As soon as Charter Communications voiced concerns about the controversial behavioral targeting issues, two other internet service providers (ISP) immediately distanced themselves from behavioral.  It has become the “hot potato” issue around targeting for internet advertising.  The privacy issues surrounding behavioral targeting are nothing new either and go back as far as 2005 or even earlier.  What I don’t understand is why organizations would even try to tackle this subject when there are great contextual targeting solutions out there that perform as well (or even better) than behavioral when it comes to performance lift for both direct response (DR) and brand advertisers.  Now don’t get me wrong, I am not anti-behavioral—far from it—but if the privacy issues rear their ugly head there is definitely a safe harbor from them in contextual.  Marketing Sherpa’s 2008 Online Advertising Handbook surveyed 577 online advertisers from a range of companies and found that 40.5% of the advertisers surveyed felt that contextual targeting yielded a higher ROI while only 36.7% preferred behavioral.  So while I’d prefer the industry found multiple ways to target for efficiency and performance, including unintrusive behavioral methods, which we certainly are doing, there has long been targeting solutions that completely side-step the subject of privacy.  Contextual is sublimely elegant in this aspect as it draws its relevance directly from the impression in real-time (at least our ClickSense approach does) to match the perfect ad to the user based on what they happen to be reading at the time.  This avoids saving any bits from the user’s historical actions yet serves up an even more relevant ad at a time when they are interested in learning more about the subject and they are most receptive to your message.  So if behavioral is got you down why not check out the contextual advertising solutions on the market today.  You won’t be sorry you did.

I just got back from the MediaPost OMMA Publish New York event and must report on one very significant outcome.  There was an outstanding panel discussion called Publishers and Ad Networks: Can This Marriage Be Saved which I was fortunate enough to attend.  The talk was on the value and life expectancy of the ad network model moderated by the very direct but never dull Wenda Harris Millard, President of Martha Stewart Living Omnimedia and author of the now infamous “pork bellies” quote.  On the panel was the similarly outspoken and sometimes abrasive Jim Spanfeller, President and CEO of Forbes.com most recently in the spotlight for his preemptive eulogy for ad networks.  Forget the dripping irony that Wenda sits on the board of an ad network and Jim recently launched his own ad network, these two are regularly in the news with pessimistic views of the ad network’s value to interactive advertising and big brands going online today.  The round table discussion also included Jarvis Coffin, Co-founder and CEO of Burst Media who was incredibly refreshing and sensible, and Matthew Boyd, SVP at ValueClick Media, who together defended the ad network point of view exceedingly well.   It quickly became apparent that ad networks have a solid and necessary place in the value chain within display advertising as Jarvis and Matt, along with Ed Montes, EVP at Havas Digital, talked through the evolution of the ad network and the necessary reach, optimization and aggregation role they fill today.  We saw that the original “horizontal” network model has undergone a Darwinian evolution using things like vertical-ization, contextual technology and behavioral targeting to reach point where they are not just “sopping up” the remnant inventory, but rather adding new and unforeseen value to the big brands that need to be online with their messaging.  I could not resist the Q&A period at the end to put the question to Wenda as directly as possible in hopes of some final punctuation to the argument that has raged in the industry for weeks.  But she took the question with great aplomb and very candidly responded that—based on what was said on the panel—ad networks are more “pearls than pork bellies” to brand value and display advertising.  So I think we can now finally put this issue to bed and get on with driving the industry forward.  Thanks have to go to MediaPost and OMMA for the great venue and the “chutzpa” to host the topic and get the names up on stage.  It was a very satisfying event.

I was talking the other day with a colleague, Paul Rostkowski our new Vice President of Sales, and he came up with a term that I thought was very relevant to what we are doing here at LucidMedia. We were discussing what makes LucidMedia uniquely different in the crowded marketplace of ad networks and how we are passionately focused on the advertiser and their agencies. This is almost a 180 degree departure from the norm where the focus has historically been on the publisher and connecting them to advertisers. In that norm, however, real transparency is a pipe-dream that is never realized because the publisher network must be protected at all costs. As we were talking he casually said we are an “un-network.” The idea being that we are doing the opposite of the norm by empowering the advertisers and, unlike the blind networks, we provide transparency down to the page in the name of improved performance. I thought the idea had real legs and the more I thought about it, the more I wanted to take it to the next level. You see, traditional blind ad networks are a community of publishers and advertisers yet LucidMedia is an ecosystem of inventory aggregators built on the most robust contextual targeting engine in the business. You can look at it as almost a meta-network or a network of networks because we tie together and leverage a vast pool of ad networks, ad exchanges, vertical networks, publisher networks, and publisher optimizers. Basically we’re cutting a “channelized” swath of relevant, high performing super clusters of inventory across all the aggregated pools of inventory out there. It’s the right inventory anytime, anywhere, any way as long as it works. This is similar to the exchanges model as it’s an ecosystem of advertisers, publishers, ad networks, and advertising technology providers all happily steeping together in a free market broth. So maybe we’re a “nexchange” (pronounced nex-CHANGE); literally a network of exchanges. Isn’t that a meta-network? I like this term, nexchange, not only because it describes us in a single word but also because it is highly likely that our model will be replicated by other companies when the ad network and exchange space reaches equilibrium and has nowhere else to evolve. That day certainly has not yet arrived, as prophesied by Spanfeller in recent comments, especially with the recent explosion of publisher and vertical ad networks like quadrantOne, Healthline, and WPP. The supply of networks and exchanges will grow until they satisfy the existing demand and although they have created a sea of inventory and unprecedented reach, the demand does not seem to be satisfied yet. Advertising has always had an insatiable appetite for an audience and online display advertising, especially with its great ROI and measurable performance in an uncertain bearish economy, shows no signs of slowing. Maybe it is trite to coin a cute little phrase like nexchange for what we are doing but you watch, you will see more and more media companies taking this next logical step (if they can). More and more organizations will start cooking with the fresh ingredients of inventory across multiple networks and seasoning it with their own performance enhancing flavors. A dash of behavioral here, a sprinkling of contextual there, a smidgen of optimization, two cups of targeting, and a stick of demographic—and presto, a nexchange is born! Just remember who invented the succulent confection before you when it comes time to write the media plan or issue the RFP. When you need reach, an engaged audience, and a clean well-lit relevant ad space, at least you’ll know where to find the master chef in this Hell’s Kitchen. Dinner’s served!

It’s hard to believe it has only been three months since we launched our new ad network. What a difference a quarter can make! Today we announced two strategic hires that are central to the execution of our ad network business model. Not only did we announce Paul Rostkowski will be joining as our VP Sales, but also that Abderrezak Kamel would be returning to LucidMedia as our CTO. Together they are a great indication of the remarkable adoption rate of ClickSense as the contextual advertising engine of choice for the display ad industry. We are almost struggling to keep up with the overwhelming demand for our contextualization. Not only are we currently powering AOL’s Web Offers strategy, we are rapidly expanding our work with some of the great brands in the ad exchange community to provide contextual targeting services. This puts us in a unique position to offer our deepest granular targeting capabilities—31 channels and 14,000 micro-segments—directly to advertisers and their agencies. And this is where Paul comes in. His depth of knowledge and breadth of ad agency contacts will help us emerge as the premier ad network; the one with exceptional lift potential, hand-on customer service, and deep technology. To take that powerful technology platform, already a strength of ours, to the next level we jumped on the chance to bring Abderrezak Kamel back to LucidMedia where he will continue his groundbreaking work on our ClickSense® engine. And what a great story that is by itself. We first joined forces with Abderrezak back in 2002 when LucidMedia, then Entrieva, acquired Semio Corporation. As the Chief Architect at Semio, he was the brains behind the brilliantly elegant Semio algorithm (with multiple patents) that won rave reviews at almost every major pharmaceutical company and federal agency. Since then he continued to do cutting edge work at Autonomy until his momentous return “home”. We already know from our customers that we are in a class by ourselves. One of our largest customers picked us from over 17 other competitors because we ranked #1 in technology, customer service, and innovation. With the return of Abderrezak to the fold, expect to see more groundbreaking innovations to get the most from your media dollar. With the addition to Paul to the team, we are now putting the “media” in the LucidMedia name. Now the fun really begins!

It’s no surprise that the context in which an ad runs has a significant impact on its effectiveness. And that’s especially true for brand advertisers who are going online with their campaigns. I’ve looked at this phenomenon from plenty of different angles around here with posts like Advertisers Say Contextual Offers Best ROI and Contextual Targeting Yields Highest Return for Brand Advertisers. And now to finally put the question to bed, a new study by OTX Research has been written up by Jonathan Lemonnier in AdAge that seems to prove the point conclusively. They found brand recognition could be increased 19% just by running ads in context. By in context, or contextual targeting, they mean running ads on non-endemic content that happens to be relevant to the products or services being advertised. That is not the same as site targeting which is running ads on sites that are inherently relevant due to the overall genre they serve. This is significant to note because it opens doors for advertisers to dramatically increase their reach. No longer must advertisers find vertical endemic sites specific to their industry, they can now reach out to a much larger general audience to find specific content pages talking about related topics and actually drive greater brand recognition. This can even mean dipping back into the remnant pool for high performing inventory if you have the means of categorizing pages to determine true meaning. And that is sort of the rub here; it is not easy to discern meaning from the chaotic web and especially the unmanageable long tail. And when you step outside the well-lit confines of the premium world you immediately face the challenge of brand safety. How do you guarantee your brand will run alongside appropriate content when you are out there in the wild-wild-west of the web’s seedy underside? Real meaning and real brand safety take granularity. I am always surprised when I look at the contextual targeting solutions on the market today and realize how shallowly they categorize. Everyone seems to offer 20 or 30 top level channels and that makes good sense on the surface. That accurately reflects how advertisers generally see the world. But a high level channel only puts you in the ball park and does not significantly drive up targeting-based effectiveness. Knowing that a page is about Automotive is a good start but that will not significantly impact clicks considering this level of broad channel-ization has already become a commodity within our industry. It is when you can discern manufactures of cars from types of minivans that you really begin to be relevant to the end user. And when you can determine a page is not only Automotive in nature, and not only related to subcompacts, but also that it is about Toyotas, Hybrids and Fuel Efficient Alternatives, and Hydrogen technologies, then you have deep targeting that has a significant impact on relevance and performance. But sadly there are very few systems that can go beyond a rudimentary understanding to determining the page was really about hydrogen fuel cells on environmentally friendly vehicles. Without this level of granularity you are stuck running an Automotive ad or if you are lucky maybe a subcompact ad and settling for average click rates. The real performance comes in when you know the true meaning is environmental in nature and you can target eco-friendly ads that will have a significantly higher recall rate. I’ve seen semantic engines with only a few hundred total categories across only two superficial levels into which they must classify all the eligible content from the more than 20 billion web pages out there. To really understand meaning in the sea of available ad space you need a solution that is far more granular. You need at least thousands, if not tens of thousands of categories if you really want to certify that a page is brand safe with the goal of maximizing effectiveness and subsequently increasing ad revenues, ROI and page yield. This is why LucidMedia has more than 13,000 fine-grained subcategories behind our contextual engine. It allows us to determine the true meaning of a page before an ad is served and makes sure the most relevant ad can be shown to the user. In some of our earliest tests this deep categorization yielded a 76% jump in clicks in the average direct response campaign versus the typical run-of-network buy. When you want relevance on the web for advertising you need depth and breadth. Having just breadth only gets you half way there.

Shira Ovide wrote an interesting piece in the Wall Street Journal’s On Technology section about self-service display advertising. I agree that the display side of the business needs to get easier for it to move to the next level but there is one thing in this article with which I am struggling. I am having trouble with them equating search-based text ads to display advertising because while self-service may work for direct response advertising (DR), they are forgetting brand advertising in this equation. In branding, display is inherently tied to the creatives and that does not lend itself to a self-service model. I know I disagreed with Spanfeller and Millard in the past, and I still do, but I’ll get to that in a moment. Shira’s analogy is like saying branding on the small screen would grow if it had a self service portal because Google did it with AdWords. That never happened in five decades and trillions of dollars went under that bridge. How could the average advertiser create an engaging 30 second video spot? Not on YouTube. Yes, a guy like Dunn who was mentioned in the article, can use Facebook to upload a photograph of his great pants and take clickers to his e-commerce portal page. He’ll likely hit an acceptable performance-based metric as in their example but the big brand crowd will not have the same luxury. It is different with search and text because search has the key words provided up front for some minimal relevance and almost anyone with a QWERTY keyboard can produce a decent performing monochromatic text ad in 30 minutes. They can even spit out a decent thumbnail image when pressed. But the performance, and subsequent return, of brand advertising hinges on many factors including the engagement of the creative and, when there is a call to action, the quality of the conversion process (as well as the context in which they are served). The best brands in the world go unnoticed with terrible creatives and the best creatives in the world fail miserably with non-intuitive landing pages. Basically I am saying that engagement and emotion don’t lend themselves to a self-service model like AdWords. And I’m not talking about Punch The Monkey here, I’m talking about creating real brand affinity, brand recall and purchase intent online with display. This gets us back to what Spanfeller and Millard were recently pontificating. While I still disagree with their prophesy that the ad networks are a dying breed and are devaluing the brands they serve, I agree wholeheartedly with them regarding the need for the human creative element in the process. This is why we have the great agencies we do. Maybe if there was a simple and free global library of real-time customizable rich media creatives in all IAB standard ad spot sizes using text-to-speech technology to create automated professional voice-overs then the big brands would dip more than the current toe-in-the-water online but we are a long way from that happening. It never happened with TV and now the big and little screen ads are evolving into even more protected methods like paid placements and integrated endorsements moving further away from a self-service potential. I think self-service is highly applicable to DR but I don’t think it’s the magic elixir that will pull more big brand dollars online. To do that you need context but I’ve already beaten that drum enough for now.

Forbes.com President and CEO Jim Spanfeller recently delivered a preemptive eulogy for ad networks at Needham & Company’s Third Annual Internet and Digital Media Conference. In doing so he has stoked the already searing flames ignited by Martha Stewart Living Omnimedia Media President Wenda Harris Millard and her infamous “pork bellies” quote that algorithm-driven ad networks are devaluing premium brand advertising. Forget the dripping irony that Forbes themselves have recently announced an ad network of their own, albeit a “slightly different” model, when you peel back the spinning layers of this onion the death certificate seems to be lacking any sort of authoritative signature. Everyone seems happy to relegate remnant inventory to the networks and exchanges, as though it were the red-headed stepchild of the display advertising world, but their panties sure get in a wad quickly when it comes to premium advertising going through the same algorithm-driven systems. You need look no further than Forbes own healthy revenue growth, even in a recession economy, to see that the current trends are working and improving on both remnant and premium inventory for the publisher and for the advertiser. Spanfeller prophesied that the ascendancy of online ad networks is probably at its peak as advertisers and publishers struggle to monetize the growing supply of inventory created by social media exploding online. He better be ready to embrace Google’s new Friend Connect social widget! He bravely predicted that the role of ad networks and ad exchanges will diminish over time as publishers take back more control over how their own media is monetized. Yes publisher want and need editorial control but the data seems to indicate that publishers gravitate to what maximizes yield and not what maximizes control. The question is really whether or not algorithm-driven media buying will have a negative long term impact on media buying. I have to give props to Tameka Kee over at MediaPost and my colleague Paul Levine, Vice President of Marketing over at AdBrite, who countered recently with a great deal of pertinent data which seems to prove the doom sayers are missing the mark with their dark prophesies. The roots of this debate spring from the early wild-wild-west days of the ad networks. Back in the early formative years of the ad network’s puberty it was almost an “anything for revenue” attitude and the trust got broken. Just look at how Spanfeller describes how the Forbes ad network is different from us unwashed masses. He depicts his solution as a “clean, well lit place” for monetizing the rapidly expanding long tail. How is that different from the new breed of algorithm-driven ad marketplaces out there? Take a look at the Certified Ad Space within the Rubicon Project. With the stellar reputation of the Rubicon folks, their approach seems like a cleaner and even better lit ad space. Or take a look at how LucidMedia provides brand safety through the most rigorous contextual scrubbing solution on the market creating a guaranteed Ad Safe Environment for premium brand advertisers. And yes, they all are in part algorithm-driven solutions. But these are good for the premium brand advertisers (and good for the publishers) and are not devaluing the brands they serve. Actually the opposite seems to be happening as these brand safe zones buoy up premium CPM rates wherever they occur. What the Spanfellers and Millards of the world are really saying is not that this is bad for the premium brands; they are actually signaling that the new breed of competition is an unwanted threat to their profit margins. The amount of angst created by the wonderful new breed of algorithm-driven advertising spaces on ad networks and exchanges like AdBrite, PubMatic, Rubicon and LucidMedia is a very clear indication of how positive these solutions are for brands going online. If they were truly bad then the Spanfellers and Millards would not care and subsequently draw this kind of attention to them because it would not be threatening their margins. I say that while the ad networks and exchanges must evolve to survive and continue flourishing—Levine’s comment about reach versus engagement for example—they are working just fine and are here to stay for the foreseeable future.

“In a nutshell” is a term to which I gravitate frequently because concision in marketing and public relations, when it comes to messaging, is one of the most critical factors of success. The proverbial sound bite. So here is another “in a nutshell” about how to effectively build brands with online interactive advertising as a significant component of your overall strategy: put it in context. Advertising is all about using emotion to create value and ultimately drive commerce. As Ms. Wenda Harris Millard puts it in the recent AdAge article (which got me thinking about this subject) regarding her now infamous pork bellies comment; “If you think about what does advertising do, it creates desire and eventually causes transactions.” Very well stated. She was providing new insights into what was founding her comment. She points out that ad networks and exchanges who are simply aggregating a critical mass of inventory without considering the context are basically just creating volume which will drive down prices over time. But to me, the future of online brand advertising has it’s cart inherently hitched to value, emotion and desire and that is not found in pure volumes. The only way we can address that aspect of advertising online with the technology that is readily available today, especially when you take into account the now inhuman scale of the web, is through advertising in context. While several types of targeting might work well enough for direct response, when you really want to elicit an emotional reaction for a brand you need to do it in context. When your online advertising approach works in concert with your branding campaign goals instead of working for your campaign, that is when you begin to squeeze the maximum ROI from your online advertising dollar.

Marketing Sherpa’s Chart of the Week this week comes from their 2008 Online Advertising Handbook & Benchmarks. In their article Display Ads Do Work and They’re Getting Better they posted the following chart.

They go on to point out that for years, online display advertising has been a confusing challenge for brand builders and the object of suspicion for the direct marketing crowd. They surveyed 577 online advertisers from a range of companies and there is a lot of no-nonsense information in their report like; “From an ROI perspective, eliminating wasted impressions, then making a good impression by serving up great advertising, is consistently the best option for advertisers.” But from the advertisers perspective I was delighted to see how well contextual targeting scored in the report. They found that 40.5% of the advertisers surveyed felt that contextual targeting yielded a higher ROI while only 36.7% preferred behavioral. This speaks volumes to how well contextual has matured as a technology in the display ad space. Search advertisers like Google have always had the luxury of having their users input keywords to tell them exactly what the relevance is but in the display space it can be much more difficult to find the most relevant ad in just a few milliseconds. To do this you have to run a rich semantic library against an intelligent rules engine to match phrases to meaning all astride a robust data crawler scarping content in real-time. Few ad networks bring this kind of horsepower to the game and usually fall back to simple keyword spotting against a flat database of user generated synsets. When you really put a potent contextual engine behind an intelligent optimization algorithm you can get much higher returns than even what Marketing Sherpa’s survey set has found. In our early case studies we found that we could easily lift eCPM by more than 70% and return a minimum cost savings of 30% by eliminating waste for the advertiser and focusing their ad spend on just the highest performing combinations of hyper-targeted micro-segments. To me this report found that basic contextual is the top targeting method. You should see what good contextual can do.

MediaPost recently wrote about Marketing Sherpa’s inaugural 2008 Online Advertising Handbook which showed that less than half of their advertisers use online display ads for branding purposes. I was happy to see that advertisers rated the ability to use behavioral and contextual targeting as an important aspect to ROI measurements though. InsightExpress reported that targeting was a key driver in effectiveness and advised advertisers that the context in which an ad is served is just as important as the ad itself. It comes as no surprise to me that context is important and targeting impacts effectiveness and ultimately ROI. What we need now is to take this a step further and understand which types of targeting work best. This is important because I have noticed that vendors in this arena tend to muddy the waters around targeting and in the end confuse the advertiser and their agencies. So I thought I would shed a little light on the difference between behavioral and contextual mentioned in the study. There seems to exist an almost unnecessary tension between the two different methods of targeting in the marketplace. I say unnecessary because when you compare the two, it is important to note that behavioral is to some degree dependent upon a contextual element; it is in part “contextual over time”, but advertisers still see it more as a black-and-white, one-or-the-other, which-one-do-I-choose situation. So it is worth investigating further. And to make matters worse I realized from this year’s Ad:Tech in San Francisco that many networks are claiming to do a mix of both but in reality they do very little contextual. No wonder there is confusion in the marketplace. Just take a look at two quotes from the industry press over the last few years. “The CPM of behavioral targeting was 24 percent less than the contextual placement, yet it delivered 50.3 percent more imminent purchasers … Therefore the CPM against imminent buyers was 50.6 percent of the CPM of contextual targeting. Behavioral targeting was twice as cost effective.” This is from a case study in TACODA’s Behavioral vs. Contextual targeting research done in 2006. Now here is another more recent quote that seems to almost contradict their findings. “The last two placements showed about a 19% lift in brand recall over the former, proving that when it comes to online ads, contextual targeting can have an effect. According to Marketing Sherpa data, 40.5% of marketers said contextual targeting delivers good return on investment; behavioral targeting was not far behind at 36.7%.” This is from Jonathan Lemonnier in Advertising Age early 2008. Ok, so is behavioral twice as cost effective as contextual or is contextual more effective? How are advertisers supposed to sort this out? To find the reality you have to compare how the TACODA case study was executed with the actual data in the research paper. If you look at the actual data in the TACODA study cited in the impressive first quote, the actual results are far less remarkable. The study is measuring the right KPI, cost effectiveness based on purchases, but the data in the study does not necessarily support the claim that behavioral was twice as cost effective. The case study assumes a certain CPM paid for both behavioral and contextual impressions and that is where the case study separates from the research data. If you look at just the research paper and don’t take into account the current market value of behavioral and contextual impressions, the subjective part of the claim, the empirical data seems to say that contextual targeting outperforms behavioral especially under a frequency cap!

(Number of looks at an ad)

(Seconds spent looking at an ad)

These images are from the actual study. Researchers measured the number of times the subjects looked at each ad on each page (looks, the first chart) and measured aggregate time spent looking at each ad on each page (seconds, the second chart). In the two charts you notice that contextual targeting outperforms behavioral until you add frequency. Only then does behavioral overtake contextual. In fact, on first exposure, contextual well outperforms behavioral for initial looks and ends up with almost similar look results at the second exposure. The story is even better when you look at seconds spent looking at a particular ad. Contextual well outperforms behavioral in seconds spent looking at an ad on the first through third exposure and it is only as you approach the fourth exposure, which is one reason why we frequency cap, where behavioral clearly begins to outperform contextual. Behavioral definitely has it merits. But this study, used to support a behavioral approach, shows why contextual targeting yields the highest returns for brand campaigns (as in the more recent Advertising Age quote). Contextual ads get eyeballs faster and they keep them looking longer especially under a frequency cap of four. In fact, brand advertisers should consider a frequency cap of three in light of this study. This is why big brand advertisers are doing so well on the LucidMedia Network and why they continue to be a strong focus for us. Contextual gets eyeballs faster and keeps attention longer in today’s world of hyper-short attention spans and overcrowded messages. The moral of the TACODA study should be; “Just don’t over pay for your contextual impressions.” Luckily for advertisers and agencies we are making the deepest contextual solution one of the most economical forms of targeting.