benefits of the web, including legitimate commercial uses by companies that are guided by respectful consumer-friendly principles and profit-driven innovation.
3. Behavior – online or off – can be misleading. After reading “Find Me Again: A Blizzard of Retargeting,” I visited several sections of the Skechers site, beginning with the women’s shoes section, likely to be the most valuable and heavily-tagged and trafficked part of the site for research purposes. Next step was to go to my Yahoo! Mail account and, sure enough, the parade of Skechers ads – all targeting women – began appearing. Six weeks later, I still see them all the time.
One visit to the women’s shoes department and they retarget me to death. I assume they can do this because they pay only for specific actions generated from ads on inexpensive and plentiful exchange and network inventory.
To the company’s credit, Skechers has been very open about their marketing efforts. In addition to the Behavioral Insider article, there are Skechers case studies from AudienceScience and MyBuys, among others, and open discussion at conferences. If the privacy fearmongers would read some of these, they might be further inflamed by the casual references to targeting consumers. Or they may get the idea that this practice is widespread, innocuous (even if some find it annoying) and, at its best, it results in a satisfying experience for the consumer and the advertiser. If they were to read further, they might even come to understand that this popular and simple form of retargeting is not particularly accurate or effective.
My first Skechers ad on Yahoo! arrived courtesy of Blue Lithium, but it might easily have been associated with other sources identified on the Skechers site on July 1, 2009, including Acerno, AudienceScience, Burst, Fastclick, Fetchback, Interclick, Trafficmp, Tribal Fusion.
4. Will the big dog hunt?
On the web, Google is like the world’s tallest dog, Gibson, measuring more than seven feet tall standing up. He appears to be friendly, but you can imagine how fearsome a presence this towering Great Dane makes, and how he must garner equal measures of respect and terror even among dog lovers.
Google introduced its flavor of interest-based targeting several months ago, so I promptly signed up for over a dozen different categories of business and consumer interests. Ho-hum … I have noticed exactly ONE ad that may have been a result of this program.
Interest-based targeting on Google: not interesting
If the big dog keeps up this performance, you watchdogs can move on to a new fire hydrant in someone else’s industry.
If you want to know where behavioral targeting is going, look at aCerno. After consulting with Tom Sperry, Dave Hinton and team last fall, I signed on as VP of Sales & Marketing to help bring the company’s exciting story to market. You’ll be hearing a lot about us soon. For now, a snapshot:
- the only predictive targeting ad network
- the only online data co-op, with more than 350 member brand and multi-channel retailer sites
- anonymous shopping and purchase profiles of more than 125-million US consumers
- use predictive analytics & real-time ad decisioning at scale to accurately describe who is in an audience and what they’re likely to buy next.
I’ve written previously about the many opportunities available in the marketplace to help advance behavioral targeting, and I’ve been up close and personal with several of them. There’s also a summary today in Adweek. I chose aCerno because it represents the best combination of great data (responsibly managed, I might add), people, real-time targeting and results, results, results – for both brand-building and direct response.
Stay tuned …
… and he is us. (Walt Kelly, Pogo)
For years I’ve enjoyed asking a couple of simple questions when speaking to online advertising, marketing and media groups:
- “How many of you delete your cookies?”
- “How many of you use ad blockers?”
Try it the next time you’re in front of a roomful of advertising and media professionals. I’ll bet you will find that at least a third, and often more than half, of the audience will raise their hands. They are the professionals, and they don’t get it.
They think that internet advertising is an invasion of privacy, an unwanted distraction, and a downright unAmerican practice. If people in the business don’t understand, how can we expect ordinary web users to welcome cookies, targeting and advertising generally?
Lots of people in the online business tend to be self-absorbed and smug about how they have changed the world. Well, they’ve done a poor job of educating themselves and the people around them who have made them successful.
How about a web-wide blackout? Every website would replace its contents with a blank screen for a few minutes at a peak time of day. And here’s the message they’d put on the screen instead:
This is your internet without advertising.
Please disable your ad blocker, enable your cookies and enjoy the great free content.
Nice post by Andrew Chen about the proliferation of ad networks and the surprising success of several that have sold for very high multiples. He summarizes it this way:
My overall lesson from all of this is that a lot of times, people view things as “winner take all” and sometimes it is that way – but in this case:
mature industry + real revenue + adjacent space heating up
= huge outcomes for everyone
I think this is true, but it’s probably cyclical and there’s bound to be a lot of consolidation ahead. True, thanks largely to MySpace, YouTube, Facebook, et al, total ad inventory available has skyrocketed. True, no single network or handful of networks can meet 100% of this growing demand. And true, multiple pricing models and targeting technologies help to make this a market for the multitudes.
But consider some of the pressures working against “huge outcomes for everyone.” Various estimates put the total number of operating online ad networks in the hundreds. Yahoo’s Right Media Exchange and nascent others can accommodate all of them – but only for as long as they contribute real value to the marketplace. Better targeting, better optimization, better something is required for establishing a niche, staying in business and succeeding.
Without the exchanges, there is almost literally no hope for dozens of these networks. Media buyers are humans, and they are in short supply as it is. There is simply no way for them to add another thirty phone calls and meetings to every day to give serious attention to every network that wants their business.
Ultimately, there can and will be “a number of” winners. That number will probably be closer to 20 than 200, however, due to basic Darwinian principles. Some reasons why this is so:
1. The largest contributors of inventory to ad networks already work with 10, 20, 30 or more networks. It’s a big, ugly, inefficient process in which networks pass ad impressions back and forth, up and down a daisy chain or waterfall, depending on your metaphoric predilections. As in a beauty contest, there can only be one true winner, and that’s the number one network in line. Ad impressions get stepped on many times, the way poppies get reduced to heroin and then to a street mix that’s cut time and again before it hits the “user.” (At last, an excuse to relate web users and drug users 
2. Conversely, the hundreds of ad networks are all selling the same media placements. They are all offering every known and quite a few imagined forms of targeting, but they all base their targeting decisions off the same limited data set – primarily context. This is true of contextual ad networks and of behavioral networks that rely on context to define behaviors or interests.
In the end, individual networks won’t win simply because inventory is growing and they’re bigger and badder in getting to the best of it first. Media placement, context-based targeting or some new spin on optimization don’t matter that much. With apologies to my publishing colleagues, that’s the commodity end of the business.
Advertisers need a better, more predictive and accurate data source to drive much more value through the media value chain.
By next March, a dozen companies you’ve never heard of will launch notable products, ad networks, or services based on behavioral targeting. Some are newborn; others are already making money, but still flying low. They come in lots of new flavors:
1. Targeting with ISP data. Competitors include Adzilla and Nebuad, which have raised $10.25MM and $30MM recently, and Phorm. They all work with ISP subscribers’ data to target more relevant content and ads. Other companies with strong ISP relationships will enter this market, as will a venture that includes ISPs as founding partners.
2. Data exchanges. As one founder described it to me, “it’s a little Tacoda and a little Right Media. It can’t miss!” The theory is that sites will gladly sell user data rather than continue to give it away to ad servers, networks and research companies. At least two raw startups and two veterans are racing to produce the first commercial-grade data exchange, where advertisers can bid on audience by behavioral segment. They split the ad market, with two of them being all about performance and two going for brands.
3. Purchase behavior. Tom Hespos wrote recently that purchase behavior may be the new behavioral “thumbprint.” And he’s right: One company documents a conversion rate increase of 790%. The aCerno Transaction Marketplace is an online data co-op whose 300+ customers can target their own and each other’s customers all over the web.
4. Exotic behavior? Agent-based modeling is the secret science that will propel one startup’s better targeting engine. The goal is to super-size valuable segments comprising enormous populations of target-lookalikes.
5. Beyond behavior. Mindset Media offers brand marketers the chance to tailor their messages according to twenty elements of personality, such as “Humility” and “Bravado,” “Creativity” and “Compliance,” each of which has up to five distinct “mindsets” that can be targeted at scale. Tasty.
More flavors and details to come.