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Don’t count on ad targeting to lift CPMs in the near term October 2, 2008

Posted by jeremyliew in advertising, contextual targeting, targeting.
3 comments

The online ad market is not immune to the overall advertising recession, and growth has slowed. Many online media companies and ad networks are counting on targeting to help lift CPMs.

But Julie Ruvolo reports from the Adweek conference last week that media buyers are still hesitant about highly targeted ad campaigns:

In the traditional media-buying paradigm, advertisers buy audiences by buying content. Coca-Cola sponsors American Idol, Nissan sponsors Heroes, and so forth. But social media, ad networks, and especially behavioral ad networks, are chipping away at the “content as a proxy” mentality and positing that ads can be as or more effective if they’re tied directly to people and not to content…

But for all the talk it’s garnering, media buyers remain hesitant about jumping on the addressability band-wagon for several reasons.

First, while agencies are opening up to a more data-centric approach, operational challenges abound. One of the key issues is that it’s easier to buy a national TV ad than to set up and constantly manage a million-word AdSense campaign, or develop video creative for hundreds of demographics instead of one broad demographic…

Further, advertisers are struggling with the sheer volume and sophistication of data available to them. As digital marketing agency Avenue A’s Andy Fisher said, “We’re drowning in data.” …

We can talk all day about how wonderful digital media is, how addressable and trackable and cheap the media is, but the reality is that there’s a decades-long and multi-billion-dollar symbiosis between the ad industry and the TV industry. It’s going to take more than superior product, logic and efficiency to supplant that relationship.

I think Ruvolo is right.

Online advertising has typically been sold in one of three ways:

1. Endemic advertising targeted against relevant content, typically commanding double digit CPMs. An example would be selling movie advertising against Flixster (a Lightspeed portfolio company).
2. Demographically targeted advertising, typically targeted against relevant content, typically commanding low single digit CPMs. An example would be selling a “women” demo against TMZ.
3. Broad reach inventory, typically commanding $1 or below CPMs. An example would be a selling Yahoo email inventory.

Advertisers are comfortable with buying advertising against content adjacencies.

There are four flavors of ad targeting popular today:

1. Geographic
2. Demographic
3. Contextual
4. Behavioral

Through demographic and behavioral targeting, online media companies are asking advertisers to follow the user instead of following the content:

But, online ads should follow users and communities, since users are the ones to decide what content they want to put where, says David Carlick, Managing Director at Vantage Point Venture Partners.

“[I] say no, now you [the advertiser] are sponsoring the consumer—not the content online, but what they want to do online. If they want to go on MySpace and look at half-naked drunk photos, who are you to say that’s not good for my brand? You need to go where the people are and sponsor what they do, and not attach yourself to the 5% of content that looks like TV.”

Or as Jeff Jarvis says:

That’s [buying content adjacencies] still treating us like a mass. That’s still about lazy advertisers who want to buy upfront and don’t want to converse with us as individuals or at least communities. We need advertisers’ money; that will be the primary support of online media. But we need to both retrain them and give them the infrastructure and data to enable them to market smarter and create meaningful relationships — and, in the process, support small instead of big.

In my experience, when the guys with the money [advertisers] want to do things one way, and the guys who want the money [media companies] want to do things another way, then it is usually the guys with the money who walk away happy.

Behavioral and demographic targeting to the user level will likely have success with direct response advertisers who can readily measure and potential lift in response rates. But brand advertisers will want to continue doing business the way they are used to doing business. Furthermore, an advertising recession is not going to be an easy time to “retrain” advertisers. Content adjacencies will likely be the way most brand advertising is sold for the next couple of years at least.

Will contextual advertising work for online video? August 27, 2007

Posted by jeremyliew in ad networks, advertising, contextual targeting, video.
12 comments

I posted last week about why I though that Google’s new overlay advertising product would be good for the whole industry; Gootube has both the volume of inventory and the advertiser relationships to make the overlay a standard ad unit.

The other notable thing about Google’s new ad product is how the ads are being targeted, or rather how they are NOT being targeted. The New York Times quotes Eileen Norton, Google’s Director for Media Platforms:

Ms. Naughton also said advertisers would be able to take aim at specific channels and genres, as well as demographic profiles, geography and hour of the day.

What is notably missing from this list, especially from Google, is contextual targeting. I wonder if this suggests that contextual targeting is not as important for online video ads as it is for text link ads.

Online, Google’s adsense has been the premier form of contextual targeting, and it is primarily about direct response.

Television advertising is primarily about branding. Direct Response TV (infomercials) make up a very small fraction of TV advertising and they typically run in latenight and overnight time segments when both ratings and ad prices are low.

The question is whether online video advertising will look more like online, or more like TV.

For long form video online, it seems less likely that contextual advertising will be a good match. Long form video is more of a “lean back” experience, where the viewer is less likely to click on any ad, even a highly contextual one. That makes it hard for direct response advertising to work.

Short form video online may be more promising as viewers may be more willing to click away. People from online video analytics comapnies tell me that less than 50% of online video streams are watched to the end, with the bulk of the drop off occurring in the first 20% of the stream.

When you combine this with the fact that both Youtube and VideoEgg are seeing click through rates on their overlay ad unit 5-10x higher than typical online banner ad click through rates (according to the NY Times article), it seems more possible that direct response advertising will work for short form video online.

But two factors complicate this situation. The first is that neither Youtube nor VideoEgg are actually using contextual targeting today. The second is that the current advertiser base for VideoEgg appears to skew heavily towards “cool” entertainment ads (gaming, movies, TV and music), or at least so it appears from their sample advertisers. The same is true of the few Youtube ads that I have seen “in the wild”.

These early adopters may have more compelling video ads that are not as representative of the mass market – it may be easier to get someone to click away to watch a Superbad trailer than an ad for Tide, even a good one.

If indeed it is true that targeting against channels, genres and demographics is sufficient for video advertising, then this is great news for online video startups. Google accuracy at contextual targeting its text ads benefits greatly from the vast volume of ads that it serves, and from its very low cost compute infrastructure. Targeting against channels, genres and demographics requires a lot less volume and a lot less computation, which levels the playing field substantially.

I’d be interested to hear what readers think about whether contextual targeting will be the way forward for online video advertising.

Youtube’s entry into online video overlay will be good for its competitors August 23, 2007

Posted by jeremyliew in ad networks, advertising, business models, Consumer internet, contextual targeting, video, web 2.0.
6 comments

Google’s announcement yesterday of overlay ads in Youtube has prompted a lot of discussion about the format of the ads, and who invented overlay ads first.

As Henry Blodget and others have noted, some of the most interesting commentary on the overlay ad unit comes from Brightcove CEO Jeremy Allaire:

To our disappointment, there has been extremely limited uptake by the advertising community around [overlays]. There are a lot of factors behind this limited uptake, including:

– the advertising community buying video have been very focused on leveraging existing creative and buying patterns in the online video space

– most content publishers and media owners have been focused on getting the ‘basics’ up and running, and also responding to the RFPs from marketers and advertisers, which are almost 100% focused on basic short-form video commercials

– for premium brands and content, the basic pre-roll and companion banners are yielding extremely attractive CPMs and there is little evidence that :15 ads have any negative impact on end-user viewership behavior — in fact, our own metrics show that sites that run without any ads, and then introduce :15 pre-rolls and banners achieve identical usage and performance (e.g. no drop-off in users because of ads) on their content.

Nonetheless, we remain very bullish about ‘composite’ video advertising formats that combine overlays and unique and non-intrusive calls to action with deeper interactive marketing experiences. We’ve been pushing this for years and only now are starting to see the publishers and media owners that we work with begin to take an interest in these formats. I believe this is because we’re now entering a phase where content companies are looking at ways to maximize yield and revenue within their content, and they are introducing more mid and long-form content which require, by economic necessity, a different suite of formats to deliver a good user experience.

Jeremy’s experience is not surprising. As I have said in the past, new forms of advertising are hard. They take longer to catch on then you expect. Until standards emerge, it can be difficult to cross over from “early adopter” advertisers who are willing to experiment, into the mass market of advertisers. If the media buyer at the agency doesn’t see your sort of advertising as a line item, she can’t allocate you part of the ad spend.

That being said, Youtube’s entry into the market is a game changer. With Youtube representing 50% more market share than ALL other online video sites combined (according to Hitwise), and with Google’s existing relationships with advertisers, they have both the volume and the connections to be able to create a standard. And that is great news for VideoEgg, Brightcove, AdBrite, and all the other online video ad networks. Online Google/Youtube can create the standard that the industry needs to be able to really grow into scale.