Jonathan Mendez's Blog

Audience: Display Advertising’s Cat in the Hat?

Jonathan Mendez — Sun, 21 Jun 2009 19:11:39 -0400

Display advertising, which at one time looked like the web’s glorious channel is now a glory hole for direct marketing. In many respects brand advertisers have themselves to blame, not believing that a click is branding and fumbling around with poor microsite driven strategies that have zero ROI. The fact of the matter is an interaction experience anywhere (in our case the click) is an opportunity to create an emotional attachment with your product or service.

So while half the blame for the display implosion rests with strategy the other half rests with technology. Listening to the display industry of late you might believe that the worst is over – that a second coming of display is upon us. Emerging from the wreckage are two saviors that marry new technology with emergent strategy to blend performance with brand. Let’s call them Thing 1 and Thing 2.

Thing 1: The new mode of buying display ads is about buying an audience

Thing 2: The new mode of buying display ads is about using data to optimize

If you recall in The Cat in the Hat, Thing 1 and Thing 2 fly kites around to amuse the advertisers err, children. Ultimately the kids capture the Things and the Cat in the Hat cleans up the mess that was created. Then they all disappear.

In our story Thing 1 and Thing 2 will not clean up the mess that is display advertising either and the disappearing part is ominous. I will follow up soon with a post on issues around data and optimization (in the meantime here is a great look at the challenge from AdExchanger.com) but first I want to first examine Thing 1 - the idea of buying an audience vs. the old way of buying impressions.

Audience: Audience is a group of people collected together in a single place and time. They don’t need to have similar attributes but they share some common interest defined by expressed actions or attendance. The presence of audience is by itself worthless (unless they have bought a ticket – subscription & pay4play models). The value resides in the emotional state that allows for the success of persuasive efforts. This disposition is almost always temporal in nature and as such is something that is most effectively targeted in realtime systems (like search). This is one reason why display consistently fails.

Audience information is useful to target messaging that triggers a response but the underlying emotional state is best mined deep inside the publisher’s content. Search works in a large part because it is content driven. But make no mistake, the dynamic content delivery controlled by the user is still present in publisher environments. What is not built in is effective solutions to derive revenue from the goals of the user and leverage that moment (the kairos).

So if at its core an audience is about interest, intent and action how does this fit in with the buying models now being touted? Data and observation have taught us that online demographics & personas are meaningless for optimizing performance. The web is a user-controlled medium so just like the actions that define people we need to segment and target based on what people are doing, not who they are (as defined by what they’ve done).

Don Norman calls this Activity-Centered Design. He also rightly points out the weakness of human centered design approaches to dynamic sequences -- the very backbone of the event driven medium that is the web. My own optimization work has only validated these same ideas qualitatively and quantitatively across dynamic content and advertising. People are not predictable, but their actions can be a window of predisposition to certain messages and information.

Impressions: If we are being honest with ourselves as an industry the only reason we are moving to audience buying after a dozen years is that impression-based buying/selling has run its course. The problem with buying impressions in display is only that no one actually clicks on the ads. The strategies and platform are of a different time and medium and consequently the ads suck. If we knew CTR would be this bad no one would have ever built this type of system.

On the back-end most of the problems stem from the different goals each participant (publisher, advertiser, visitor) has. This causes multiple inefficiencies or optimization conflict. Display as it exists now is further expanding the delta between the value of publisher’s visitors & content with the revenue generated from third parties. This is not sustainable business for anyone. Eventually in digital optimization no one wins unless everyone wins.

The funny thing with impressions is that when the ads are good you can actually give away the impression for free. In Search the goals of the users (relevance) the advertiser (ROI) and the publisher (revenue) work in lockstep, each helps optimize the success of the other. Search validates the idea of activity targeting vs. audience targeting. This is realtime and dynamic -- what people are doing and what is effective in persuading them to do something. Proof that audience targeting isn’t needed? Besides language the Google homepage is the same in all 233 countries and has grown to dominate global search.

Cleaning Up: As the web has become more complex band-aid after band-aid has been added to try and make display work. Everyone has known about its poor performance for a decade yet few have done anything about it. Those few that have successfully created new ad platforms have not surprisingly had huge exits. However that innovation is now 5-10 years old. The “lost decade” for VC in digital advertising was due to investment in layered approaches to an underlying faulty system rather than brand new ad models (though entrepreneurs surely share some of the blame).

It’s never too late to build new systems and it seems the need is becoming more obvious. Just yesterday Bernard Lunn of RWW made his siren call. It is my belief that in order to work new solutions must have a ground up approach where the core inputs are content and realtime events and the trigger mechanisms are visitor attributes. Just like the timing needed for ad persuasion, the current rise in APIs, realtime data, IR, semantic tools and desperate publishers signal that the time may now be right for a different conversion event.

More Thoughts:

Brand Marketing in the Digital Age

The Power of Brand to Influence Outcomes or Why Brands Will Always Rule Digital

Platforms, Applications and the Future of Digital Marketing

The Brand Optimization Revolution - The Metrics are Coming! The Metrics are Coming!

API Battle Plans: Fighting for Next

Jonathan Mendez — Mon, 08 Jun 2009 01:31:59 -0400

We have reached maturation point with APIs where the three core components of the web experience – content, utility & data – are becoming readily available via API delivery. The implication of this growth is nothing less than the next web. A smarter web that delivers improved relevance, a better experience and expanded revenue generation opportunities. As the ramifications of these benefits become understood businesses now have no choice but to support an API superstructure, the pillars of which are content, utility, development and analytics.

But where do forward thinking businesses begin?

Though APIs have been around quite a while for information we are still in a nascent period of growth for content and utility. Amazingly we’re even earlier in using APIs to optimize digital media and experiences. Can you imagine a fully dynamic web? I know it may seem hard when in some respects we're guilty of leaving the mashup behind with the rest of Web 2.0.

An ambient web calls for strategies that leverage that ubiquity. APIs are they key to this. Semantic web (or the new & improved term, linked data) will also have a big role. As best I can I am sharing my thoughts on how start-up, legacy digital, and traditional businesses should approach an API strategy for their digital business. I welcome your thoughts in the comments. The only thing I know for sure is the ramifications of not having a battle plan are as large as the opportunity for those that do.

Bitly: A Model API Army

There are many approaches to using open content and data however unless you create something that blends the core API components (content, utility, development and analytics) you will always be vulnerable or at a competitive disadvantage. The best example might be in URL shortening.

There are quite a few URL shortening solutions however only bit.ly marries content (linked page), utility (URL shortener & link), development (Calais) and analytics (click data). The sum of bitly's parts are greater than it's whole but even the parts on their own are valuable at different times depending on the goals of the user (and the biz dev goals of bit.ly). This layered approach is why bit.ly is a homerun and should be a case study for how create new solutions using APIs.

So let’s dive into using each of the API components of the web experience together in the manner bit.ly is doing and see what we can learn.

CUDA: The API Stack

Everyone likes to talk about stacks these days so I’ll frame what’s involved in successfully creating API battle plans within your organization in that manner.

I'm calling it CUDA because, well I'm a marketing guy and it sounds cool.

Layer 1) Content APIs: Text, Images, Audio & Video

Since the web is an information medium content APIs present the biggest opportunity but also the biggest challenge. The thing holding back success for content providers might just be themselves. Creating an API is but just one layer of the stack.

The New York Times believes its API will deliver 2.5X the amount of eyeballs on their content. But how? Depending on unknown third parties to bring you revenue from your API is akin to a salesman sitting around waiting for the phone to ring. The content API is your raw material but how you mine it and what you chose to make with it can be the difference between diamonds and coal.

One problem for publishers is that they have never been very good with digital marketing or technology innovation. To make matter worse technology innovations have been publisher agnostic. The fact that the Kindle brings Amazon higher margins on Wall Street Journal subscriptions than the WSJ gets (not to mention the direct loss of revenue and customer relationship to the Journal) should be all the motivation needed for in-house solutions to take priority. When it will happen in earnest is anybody's guess.

Layer 2) Utility APIs: Messaging, Payments, Pricing

It’s becoming clear that messaging, payments and other API based tools &utilities will ultimately lead to the most creative use of APIs. We have already seen this around the API fueled Twitter ecosystem with numerous products being developed off the API and some even being acquired by or partnering with Twitter. I think this area is going to explode in the next year. Integrating utility is a one-time deal with long payoffs for core platforms. For entrepreneurs and VC this biz can also presents a quick flip opportunity.

We’ll soon see more transactional APIs in place with the much-anticipated Facebook payment leading the way. At my own RAMP Digital we’ve incorporated mobile carrier transaction APIs into a display ad to facilitate a subscription purchase from within the ad unit. Solutions like this are just the beginning of the next wave of API fueled utilities.

Layer 3) Development: API Services

In many ways dev is always the core layer. On the path to a true web of services it will be the innovation that can be built on top of it all. http://camelbuy.com/ is a great example. Created using the BestBuy API it delivers a wealth of information and value. It’s a great start but businesses can’t be lulled to sleep believing their API’s success (and ultimately their own) will be taken care of by developers earning affiliate commissions or contest winners.

My last company (Offermatica) built an insanely great web services tool. Instead of API calls we made JavaScript calls. Left to the their own devices most customers were nowhere near able to fulfill the full potential of the technology on their own. This is an old story in new technology. If it's too hard for people to use they just won't. This is the human element to it all.

Creative and media agencies will be of little help. Not until service businesses are built that uniquely understood the technology and have developed methodologies (with results) will the promise be fulfilled. Without services I’m afraid that there will be no case studies, no evangelists, no competition and ultimately no performance improvements for the web. But why build these businesses if there are no customers? Or why not just DIY if you're so smart about it?

If anything is holding back the next web it's not optimizing the content delivery -- it's optimizing the content presentation.

Layer 4) Analytics APIs: Data Profiles, Parameters,

API fed data has already had a profound impact on the web. Google is making 4 billion calls a day on its APIs (think for a second about the competitive advantage they have in place in order to do this).

The first decade of the commercial web saw counting. This new second wave seems to be about insight. This game changer is realtime data. RT is going to change everything from content delivery to dynamic pricing models for ads and traffic.

We are also moving from a browser web to a web where anything can make a request, not just a browser. This requires new ways of collecting and analyzing data along with new ways of optimizing. Good thing that is what we’re using APIs to make it all easier.

Summary

The winners in the first decade of the commercial web were sites like Amazon and Google that focused on performance, user experience, testing and optimization in order to deliver relevance and revenue. The winners over the next decade will be those that take those same tenets and apply them to how they aggregate and develop the content, utility and data that APIs will deliver. We are at a point in time where we are optimizing how we incorporate what the web has to offer. Unlike before, it now offers us everything.

Some Previous Thoughts on APIs:

Using APIs to Mashup Ads & Landing Pages

Why Mashups are Mandatory for Marketers

Platforms, Applications and the Future of Digital Marketing

Think Like a Search Engine – APIs & User Control