After returning home from a month of speaking at video conferences  – the iMedia Video Summit in San Antonio, Digiday NY and Digiday LA , one common theme stood out – the debate about programmatic vs. pre-sold/upfront. Having worked in digital for more than a decade, I can tell you that while the debate was intense, the balance of power has shifted in favor of programmatic buying. As the first platform to programmatically decision in video, you could say we’re biased.

Numbers these large aren’t lying

Our friends at Forrester (and our partner SpotXchange) confirmed this hunch recently when, for the first time, they estimated the size of the video RTB market.  Everyone suspected that it was growing fast and becoming an important part of the video ecosystem:

•  In 2012, RTB video will account for $387M out of $2.48B.  That’s 16% of the market, or about $1 in $7 dollars spent online.
• A year from now, Forrester estimates that share will grow to 22%, or about $1 in $5 spent online ($667M out of a $3.06B market)

To be even more stark: Video advertising is growing at an annual 23% clip. RTB Video? 72%.

The reason is? Programmatic buying is just more efficient to the advertiser.  Assigning a value to an ad impression when it becomes available based on various factors of value like placement position, context of the ad, performance it delivers, etc. still trumps pre-determined buying.

What’s next?

We at DataXu see strong market evidence confirming what Forrester and SpotXchange found in their research.  Every day, more and more of our customers are asking us about video RTB and how that should be a part of their overall video advertising plans.   As more advertisers put video RTB on their plans, more publishers will logically follow and make more impressions available.

One of our partners, Adap.TV recently published out an interesting ‘State of the Video Advertising’ study which further substantiated this view.  Compared to 2011, they asked, “Where are advertisers buying their video inventory?”

Their findings:

• Direct from Publishers:  Went down from a 75% share to 72%.
• Ad Networks: Almost stayed flat from 72% to 73%.
• Exchanges: 15% up to 29% (almost a 100% increase!)
• DSPs: 15% to 32% (more than a 100% increase!)
• ATDs: 29% (no benchmark last year).

As you can see, the fastest growth is driven by exchanges, DSPs and ATDs – all of which take advantage of programmatic buying.   Ad networks can see the writing on the wall – a full 82% (or 4 in 5 ad networks) source inventory through exchanges.

The above facts bode well for the rise of programmatic buying in online video.  The industry’s job is to ensure that buyers and sellers fully understand the power of programmatic buying and how it can deliver value for advertisers and publishers. It is a job that the industry should collectively adopt, and we at DataXu are doing our part in educating the industry.

Much of the uncertainty around mobile IDs versus cookies is that mobile IDs are tied to the actual device.  IDs are persistent and can’t be deleted.  They can only be replaced with the purchase of a new device, whereas cookies can be expired and deleted by the user.  The persistency and permanency of the ID is what has the media and consumers up in arms: Permanency equals bad; temporary equals good (or at least acceptable).  Further complicating the targeting issue is Apple’s news of deprecating the UDIDs on Apple devices, originating from Apple 1) never intending to allow for cookies to be placed on Apple devices and 2) not offering up any other solution for advertisers to buy media within the parameters that are consistent with online practices.

There are several targeting options coming to market including using the Mac address and Open UDID.  The former is not really any different than a permanent UDID.  The Open UDID, being backed by 17 mobile companies, is more of a temporary ID copy and paste approach..

Overall, it is still unclear whether Apple will assist the industry by addressing tracking, or whether Google will push its own standards forward.  From DataXu’s point of view, adapting quickly allows us the opportunity to understand the challenges of identifying users and working with all kinds of technologies to help advertisers hone in on their audience.   With all of the options and the unclear backing by any big players, there is too much risk to pick the wrong solution — creating more fragmentation in the market.  The real solution is to understand what we can about the users and not tie it to a device but how they interact with media.

At the crossroads is privacy. DataXu works diligently to strike a balance: companies want to reach their audiences with relevant content and offer people meaningful, high-impact interactions. Equally important, consumers want digital experiences that speak to their unique interests and needs. In every situation, protecting consumer privacy is paramount.

At DataXu, we make a concerted effort to safeguard consumer notice and choice and ensure their privacy and anonymity is protected. We work hard to uphold the highest values in all our business activities, and our leadership and policies regarding consumer privacy are no exception.

We are an active member of the Network Advertising Initiative (NAI) and comply with the NAI’s Self-Regulatory Principles. We also fully support the Online Behavioral Advertising (OBA) program, an initiative spearheaded by leading industry associations, and the efforts of the Better Business Bureau, to regulate behavioral advertising across the Internet.

Starting in August 2011, the OBA Accountability Program repeatedly tested the functionality, usability, and duration of consumer-choice mechanisms offered by a number of companies across five Internet browsers: Internet Explorer, Firefox, Chrome, Safari, and Opera. DataXu’s corporate website was part of those tests.

A few weeks ago we learned that the OBA Accountability Program discovered a minor issue isolated strictly to our corporate website. The “opt-out” link on our Privacy page improperly set a cookie that was only readable by certain sub-domains, resulting in a few consumers (less than .03%) receiving DataXu ads after they left the company’s corporate website. Upon notification of the issue, we immediately updated our corporate website to resolve the situation and be back in full OBA compliance. In addition, we expanded our quality assurance procedures to ensure that the opt-out mechanisms will remain fully functional and in compliance moving forward.

Trust and honesty are the bulwarks of our brand, as they are for our clients’ brands. We genuinely welcome your comments on self-regulation when it comes to privacy in digital advertising, so please send us your thoughts.

According to the DataXu-commissioned 2012 Digital Marketing 2.0 Study announced today, enterprise organizations have embraced digital marketing, and consider it to be a valuable channel to provide customer insights and drive sales. In fact, the study indicates that 75% of enterprise decision makers believe that leveraging their digital marketing data will help their companies dramatically improve their business.

At the same time though, enterprise organizations report that they are not fully capitalizing on the data generated by their digital marketing initiatives.  Why? The study shows they are not able to mine true customer insights from their digital and offline data because they lack the tools and talent necessary to get the job done.

What’s the potential business impact of this shortcoming?  Failing to fully capitalize on the data they heavily invest in capturing not only diminishes enterprise organization’s ROI, but also put them at a competitive disadvantage. In short, it opens the door for competitors to gain market share.

In fact, this issue has the power to shake-up the competitive landscape. Companies that master the ability to manage their digital marketing and offline consumer data and truly extract value from it will win. Those that don’t will fall behind. And the gap between the two will only widen as more and more budget dollars migrate to digital.

This is just one of the many interesting findings in the white paper we released today. Commissioned by DataXu, the study is the result of a research effort conducted by customer strategy firm Human 1.0 and the Society for New Communications Research (SNCR), a non-profit think tank. Overall, it demonstrates why management should make it a top priority to take a closer look at the people, tools, and processes they have in place to analyze their available data to make rapid, intelligent decisions to drive profit and boost ROI.

We invite you to explore the full report, available for download here, and register to attend our March 29 webinar (here), where DataXu and Human 1.0 will discuss the results of study in detail.

The addition of Geoff to our senior management team is a sign of our continued momentum and expected growth trajectory. As we drive forward and expand globally, Geoff will be responsible for DataXu’s sales and marketing strategies, and go-to-market plans for DX3 – our enterprise digital marketing management platform (the #1 ranked DSP offering in the “The Forrester Wave™: Demand-Side Platforms, Q4 2011”).

DataXu has worked hard to create solutions that transform how the enterprises manage their digital marketing efforts to meet their business objectives. We help them cut through the complexity to deliver what they really need: turn the data into consumer insights, and those insights into immediate and intelligent action, and in turn, boost ROI. In short, we simplify the complex and make it active, so companies can leverage it to drive sales and profit.

Fortunately, Geoff fully understands the needs of enterprise organizations. He comes to DataXu from enterprise CRM software powerhouse Salesforce.com, where he was Senior Vice President of Sales. During his tenure there, he was instrumental in growing Software as a Service (SaaS) solutions for the largest media and communications companies in the United States. Prior to that, Dodge served in a number of leadership roles in the media industry, including Senior Vice President and Publisher of BusinessWeek.

Today we also announced the appointment of co-founder Bruce Journey to Managing Director of International. As the first and only truly global demand side platform (DSP), DataXu provides local service and superior results for brands across more than 60 countries. In his new role, Bruce will continue DataXu’s rapid international expansion, and take digital marketing management to global scale.

Given Geoff’s experience and success in both media as well as enterprise software solutions, Geoff is an ideal fit for DataXu. We fully expect that Geoff and Bruce will capitalize on the momentum DataXu has achieved to create even more success, and prove to be a driving force behind our continued growth as we move forward.

What was your first gig in digital? How did you get it? Why did you get it?

My first gig in digital was when our startup Vizium was acquired by Carat.  Before then, I was doing online but all web and email marketing – no digital media.  Suddenly, I found myself thrown into an entirely new world of arcane jargon, TLAs and complex technology.

What was the hardest thing to learn or master about digital marketing?

The technology underpinnings and how to get real, actionable insight out of massive amounts of disparate data.  I think the industry is somewhat self-selecting because of the fact that tech and data are prevalent in our daily work lives; digital naturally draws in folks with a bit of geek in them.  But even people comfortable with technology can become flummoxed by the technical/operational hurdles you sometimes have to jump through to accomplish your strategic objectives.  Just take a look at AdOpsInsider.com and you’ll see articles like “Diagramming the SSP, DSP and RTB Redirect Path.”  Our industry is incredibly complex once you throw back the covers.

If you had the chance to learn/study/do something differently earlier in your career, what would it be?

I would have looked for more opportunities to work in branding vs what became a career grounded in direct response.  I think there’s a huge chasm between the two, which is a shame for both brands and their agencies. The industry needs more people who are conversant in both.

What advice would you give to someone considering a career in digital marketing? What about to someone who’s in their first job and is looking for advice about how to advance their career?

If you want better pay and work/life balance, get a job in a corporate marketing department.  But if you want to learn from the best and work with leading brands, go for a position at an agency. They are very different worlds.

About Judy Gern:

Judy Gern is a marketing innovator and free agent who helps brands drive new customer acquisition and revenue through insight-driven, ROI-focused strategies. Judy was founder and CEO of Adroit Interactive, a pioneering dynamic display advertising platform, which was acquired by MediaMath in 2010.

Prior to founding Adroit, Judy was VP Account Director at Carat Interactive, where she launched the Vonage brand online and developed acquisition strategies that led to explosive growth of the customer base, from 7,000 to over 400,000 customers.  Judy joined Carat from Vizium, a digital marketing agency which she co-founded and was acquired by Carat in 2001.  Prior to Vizium, Judy was a founding employee and General Manager of TECHMAR Communications, a CRM services and technology firm.

Most recently, Judy was Director of Conversion Marketing at Constant Contact, where she led the team responsible for driving conversion-to-pay, cross-sell, ARPU growth and loyalty for more than 450,000 small business customers.

The full report can be found here: DataXu MarketPulse – March 2012: http://www.dataxu.com/dataxu-marketpulse-prospecting-increases-scale-and-effectiveness-of-retargeting

Advertisers today are faced with the challenge of finding new customers to grow their businesses. Retargeting (showing an ad to a consumer who has already visited a brand’s website or taken an action) is a popular and effective technique for turning browsers into buyers. However, retargeting campaigns typically don’t scale as they are inherently limited by the number of people who visit an advertiser’s website, ignoring a broad universe of untapped potential customers.

One way to identify those untapped consumers is through prospecting – strategic techniques that discover pockets of dynamic demand. With that in mind, we set out to discover: “can a brand drive incremental conversions using prospecting in concert with retargeting?”

We worked with several advertisers running campaigns across automotive, telecom, consumer services, and financial services markets, respectively, and studied the actions of the consumers who converted. We separated consumers for whom retargeting was driven by offline media such as TV ads from those who were first discovered by online prospecting and later closed by retargeting. The team then measured the number of incremental conversions driven by prospecting.

What we found (chart below) was that prospecting drove between 37% and 147% in incremental conversion volume on top of what was already achieved by offline media-driven retargeting.

“As the overwhelmed salesmen of the cult classic Glengarry Glen Ross contend, it’s all about having ‘the good leads,’” said Sandro Catanzaro, SVP of Analytics and Innovation and leader of the Active Analytics Group (AAG). “DataXu’s prospecting techniques identify a high volume of potential customers – ‘good leads’ – and introduce them to a brand. Retargeting works in tandem with prospecting, providing these consumers with the subtle push they need to complete a purchase.”

Real-time bidding (RTB) offers incredible advantages over the Ad Men way of doing things (although the occasional three-martini lunch would be a welcome break from the seven-day work weeks to which most of us in the ad tech space have become accustomed).  And we have seen truly remarkable growth by almost any measure over the past couple years. According to a research report by IDC and PubMatic, in 2015 RTB display ad sales in the U.S. will have increased 71% over 2010 figures. The advantages of today’s approach to marketing compared with the old way of doing things are as clear as a tall glass of water (come on, you’ve already had three martinis) – transparency, granularity, control and better insights – to name just a few.  Oh yeah, and better ROAS for advertisers and improved yield for publishers.

And yet, while it would be nice to pat ourselves on the back for transforming the advertising industry in just a couple of short years, it behooves us to ask the question – why is the RTB marketplace so small?  Today there are hundreds of companies fighting for scraps primarily in the direct response sector.  As Randall Rothenberg said recently at the Rubicon Summit, the LUMA Landscape consists mostly of services businesses supporting direct response bought and measured advertising.  The good news is that there is still a ton of money.  The bad news is that 95% of brand budgets do not go into digital media.

Thus, the long term opportunity is HUGE, but where will the growth come from in the next year?

That’s easy.  How about using the pipes and the technology that we’ve been building over the past couple of years?  I mean really using them.  Let’s stop talking about the paddling in the baby pool that is exchange-traded media and apply these rich, robust impression-level decisioning technologies to the entire media plan.

The business case is too obvious to ignore.  A 20% decrease in your last click-measured CPA is interesting, and might help you keep your job for a little while longer, but what about a 25% increase in the effectiveness of your TOTAL online ad spend?

That would be a game changer.

Not to mention something that makes it worth going to work on Sunday.

Click here to feel the love:

Watch “Mobile Love Tour: Reason to Love Mobile”

Watch “Mobile Love Tour: 2012 Mobile Challenges”

Watch “Mobile Love Tour: What’s Exciting in 2012”

Big thanks to all our panel participants for providing unique insights and lively conversations.