There’s been a recent meme, conversation, trend, topic, or whatever you want to call it around Native Monetization opportunities.  I’ve spoken about the opportunity publicly a few times including in a conversation started by Buzzfeed’s Jon Steinberg on Branch and most recently today in a Digiday article.

But what is Native Advertising?  According to iMediaConnection, native advertising is defined as, “advertising unit designed to integrate seamlessly with a user’s consumption experience.”

I believe that for most of the Internet, we’ve not found our native ad units.  Note however, a unanimous native ad unit across the Internet is a idealistic dream.  On TV, the unanimous unit is the “spot” and the equivalent of that in digital is the banner.  Note, these units are not native.

Recently, Tumblr announced Radar, Outbrain is gaining steam, Buzzfeed is showing strong Viral Lift, Sharethrough is penning a piece on TechCrunch about native monetization and Silicon Valley, and Facebook announced new native units.  The “native advertising” space is heating up.

Advertising is content and content is generally designed for consumers.  This means that advertising is essentially consumer centric, but is it.. in reality?  While creative might borderline consumer centric by the time it gets thru legal and business affairs of marketers, the actual media unit it’s being placed within might make the entire campaign fail.  All the hard work by the strategy agency, creative agency, production agency, planning agency all gone down the tubes because the placement of the media got it virtually unrecognized.    Yikes.  Many people believe that banner ads are dead and this is why*.

Native advertising as defined above are integrated within the user’s consumption experience.  It could be the holy grail of advertising.  When done correctly, it performs extremely well.  We’ve done it here at the agency and I continue to beat my drum about it.

However, native advertising is not without it’s limitations and issues.

1. The biggest issue is that you need to work with every single publisher on a media plan independently, at least for now, because there is little to no scalability across pubs.  This takes a lot of time and has cost implications.
2. Additionally, each publisher will require their own creative, produced in formats that might be unique to only one particular publisher.  This has production budget (non-working media) implications because these budgets are not infinite.  In one of the latest GM/Facebook articles, GM released that they had spent $30MM on non-working media and $10MM on Facebook ads.  The $30MM was on support and infrastructure to make that $10MM more effective.  While I think this number is grossly out of proportion, I do think in a more cleverly planned approach it is a reality.

These are two of many limitations.  Again, native monetization is not new.  Classifieds in newspapers are native.  TV Guide advertising is native.  Paid search is native. With all the new platforms emerging in the digital space, we’re going to see similar native models come to life.  I’m excited for those – and those agencies and marketers who can get thru the limitations will reap the benefits.  I’m excited about this as it’s going to keep me busy planning and investing.

If you are an entrepreneur who is building a platform or solution to address native monetization, we at kbs+ Ventures would like to meet you.

* I do not believe banner ads are dead.  I actually believe they are going thru a renaissance.

I graduated (almost did not – was going to leave early to pursue a startup) with my 4 year degree from Skidmore College in Saratoga Springs, NY.  I did not have the typical college experience as I was only there for 13 weekends in four years due to running a business while in school and traveling to the office and clients Friday-Mondays.  School provided a campus for learning as learning did not happen in just the classroom.  I think I actually learned more outside of the classroom then in it.

Fast forward to today, I have two children, both under the age of four.  I’m thinking about college for them already but I do not know if they will have the same college education I did.  Why?  The forthcoming education evolution here in the United States and how it might impact them.  The NY Times just wrote an article called The Campus Tsunami that outlines a lot of the current landscape.

Companies like Skillshare, General Assembly, Lore/Coursekit, Udemy, Minerva, Khan Academy, Codecademy, Edmodo, and others are forcing us to re-think what education is, not just what college is.  While much of this post has been about college, I think I need to re-think how my kids will even go through grade school.

I do not know what the future holds, but I have to imagine that the Internet will disrupt everything it touches.  This means education as I and my parents know it is being re-written.  I am excited for what lies ahead.

Enjoy it.  Some friendly faces from Buzzfeed, Second Market, and Business Insider.

When point solutions emerge, they tend to be the deepest in knowledge in that particular area.  It’s usually a founding team that recognized the opportunity while working somewhere larger and wanted to create a very specialist company dealing with this new space.  We are seeing examples of this today within the spaces around Pinterest, Path, YouTube, and mobile amongst other areas.

There is a problem with point solutions.  Once your customers get comfortable on your platform, they will ultimately will want more.  They will want service a bit above and below your solution and as a company, you need to make a decision whether or not you want to service this business or someone else (competitor) will come in and service this need.

In the advertising agency world, I see this all the time.  It was especially prevalent with the initial social media boutiques which popped up.  Their clients are now asking them for paid media, creative, and offline work.  Very quickly, these social media boutiques become less “boutique-y” and more like full service agencies.  And overnight, the social media agency is no more and it’s back to being a fully integrated agency.

Pros of being a point solution:

• You’re a specialist and you’re genuinely good at what you are doing
• Free from distractions surrounding the areas around your product

Cons of being a point solution:

• You are looked at less strategically and more tactically in many cases (not all)
• You might get commoditized quickly by larger entrants who will give away your portion of whatever “stack” you are playing in

It’s OK to be a point solution and if you are taking investment dollars from venture-type investors, make sure to keep the capitalization low (and valuation), in order to drive meaningful outcomes for your shareholders.  We’ve been seeing a flurry of acquihires of point solutions and no real big exits.

If you’d like to add your name to the list of potential players, please click here and sign up.  This does not guarantee you a spot, but does get you on a list that will be notified if there is extra availability.  Requirement to participate in the event is that you must be an active senior participant of the Silicon Alley ecosystem as either a founder/executive/partner/etc of a start-up, venture firm, technology company, or other type of organization.  I hand pick every attendee at the event.

This is one of my favorite events as it brings together a fantastic group of business executives and puts us all in a neutral setting to have a good time and celebrate our industry.  It’s nice to remove yourself from the day to day streets of NYC and set foot on the 6,300+ yard courses of Westchester, Rockland, and Northern New Jersey.  We change the course up each year and I spent all of Saturday touring different golf clubs trying to pick the right atmosphere.

A lot of coordination goes into this day as it’s a labor of love and there is no “business” behind it to get things done.  I might change a few things up from the previous years but it’s still too early to tell.  Either way, the 2012 Silicon Alley Golf Invitational is going to be special and I’m looking forward to seeing you on the course.

The overarching topic of the event was “mobile” and most of the presentations paid this off.

Tweets were active around the event hashtag, #tmkvcc so check here to read the tweets to get an idea of the event.  I love going back thru these as many of the insights that the speakers mentioned were captured here.  AdExchanger also wrote a nice piece on the opening keynote.

Here are a few of my favorite:

• TV dollars won’t come online. Rather, the web will become TV @benfoxgo #tmkvcc
• “Location may be one of the biggest indicators of intent since search.” Duncan McCall @PlaceIQ #tmkvcc
• People spend money to rid themselves of ads in the mobile ecosystem via @albertwenger #tmkvcc
• ‘Google has made advertising ugly.’ – @simonkhalaf at #TMKVCC
• “Good advertising is a feature, not a bug.” @albertwenger at #tmkvcc
• In Silicon Valley, we get the idea right. Decade wrong. Simon Khalaf, Flurry. #tmkvcc
• Draw Something does 3000 drawings per second. Wow. #tmkvcc

There was a nice tension between the speakers ar0und interruptive vs. native advertising opportunities and that’s something that I envision spending a lot more time on in 2012.

One thing was absolutely certain from this event:  mobile is a platform that is going to dominate and change industries in ways we haven’t even imagined.

I have one extra spot I’m holding for a reader of my blog.  If you’d be interested in attending, please contact me and let me know why you’d like to attend.  It’s from 8:30am-1pm in Tribeca (NYC) and you’d be expected to stay the whole time to maximize the opportunity.

Here are some of the topics of the talks:

The 2012 Industry Landscape—Challenges and Opportunities

Mention “the slide” to any industry vet and she’ll immediately know that you’re talking about Terry Kawaja’s famous “LUMAscapes”—the maps of how the different pieces of the digital marketing business fit together. Whether it’s how trading desks like Cadreon relate to DSPs like Turn in the display ecosystem, how Tremor feeds into Akamai in video and other companies across social, e-commerce, mobile, search and more, the LUMAscapes are, in the words of Google’s Neal Mohan, “the clear industry standard when it comes to understanding the digital media economy.” Today, we’re pleased to welcome LUMA Partners CEO Terence Kawaja as he outlines the most significant challenges and opportunities to companies trying to succeed in these rapidly evolving and inter-related ecosystems. Don’t miss this exciting keynote address!  Terence Kawaja, CEO & Founder, LUMA Partners LLC

The Past, Present and Future of Online Advertising

Can’t see the forest from the trees? Here’s a chainsaw. This presentation cuts through the complexity of the advertising industry by looking at its evolution over time. From the creation of the first billboard to the Exchanges, DSP’s, and Trading Desks of today, Ben Fox takes a comprehensive look at where the industry started and where it will go next. He exposes the forces that will drive change and takes a deep look at the technology systems that will be the foundation of the new online advertising ecosystem. Finally, he provides agencies, advertisers, ad networks, and publishers a roadmap to navigate the future space.  Ben Fox,  Adconion Media Group

Trends and Opportunities in Venture Capital and Mobile

First Round Capital has been one of the most active investors in NYC and across the country over the last several years, and one of the earliest to focus on seed stage investing.   Managing Partner Chris Fralic will discuss the forces driving the startup landscape, and where First Round is innovating and adding value.    He’ll also give an overview of some of the most important trends in Mobile, with real-world examples and insight, and what it means for brands and marketers.  Chris Fralic, First Round Capital

Zero to $200 Million in 30 days

OMGPOP CEO Dan Porter interviewed by Chris Fralic.   It took AOL 9 years to hit 1 million users.  It took Facebook 9 months.   Draw Something by OMGPOP took 9 days.   Dan Porter is the CEO of NYC’s OMGPOP who has literally taken the mobile gaming world by storm, and in under a month launched one of the most successful games ever and were acquired by Zynga for over $200 million dollars.    This is no overnight success story, though – Dan and the team worked for years developing other games and learning what worked and didn’t.  Find out how they did it, and what brands and marketers can learn, from virality, to game theory, and working your way on to and up the app store leaderboards. Dan Porter, CEO OMGPOP & Chris Fralic, First Round Capital

Inside the Trillion Dollar Media Revolution

Everyday, mobile applications appear to be disrupting multi-billion dollar industries raging from gaming and entertainment to transportation and logistics. In this session, Flurry will discuss the impact mobile applications are having on traditional media, the web and television and will also share insights on how mobile advertising is changing the way consumers are engaging with advertisers.  Simon Kalaf, CEO Flurry

The Future is Location Aware

“Location may be the biggest indicator of intent since search…” so the saying goes and we are out to prove it. In mobile advertising PlaceIQ is pushing the boundaries of privacy friendly audience targeting using the context of location as the key. We’ll discuss how, and show some specific customer examples. Plus discuss how the future is truly ‘location aware’ and what this means for the digital media industry.  Duncan McCall, CEO PlaceIQ

Why Everything You Know About Advertising Is Wrong

Well, maybe not *everything*. But if you think the future is about interruptive advertising, then yes, Union Square Ventures partner Albert Wenger thinks you’re mostly wrong, and maybe about to become obsolete. Technology is changing how humans interact with each other and if brands want to be part of that conversation they need to figure out how to add value in a way that’s “native to the user flow.” Advertising Age digital editor Michael Learmonth talks to Wenger about what that looks like and how the next generation of brands can thrive in the social web.  Michael Learmonth, Sr. Editor, Advertising Age with Albert Wenger, Partner, Union Square Ventures

If you watch Mad Men, watch the video.

If you work on Madison Avenue, watch the video.

If you are an entrepreneur who is building advertising or marketing technology, watch the video.

If you are selling media to agencies or marketers, watch the video.

If you are a marketer, watch the video.

Here is the link to the video on YouTube.

I cannot stress how important this video is to the future of the advertising ecosystem.  I’ve always said that we need to move towards a branded response model where both brand marketing collides with direct response.  Advertising without a call to action is a waste, especially when given the opportunity to have an audience take a measured response.  I wrote quite a bit about that here and something I stressed in this interview amongst many other places..

Today, for the most part, we have text ads and display banners (of different shapes and sizes).  Both of these types of units (search & display) have been adopted and make up the majority of global digital advertising spend.  For the online world, they scale.  There are deep takeovers and experiences that can be bought, but they don’t scale nor do they makeup the majority of online spend.

For the offline wold, we too have very defined creative units which provide scale for publishers.  These defined units can be a 30 second spot, quarter page advertisement, FSI, or a 10 second live read (amongst others).

Scale allows dollars to flow, as it provides less friction to move money to purchase many media impressions.  If everyone accepts a 300X250 advertising unit, then its easy to invest behind $1,000,000 in media because there is enough inventory to support it.  There is even enough for $10,000,000 or $100,000,000 of media.

TV advertising is significant not only because it is one of the only mediums to convey both audio & video, but its mass reach with standardized units is almost frictionless;  it’s also really easy to buy.  Additionally, when it emerged as a media channel to purchase, it trumped it’s peer set and with limited other options, it became almost a must-buy.  TV ad spend as a percentage of United States GDP has been a pretty consistent 2.2% since 1919 (since first commercial).

Fact:  There are many ‘haters’ of online display ads because they are standardized.

Well, television advertising is standardized too, and there are some recent examples of run away creative (and business) success:  Nike’s Write the Future spot, NFL Play 60, and the older Jordan/Bird/Barkley McDonald’s commercials.  Note, these are all sports examples as I am a focus group of one, but the common thread they have were that they debuted not only against a high target audience composition but also with contextual relevance.  I generally see the NFL Play 60 spot during NFL games and the Write the Future spot appeared during the World Cup.   Audience plus context helped give these advertisements meaning.    In the future, audience plus content plus location will give advertisements meaning.

Within digital, we are still nascent, but we are starting to figure out some of the native characteristics of the digital platform.  A few recent examples of successful digital campaigns such as Elf Yourself, Old Spice Man, Whopper Sacrifice, BMW ActiveE (our agency), Giorgio Armani/The Room (our agency), have a common thread:  the foundations of the campaign are not immediately scalable.  Why?  Because unlike offline media, these examples require user interaction to be successful, which is virtually impossible with unplugged offline media.  In a television world, the best spots allow us to reflect on our emotions as we watch.  In a digital world, the consumer/viewer is able to create emotions with engagements on the fly. Think about this (*).

When creating effective digital communications, take advantage of the medium.

Paid media dollars are no longer the only dollars that are driving scale.   This is where the POEM (paid, owned, earned media) strategy becomes vitally important.  The best digital strategies are done with the POEM approach in mind.

A couple more words about scale:

1.  Historically, advertisers rent audiences.  We pay large media companies to rent their audiences for a period of time.  This is not a winning proposition, as the minute you stop spending, your audience returns to zero.  However, this is changing with the ability to use digital means to connect with your audience and disintermediate the media companies.  Nike’s Trevor Edwards (VP Global Brand & Category Management) had a great quote in the NY Times about 5 years ago, “We’re not in the business of keeping the media companies alive,” Mr. Edwards says he tells many media executives. “We’re in the business of connecting with consumers.”

2.  Scale is still used to help get word out and will be necessary in the future.  I’m not saying that media buying and advertising is going away, but the way we look at the traditional paid media model is changing.

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* Inspired by a pre-read of this post by buddy Chad Stoller

** This post started out about native advertising opportunities and quickly morphed into a post about scale.  It wasn’t my original intention but that’s the way my brain worked while writing.  So, pardon the inconsistencies but I think I do get my point across.

*** Scale does matter in certain businesses and within components of the advertising ecosystem.  Example:  the more you buy (larger scale) on an exchange platform, the more bid requests you see.  Theoretically, the more bid requests you see, the better the performance you might drive.

I’ve always wondered what it would be like to watch Mad Men without having worked in an advertising agency.  I guess it’s like watching CSI Miami for me, as I’ve never worked in public safety.  There are plenty of subtleties that you pick up while watching having worked in the industry.

A few things stuck out from last night’s show:

1.  Pete’s power move of gaurding his potential clients and using them as leverage for a new office.
2.  The Heinz presentation that shows that not everything Madison Avenue does is right the first time… this is so true and often goes overlooked.
3.   Sounds like SCDP are going after a new airlines which back in the day, were the top accounts to have
4.  I like the scenes on Metro North railroad as I too take the train in each day.  It’s a nice touch.

It’s amazing how the producers of the show are able to replicate the 1950s, even down to Metro North.  It’s impressive.  I’m looking forward to the rest of the season!

Oh, I was interviewed by Paper Magazine for an article titled, “Meet New York’s Mad Men and Mad Women.”  Enjoy.