We’ve heard it all.  Oversupply.  Glut in inventory.  Commoditization.  This exciting new era in digital marketing will be the death of the publisher.  Providers of quality content simply won’t survive.  All people care about is pushing for a lower eCPM and driving the cost down.  Yadda, Yadda, Yadda.

I go to a lot of conferences and attend a lot of panels (basically I don’t turn down free beer) and representatives of the buy-side always seems so charged up while the sell-side looks like they woke up to learn they managed the Pittsburgh Pirates (=====>>).  But it doesn’t make sense.   Digital spending continues to grow, budgets continue to shift online, and display spending is predicted to grow at a strong rate over the next five years.   Meanwhile, the number of people online has plateaued.  More dollars divided by same number of users should equal rising revenue and profits for publishers.  Right?  Well, actually, no, that’s not what is happening.

Publishers are seeing downward trends in pricing and are finding that buyers don’t actually care about them or their site, they simply want to find a specific audience and, barring porn and malware, they don’t care how or where they get it.  And the chorus screams “Commoditization!”

I don’t actually believe there is commoditization of display media.  And while the symptoms of it do exist, I believe this can and will be solved.  Commoditization implies that all individual units of a good are the same and are capable of mutual substitution.   I’ve seen site level performance reports and the data simply does not bear out that all media is created equal.

Rather than commoditization, what we have here is insufficient tools for buyers and sellers to really value impressions.  It all looks the same, or at least I can’t figure out how it’s different, so I’ll assume it’s all the same and not worry about it.  That’s how buyers are thinking.

This is where buying platforms come in. Platform based buying will benefit media sellers and publishers as much, if not more, than it benefits advertisers.  This seems odd and totally wrong, right? The true savior of the sell-side is actually focusing on the buy-side?  Yes, because buying platforms solve many of the issues that are causing this feeling of commoditization and this experience of ever-decreasing prices.

What qualifies as a buying platform?  It’s really any entity that can actually take control of and, more importantly, provide actionable insight into an entire media plan.

Buying platforms solve problems facing both buyers and sellers.  Let’s first look at the challenges that buyers face and dig into how platform-based buying solves, or at least minimizes, these issues.

Duplication

First, there is massive duplication of users across channels within media plans.  Currently, agencies and advertisers buy display media from a number of sellers.  The magic number for the agency seems to be about 10 or 20.  More than that and it’s simply too hard to manage.  Less than that and there’s both limited reach and also a perception that you’re not really doing enough.

What’s the problem with this duplication?  Let’s walk through an example.  Assume that Mr Omniscient Marketer has determined that the optimal number of impressions to get someone to buy is 3 impressions per user per week.  In this example, analysis has shown that less than that simply won’t generate the awareness needed while more than three will simply be wasted money since the user will either have already been convinced to buy or will never buy.   The marketer goes out to 10 sellers (networks, publishers, whatever) and does 10 separate buys and implements a frequency cap of 3 ads per user per week on each.  The campaign runs and what invariably happens is that a large proportion of users see far more than 3 ads per week – because they are addressed by more than one of the channels used by the marketer.

An obvious solution to this problem is to give each channel a frequency cap of 1, because then, theoretically, this will reduce the number of (and cost of) over-addressed users.  Unfortunately, this also increases the number of under-addressed users, which is just as bad.

Solving for this is challenging for the marketer, and they know it and that is why the holy grail for the display marketer is universal frequency capping.  We rarely get in a conversation with an agency where this topic doesn’t come up.  But this is not new and if you’re reading this you’re likely in the choir I’m preaching to.  Most discussions about exchanges, platforms, DSPs and networks all talk about the value of universal frequency capping to the advertiser.

What is new is that the lack of universal frequency capping may be even worse for media sellers.  Counterintuitive?  Yes, a bit.  Why would sellers want or need something that limits the number of impressions bought?   Wouldn’t this exacerbate the oversupply problem by decreasing demand even more?   The answer is… it’s complicated.

The buy side controls all the data and dictates how much they spend, at what price, at what goal, etc.  So the fact that far too many impressions are being served to some users is already factored into the buying process and economics.  They simply reduce their target CPA and CPM.  Buys aren’t “optimal” but it doesn’t really matter to the buyer since they are optimizing under these constraints and making it work.  Continued shift of spend to digital shows that advertisers have largely accepted this and are moving in.  But it’s painful for publishers.

Let’s put a little math behind that.  If a customer is worth $100 and we expect to convert 0.01% of the people we address (which is about right in display) then we can afford to pay $10 per thousand unique consumers.   If we have an optimal frequency cap of 3 impressions per consumer, we can afford a $3.33 cpm.  However, if we actually serve 10 impressions per consumer, now we can only afford $1 cpm.  If we serve 20 impressions, we’re down to $0.50.  And so on.

Now take that math and add in a few more complicating factors which cause smart buyers to become even more conservative with how they value impressions.  First,  add an uncertainty adjustment by the buyer because they simply do not know how many impressions they are serving to each users (so they assume the worst and overcorrect on the high side) – this lowers allowable CPM.  Second, take in the inherent difficulty with attributing display conversions due to last-click attribution and known inability to measure the true impact – this lowers the CPM further.  All of this results in buyers being unwilling (and unable) to pay a high price for impressions.

Platform based buying actually solves this for sellers.  Universal frequency capping is difficult across display channels.  It requires integration into the buy decision (eg, real-time bidding or, a better name, impression-level bidding). Without that it can result in a great amount of exhaust (extra impressions you’ve bought but don’t want to serve). However, true frequency capping isn’t really necessary.  Aggressive frequency management should be sufficient to have a significant impact on “right-pricing” display media.  Frequency management comes about when the buyer has insight into frequency, reach and duplication and can then use available levers to optimize media channels.  It’s not an absolute cap but it gets the job done.  For example, if Network 8 and Publisher 12 are not adding unduplicated or under-addressed users, they can be dropped from the plan and the dollars reallocated to Network 3, 4 and 5 and Publisher 7 which are reaching under-addressed users.

So now we’re buying less impressions at a higher price.  But the dollars coming into the system didn’t grow. So the problem for the publisher isn’t solved yet.

Attribution

Our goal isn’t to make all publishers rich. It’s to halt this feeling of commoditization and to enable publishers that are actually driving results and adding value to be compensated for that value.  This is where attribution comes in, because the challenge for the buyer doesn’t stop at frequency; correct attribution is also critical.  Though it has a huge impact, let’s ignore cross-media attribution issues (eg, display vs. SEM vs SEO vs. organic vs. offline vs. word of mouth, etc).  Here let’s just focus on attribution within the display media plan.  We want to make sure that each marketing channel is getting credited with and rewarded for the value it actually adds.  This actually is not difficult, it just requires the right tools.

Poor attribution drives poor decisions and results in dollars being allocated to the wrong channels.  A baseball analogy to poor attribution would be evaluating a starting pitcher based solely on Wins and Losses while ignoring the fact that it’s much harder for a pitcher on a bad team like the Royals to win games than it is for one on a good team like the Yankees or Red Sox.   This issue affects all types of publishers and networks.  Smaller networks or publishers may actually be driving good results and have a lower eCPM but may not have the reach to drive results in the manner that looks good to a poorly designed attribution analysis (ie, they are pitching well but they simply don’t have a good Win-Loss record, which is how they are being measured).  Similarly, premium sites may be driving results and be cost effective even with their premium price, but poor analysis causes them to look bad and to have to drop price.

The solution is to evaluate all your display media buying through one lens and while most ad servers can provide lenses into attribution, they do not allow the buyer to execute against that insight.  Platform based buying with superior insights informs the buyer who is doing what and what they are worth.  This insight means that display impressions are no longer a commodity, they are no longer undifferentiated.  A buyer can truly evaluate what works and what doesn’t and pay accordingly.   Suddenly, the medium-sized network or the premium financial site is hearing positive feedback, the advertiser is asking for more volume and prices rise.  Before you know it, we might even have a charged up publisher on a panel.

Next:

We’ll talk about the challenges facing publishers themselves and how the tools buying platforms are building can be used to help publishers compete and thrive.

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Eyeblaster released a research note -  “Search and Display: Reach beyond the keyword” (get it here).   It’s a brief note with very interesting findings, particularly for display folks.  Using Eyeblaster’s proprietary “Channel Connect for Search” (CC4S) product, Eyeblaster tracked cross-channel campaigns and determined the source of the conversion.

The note starts with a really good overview of the purchase funnel as it pertains to display and search (using a very relevant analogy to the yellow pages).   The funnel diagram shows how display and search can impact the funnel.  In the diagram, Display is shown to drive the entire funnel from Awareness to Intent to Purchase while Search only drives Consideration and Intent.   I’d suggest that Search can and does influence “Favorability”.  Once a consumer is aware of the need, she will search for generic, higher-level terms, and search can show ads that will drive brand favorability.  For example, I might search for “BlueRay DVD player” and could then see a search ad for LG and view LG DVD players favorably.  Additionally, while it isn’t clear if they mean this in the diagram, display is proven to drive repeat purchase (via retargeting).  Search is unable to directly drive repeat purchase.

As to the results of Eyeblaster’s study, it was found that:

“Overall, for customers who used both search and display, 72% of conversions arrived as a direct result of the displaychannel. Only 23% of the conversions were a direct result of the search channel. 5% were the result of display ads that were followed by a search.”

Eyeblaster caveats that the share of display vs search is “the result of  budget allocation decisions made by the advertisers.”   It’s probably safe to assume that Eyeblaster clients lean a bit more towards display than search, particularly those using CC4S.  The extremely low number of “search after display” conversions differs pretty dramatically from prior studies I’ve seen, which I believe has to be due to the types of campaigns being used in the study.

The report then digs into the share of display and search conversions by vertical. This is great data and you can see a wide variety in share by industry vertical.  Entertainment, CPG, Financial and Careers lean far more towards display while B2B, Travel and Retail skew towards search.  I’m actually surprised to see careers sitting more towards the display side, since jobs seems like a much more search-driven category, but the data tells a different story.

What would be really interesting here, given Eyeblaster’s leadership position in driving display engagement, is to get a sense of the breakout of display conversions by attribution type.  How are these display conversions being attributed?  It would be great to break these conversions out into post-view, post-click and even post-engagement.  I’m petitioning for a follow-up Research Note.

The key takeaway here is that display is an extremely important part of any marketing plan and can drive conversions on its own.  We in display intuitively know that and evangelize it every day, but it’s great to see a study from an industry leader showing some numbers to back it up.  Next step is to dig even further into these numbers and really nail the point home.

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Could there be any more compelling case that display drives search than the fact that Google is running display ads to drive to Youtube videos about Google’s search capabilities?

The videos are on Youtube here – http://www.youtube.com/searchstories

John Battelle first talked about this in his SearchBlog.

Most relevant here is that Battelle saw Google doing roadblocks on nytimes.com.  He states:

“It’s truly a brand campaign: Google is not selling anything here other than its own brand – that ephemeral sensibility that resides between its customers’ ears.”

Now we know that every campaign, even a “brand” campaign, has a goal.  So what’s the goal here?  How would the dominant search engine with 65% market share in the US measure and evaluate success?

Since I haven’t seen screenshots of the display ads, I can’t evaluate if there is a chance the display ads could drive view-based activity (vs. focusing solely on driving clicks).  But the primary video on the youtube site , called “Parisian Love”, has nearly 700K video plays in two months.  I am no expert on how many video plays is impressive, but that seems like a pretty good number.  Side note – these videos are pretty cool – I’m immersed in the space and I find them compelling yet I could see my mom or sister also finding them interesing and informative – nice job!

It’s interesting to think of the way Google could have used data to drive results in this campaign.  First, assuming the goal is to increase search share, and in an interesting case of reverse retargeting, they could have simply cookied their own searchers and either excluded people who either never or rarely searched on Google.  They could also have cookied people who didn’t search in an optimal manner (these videos do a good job of demonstrating the lifecycle of searching for things and coming to solution) or those who didn’t seem to find what they needed.  Finally, while they could never do this because they “do no evil”, they could have cookied people who have the Google toolbar but searched on Bing.

Regardless of how they are measuring success – this campaign is the ultimate example of using display to drive search.  If the master of search is using display to drive search, who are you to argue? Thanks Google.

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Took a break from blogging to welcome a new addition to the family.  Little Jackson, our newborn son, is doing very well and, as you can see, has a very excited big sister.

I hope to get back to a more semi-regular schedule with the blog.

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The Rubicon Project unveiled the Rubicon 20 Index which should be a more accurate measure of display CPM prices.  Focusing on just 20 top sites should also allow for Rubicon to account and adjust for any oddities in the data.  I’m still not sure why it takes 2 months to release this data, but maybe the concentration on 20 sites will get this report out sooner going forward.

That said, like the financial markets, if the Rubicon 20 is the Dow then we’ll still need an S&P500 to account for the broader market.  Perhaps Pubmatic’s pricing report can fill that void.

As I suggested in a prior post, Rubicon also saw prices increase a great deal in Q2.  Download the report here .

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