In February 2011, Google’s DoubleClick ad exchange did a Real-Time Display Advertising  State of the Industry Survey with Digiday, which found that advertisers and agencies are reporting that they will spend more on digital advertising in 2011 because of the benefits of real-time bid (RTB) inventory acquisition technologies.  To help buyers achieve the benefits they expect from RTB, Google published a new whitepaper that shares their view of real-time bidding for online display advertising.  Based on research and primary interviews with Google’s RTB experts across our product, sales and services organizations, this survey provides a clear definition of what real-time bidding is and how buyers can get involved with it.  Readers will find LucidMedia identified by Google at the forefront of this new technology in the free whitepaper here (PDF).

Reprinted from ADOTAS – Many moons ago, when the demand-side platform (DSP) was new and Invite Media was independent, I made some public predictions about display advertising. In the past year, LucidMedia has been executing diligently and dealing with the many twists and turns of our business. I thought it would be fun to revisit those predictions and rate them with 20/20 hindsight.

Before I get into the scoring, let me first review a few of the major industry developments since my predictions:

• Consolidation. The Invite Media acquisition was sadly not followed by a string of other overpriced DSP deals. This disappointed a number of bankers and all the DSPs.
• Self-Service DSP. This became a hot commodity briefly. There was plenty of chatter about “trading” similar to a stock exchange environment. Many media planners of old surely cast themselves as the new “mad men” of media.

We all know now that this is just silly. Soon, everyone realized that a slim markup on media is viable only if you have massive scale. The real value is provided by driving outcomes – i.e., layering valuable optimization services on top of the platform.

Data Management Platforms (DMPs). Data drives performance right?  So the reasoning goes like this – if we could value data appropriately, then publishers can be compensated properly for the “true” value of their audience, instead of getting diluted in an ocean of inventory. And so DMPs became the next hot thing for while.  BlueKai and Exelate raised even more money.

Are they still hot? Did the revenues follow? Anyone care to comment on this?  The established data players like Axciom kicked a lot of tires and eventually picked partners or charted their own path.

RTB Changed Supply Dynamics. Massive scale is now available via RTB on exchanges and supply side optimizers (SSP). These are new sales channels for publishers. These channels were and continue to induce bouts of teeth-gnashing and sackcloth-wearing for publishers as they try to figure out how to leverage them without diluting their value.

On the other hand, the traditional ad network has to deal with a new challenge to maintain their captive publisher base. As their publisher based flirted with SSPs and exchanges, networks saw no other option but to take a seat on the exchanges.  They built or partnered to acquire this ability to buy on exchanges. (Congratulations AppNexus – you read this trend well!)

Against that backdrop I thought it would be fun to revisit some of my predictions and throw some bouquets and brickbats at myself. I’ll score them on a scale of 1 to 5 where 1 = “Crack Pipe” and 5 = “Savant.” Just for fun, you may want to revisit your own predictions from last year and score them as well. I will have a glass of wine for all the savants. The crack addicts can join me for a pub crawl.

Prediction #1: Agencies won’t be able to absorb true self-service.

The Thesis: Running display campaigns requires a lot of expertise.  No self-serve DSP provides all of this expertise in a usable fashion for the typical media buyer. It will require human expertise to deliver the outcomes. Agencies do not have this talent and won’t be able to attract this talent.

How it played out: Almost all of the smaller agencies run campaigns with DSPs in “managed service” mode. The DSP typically gets a CPM rate.  Some of the larger holding companies have made significant investments in people to build up internal expertise.

They still use a third-party platform. They still profess independence from any one vendor. And they continue to use up business development cycles in “evaluations” of other DSPs. The media planning groups within these holding companies use the services of the “trading desks” services grudgingly, and continue to RFP externally.

The Score: 3.5. It is too early to call the trading desk experiment a success or a failure.  I would say my prediction is mixed for big agencies, and right on for small agencies!

Prediction #2: The DSP is the next ad network

The Thesis: Building on the predictions that (a) SaaS for agencies will not work out and (b) the change in supply-side dynamics due to exchanges will profoundly impact networks; true value will continue to be delivered by driving desired outcomes for customers. In other words, you make more money by running campaigns well.

This is what an ad network does. (I use the words “ad network” as a placeholder for a marketing services company that runs mainly display campaigns.) If DSPs have to  run campaigns to survive, and networks need the technology of DSP to continue to be relevant, then surely they are one and the same?

How it played out: Lets compare business models.

Demand-Side Platform

• Offers a “managed service” to run campaigns
• May offer a self service backed by managed service
• Pricing is typically CPM, CPC, or CPA
• Client base – agencies and direct advertisers
• Lots of noise about their awesome technology!

“Traditional” ad networks

• The run campaigns – i.e.  – offer a “managed service”
• They are trying to differentiate themselves by offering exclusive inventory
• They build or license technology to buy exchange inventory.
• Pricing is typically CPM, CPC or CPA
• Client base – agencies and direct advertisers

It walks like a duck and quacks like a duck.

So, it must be a duck right? Sort of, except that the duck with a DSP tattoo on its chest is a rocketship!
The common theme here is that both are in the business of delivering outcomes to their customers.  It is just that the inventory situation (supply side) has changed dramatically with exchanges and supply side optimizers.  The demand side has not changed all that much!

The Score – 4.5 Pretty much spot on.

What’s Next?

So what’s next for the evolving DSPs?  Emerging media is a likely wave to ride. Mobile, video, and social media perpetually sit somewhere on the slope of enlightenment. Social is probably the most exciting beach-head that DSPs are now wading into.

With DSP technology in-hand advertisers can quickly build a guaranteed fan base for new products, effectively engage and activate that audience, monetize it and then re-engage in a regular cycle. The DSP platforms with their massive reach and instant scale makes social media activation a solid bet.

Agree? Disagree? Have a visceral reaction? Let the fireworks begin.

Working with data partner eXelate, LucidMedia has been included in their Premier Media Partnership (PMP) program, making it easier for media buyers to purchase data along with their ad inventory in the LucidMedia demand-side platform. Our full on-platform data integration allows for our reporting, insights, brand safety and reach to be applied to the data eXelate provides through the platform.

You can get the full story from AdWeek.

Targeting seems like a big differentiator to those new to the demand-side platform (DSP) or online advertising marketplace. However, unless an ad management platform has their own server-side cookie database or proprietary technology (and some do), pretty much everyone has the access to the same data.  But what data is that exactly? What’s available? What can data not do? And most importantly, what works?

In this article, we‘re going to break down different types of targeting and tell a little bit of truth about each type.

Third party user data

There are an ever-profilerating number of companies in the marketplace collecting and segmenting user data. Some of the big names in this space are BlueKai, eXelate, AlmondNet, Bizo and TargusInfo. To use this data, an ad network or a DSP forms a partnership with one or more of these companies and then sells that data through their platform to their customers in the form of audience segments.

Recent hysteria to the contrary, none of this data contains information that makes any one user personally identifiable to the data provider, DSP, ad network or, further downstream, agency or advertiser/client. In fact, if it did, it really wouldn’t be of tremendous value. The main benefit of this kind of data is in the volume of users in any particular segment. If a segment doesn’t contain enough users, the network or DSP isn’t going to see enough impressions to achieve whatever back-end goals the agency or advertiser may have. One perfect user isn’t equal to one million sort of perfect users. The power of digital media is in its ability to scale to achieve reach. If you want one perfect user, send them a letter.

Retargeting

When a user visits a web page, cookies can be used to “tag” that browser. That tag allows an advertiser to them show ads on other sites for that advertiser’s products after that user has left the advertiser’s page. In combination with a big push in other marketing and advertising channels, it is possible to get a lot of browsers “tagged” in a short period of time.

This is not technically complicated and nearly any online advertising management platform can do it. Particularly if an advertiser has not implemented retargeting before, it can provide a tremendous boost to traffic and, ultimately, conversions. The trick is not to implement it clumsily, which is where a good agency or ad operations team will be an asset. Retargeting is one of those display advertising tactics that can come off as “creepy” to an individual user (for example, the pair of pants that followed one user around the internet for weeks, even after the person had made a purchase).  However, done correctly, retargeting is both effective and appreciated by users, who like seeing ads that are relevant to them better than ads that have nothing to do with their interests.

Targeting typically costs a little extra than just serving as many impressions as many places as possible for as little cost as possible, but it’s also more effective when implemented by a talented ad operations team or competent interactive agency. Have you used third party data? What do you think about recent conversations about restricting the use of targeting?

There were some very interesting developments over the weekend in the world of real-time, technology-driven media trading.  On the eve of Cyber Monday, one of the new breed of demand-side platforms (DSP) was blocked from the Google AdX ad exchange.  Many of leading trade publications have commented on this potential sea change like TechCrunch, All Things Digital, and AdExchanger.  As the leading independent digital advertising demand-side platform, we found these recent developments newsworthy.

LucidMedia announced two strategic personnel milestones last week which will take the company to the next level as a media platform. We hired Natalie Mazer as Vice President of Optimization to maximize the performance of the LucidMedia demand-side platform. We also announced that Paul Rostkowski, formerly Vice President of Sales, has been promoted to Chief Revenue Officer (CRO).

We sat down with them to discuss the future of both LucidMedia and the digital advertising landscape.

LucidMedia: What do you think is the biggest challenge facing the interactive advertising industry?

Natalie:  The fragmentation of audience across media has been challenging for agencies and their clients. Where once direct-from-publisher inventory was sufficient to achieve performance, web audiences have become increasingly diffuse, particularly with the advent of mobile and video advertising. It takes sophisticated technology to be able to reach the right users at the right time and at the right price.

Paul:  The privacy debate continues to be a hot issue for the digital advertising industry.  Media companies need to support our industry groups in their efforts to educate the public. LucidMedia was one of the first DSPs to offer a real-time network opt-out on our homepage.  We work closely with the industry groups like IAB, NAI and Privacy Choice to ensure we are employing the industry’s best practices when it comes to privacy.

LM:  What problem is LucidMedia solving today with its online advertising management platform?

Natalie:  In a competitive economic climate, advertisers are looking to improve efficiency. With universal frequency capping and a powerful optimization engine, the LucidMedia platform produces goal-driven results within budget.

Paul:  Brand safety is a major concern for brand advertisers. Agencies and advertisers come to us for protection that preemptively identifies unsafe impressions and ensures that ads appear only on pages with appropriate content.

LM: You’ve both been involved in start-ups for years. What is your number one tip for entrepreneurs in the technology sector?

Natalie:  Hire a team with complementary skills and the right attitude. It may be tempting to hire all super-stars, but that strategy is expensive and doesn’t guarantee the creation of a functional corporate culture.

Paul:  Focus on getting your product to market and getting revenue in the door when you’re first starting.  The more you have coming in, the better off you’ll be in the long-run.

LM:  Please discuss the recent partnerships LucidMedia has formed and what impact that has had on the business.

Natalie: Getting all the major data providers on-platform has been a huge step for LucidMedia. Our engineering team has been focused on these efforts for some time and now that’s up and running, the potential is enormous.

Paul:  On-platform video and mobile buying is the next frontier for display advertising.  It has been a real growth area for us and our partners, particularly [mobile advertising network] MobClix and [rich media pioneer] Oggi Finogi.

LM:  What is next in advertising business management? How do you see this evolving in the next two to three years?

Paul:  As the big exchanges and agency holding companies choose their partners, there will be another technical revolution. Right now everyone is focused on building out platforms, but soon the push will shift to integrating those solutions. That’s where a company like LucidMedia, with the combined expertise of eight technology-side experts, will excel.

Natalie:  I agree with Paul. White label solutions are becoming the norm. Platforms that exist with purchased technology, but that don’t have the back-end engineering support will experience difficulties when it comes to complex integrations.

LM:  What major trends do you see affecting LucidMedia the most recently?

Paul:  Agency trading desks have been adopting technology like crazy, trying to keep up with DSPs and all the data providers rolling out user interfaces. In some cases, it may be easier to acquire than to build.

Natalie:  There continues to be confusion surrounding RTB and what it means for online advertising.  Everyone bids in real-time now; it’s how the platform decides what to bid that’s the real differentiator.

Protecting the privacy of online users when it comes to digital advertising is fast becoming the hot topic.  Digital advertising associations, privacy watchdog organizations, and even Capitol Hill are all wading deeply into the privacy waters.  With all this change going on around us it is a good time to reiterate LucidMedia’s strong stance on protecting the privacy of online users who receive advertisements through our digital ad management platform.

Early last year the Federal Trade Commission (FTC) began issuing revised guidelines for behavioral advertising.  And the Direct Marketing Association (DMA) and the Interactive Advertising Bureau (IAB) recently launched a new program that calls for labeling online ads that their members serve based on the habits of online consumers.  You can check out AboutAds.info for more information on the new labeling guidelines.  Our Congress has even been exploring online privacy legislation that would set new boundaries for the collection of personal data by online advertisers.

Amidst all this change and heightened awareness, LucidMedia continues to take privacy seriously.  In fact, we were one of the very first demand-side platforms (DSP) to offer a real-time network opt-out on our homepage.  We are working with all of the leading privacy authorities to ensure we are employing the industry’s best practices when it comes to privacy.

When it comes to privacy, LucidMedia does not use any personally identifiable information (PII) and we do not work with partners who do employ PII.  We do not track or target specific or individual users online nor do we acquire data from providers who do track specific or individual users online.  We do not employ regenerating or FLASH tracking cookies.  Any cookie we do place is set to expire at no more than 90 days.  We use anonymous and general demographic data only, acquired through 3rd party providers or interpreted by our patented contextual engine, to improve the overall effectiveness of our campaigns.

You will find our corporate privacy policies available online at lucidmedia.com/legal.

Research back in 2006 by Microsoft Advertising (Atlas Solutions) called The Combined Impact of Search and Display Advertising: Why Advertisers Should Measure Across Channels by Esco Strong highlights an often forgotten performance rule in display advertising. That is, combining display advertising with your search campaigns provides a significant conversion rate lift over using search alone (http://www.atlassolutions.com/news_20060721.aspx). A 22% conversion lift in fact. Advertisers need to reach users across many different channels yet most metrics focus on each channel individually through their own optics and miss out on the proven “halo effect” of cross-channels synergies. This is because cross channel synergy was hard to measure until the advent of the unified buying platform.

The combined lift of using display advertising with search

There are a lot of reasons why these two mediums yield a synergistic effect. First, display has been proven as a strong way to drive brand awareness and recall and drive increased purchase intent. Display helps win users over who may still be sitting on the fence about converting after they search for after they are already interested in your brand. Display has also been shown to drive branded searches which is an early step in driving return as users pass through the sales funnel. Users usually visit your site by clicking on a display ad then they come back through search when they are ready to buy, sign up, download, register, or fill out your survey.

The same goes for video and mobile when it comes to cross-channel marketing online. Platforms that facilitate display combined with video and mobile drive an additional synergy as those very same users view a pre-roll ad on YouTube or catch an iPhone interstitial ad inside their favorite free app. This is one big reason that LucidMedia has worked so hard to unify display with mobile and video as well as leverage search data in our campaigns. Reach and frequency were always the original tenants of traditional marketing and they are translating perfectly to the digital realm.

Now that the “Google Content Network” has been magic-wanded into the “Google Display Network”, there is the potential for a lot more advertisers to come to the display party. But that party is hosted by a whole slew of acronyms. Here’s our quick and dirty guide to what they all mean:

CPM: Cost per thousand. This is your cost per thousand impressions, or the number of times your ad is viewed. A lot of display media is still bought this way.

DSP: Demand-side platform. Software used to purchase media across various ad networks and exchanges, generally with the use of third-party data and some sort of universal frequency cap to the number impressions any given consumer is shown.

RTB: Real-time bidding. Instead of buying a bunch of impressions from publishers and then auctioning them off, impressions are evaluating and purchased as they are generated.

BT: Behavioral targeting. The combination of learning from user behavior and third party data to more effectively target online advertising.

PBS: Preemptive brand safety. Some “brand safety” is really an after-the-impression assessment of potential appropriateness problems with the placement of an ad. Preemptive brand safety offers evaluation of the page prior to placing an ad there.

CPA: Cost per action. An act performed by a consumer in response to an ad, also the type of advertising that is sold on this basis. Also CPL (cost per lead) and CPD (cost per download).

RON: Run of network. Ads shown on all the web properties of any given publisher.

ROS: Run of site. Ads shown on just one specific website, though not on a specific page of that site.

IAB: Interactive Advertising Bureau. Group dedicated to the growth of interactive advertising and that also recommends standards and practices for online advertising.

NAI: Network Advertising Initiative. A group of third party network advertisers who are committed to increasing consumer confidence and contributing to the growth of electronic commerce.

RTA: Real Time Assessment. The ability to evaluate an impression in real-time for content, quality, and performance reasons before you buy or bid to lift efficiency and reduce the need for pass-backs.

ROI: Return on Investment. The calculation of revenue derived from spending on online advertisements. Also ROS (Return on Spend) and ROAS (Return on Ad Spend).

So what did we miss? Define other acronyms in the comment section below!