Targeting is rapidly overtaking inventory quality among ad networks as the one aspect that their value hinges on and the one that truly differentiates them. So much so that targeting has become the new “killer app” of ad networks. According to the E-consultancy 2007 Online Ad Network Buyers Guide, targeting was only 1 percentage point behind inventory quality as the single most important differentiator. That was 2007. Since then inventory quality has normalized with every network offering all the same top quality branded sites. Think comScore 200 and you’ll have the right picture. But the ground war around targeting has raged on. Now the single most important factor left that has not been commoditized and can still differentiate the countless ad networks is their targeting. Inventory quality is still an important factor when evaluating ad networks but it has become more like a commodity. Just a check box to be filled. Great inventory? Got it. Everyone has great sites now, or has potential access to great sites which is becoming the same thing, and can whip up a spectacular site list with all the right logos in all the right places. You’ll see that comScore now calls this “potential reach” and everyone’s got potential reach. But targeting? Good, precise, accurate, performance-driving targeting takes technology which is actually hard to come by among the ad networks. Most ad networks are made up of people and relationships and that’s how they scale. Add more great sites and add more great sales people and the revenue model scales accordingly. So what’s the best targeting solution out there? What kinds of targeting will provide the most performance boost for your campaigns? That of course hinges on what your key performance indicators are going to be. Is it clicks, acquisitions, brand awareness or a combination or something else entirely? In many ways contextual targeting has a leg up on the other forms and here’s why. The behavioral crowd almost always has a contextual component driving their segmentation so contextual tends to be one of the most mature technologies out there. Semantic relevance engines have been around since the early days of Knowledge Management and go back way before the first AT&T banner was sold by Doug Weaver on Wired.com in ‘94. And contextual side steps the ugly privacy issues as it derives its relevance from the page content as the ad is being served and does not need to ask probing questions or save little bits of sensitive data behind the scenes. But most importantly, contextual targeting has frequently shown to offer both more click lift and more brand recall than any other targeting solution. A recent Marketing Sherpa study found that contextual targeting was preferred over behavioral by advertisers for the higher return on ad spend it provided. But the best approaches are the new hybrid solutions that combine the strength of both contextual for relevance and behavioral for audience segmentation. So when you are out there shopping for an ad network and everyone is pitching great sites and real transparency at the best price, stop and ask about targeting. Don’t be afraid to ask about technology either. Most likely you will find little behind that curtain besides some basic self declared channels, a little re-targeting after the fact, and a high level report for reconciliation at the end of the month. Take the time to ask for proof and see where that leads you. Can they offer proof as to why they targeted a certain impression with a specific ad? If not then there is probably little technology back there.  And if every answer seems to come back around to great sites, then I’d keep shopping.

A recent study released by the IAB from Bain & Company titled Digital Pricing Research has ignited a virtual flurry of newsworthy commentary from prominent publications like iMedia and MediaPost about the place—and need—of networks in the advertising value chain. Declining prices, channel conflict, and devalued brands are the mantra of the network bashing fervor. It wasn’t so long ago that the pundits were predicting the end of the ad network model as we know it. The latest headliner from Adotas called Can 314 Ad Networks Really Thrive is an especially insightful look at the ongoing ad network saga.  The reality is that we’re just getting started.  Look at the statistics from the eMarketer study that said more than 90% of advertisers surveyed plan to use ad networks on their media plans and 75% said they planned to increase their spend to networks.  And look at what factors differentiate the plethora of ad networks according to the agency study; you might be surprised to find that price is dead last.  The major differentiators they cited were quality of inventory (28%), targeting (27%), and transparency (11%) then service, optimization, reporting, reach and finally price.  It’s true, there are a lot of ad networks out there, and there’s a good reason too.  Niche audiences and strategic reach.  And it’s not always one or the other either; it’s frequently both at the same time.  Advertisers need massive reach to get their message across and hit their key performance indicators.  It’s just a numbers game at the end of the day.  And not only do they need the big numbers, they also need to diversify and specialize and focus depending on what they’re selling or who they’re branding to.  One day they may need laser like focus on a specific audience segment and the next they may need numbers on a Biblical scale.  Usually they need both at the same time: the “massive niche” if there is such a thing.  Actually, there is!  That’s where we come in.  Our “super-clustered” network brings both audience breadth and contextual depth for performance and branding campaigns delivering focused reach all in one campaign.  And until there are more of these hybrid networks out there that are big enough to satisfy the advertiser’s thirst for reach and at the same time give them the finely tuned depth they require for performance, we will have a plethora of specialized networks serving the market.  And it’s not just the advertisers driving the explosion of ad networks either; it’s also the publishers. On any given day the average publisher has less than a 50% fill rate. Sure they have their own sales force out there beating the bushes for ad dollars but content is exploding all around them at a logarithmic rate and there is no way they can sell it all. Frequently they don’t even know exactly what they have to sell. Sure the high quality impressions get sold first, and for a premium price, but that’s the tip of the iceberg and there’s always the massive remnant pool of impressions hanging around unsold. So they have to farm it out to the networks and the number of networks grows again. That’s where the channel conflict that everyone tattoos ad networks with comes from but it’s self inflicted and on purpose. Channel conflict only happens when things are selling. Call it too much selling if you want. Maximum yield trumps any sales force’s headache any day of the week. And maximize they do. Just look at PubMatic’s brilliantly elegant default optimization service. Their ad network optimization automates the reselling of unused inventory back to the network enabling publishers to instantly redirect to the highest paying impression every time allowing them to approach an almost theoretical 100% fill rate. What a wonderful world advertisers and publishers are living in today all care of the ad network explosion. In fact, without the hundreds of ad networks out there delivering the reach, segmenting the audiences, and backfilling the impressions, we wouldn’t have nearly as robust an advertising industry as we enjoy today. The networks might have started out as a necessary evil but they are far from that now. They have matured into the strategic reach partner of any successful advertiser or publisher out there, and they are working–hard.

We recently announced that we have teamed up with Right Media and Yahoo! to contextualize the world’s largest ad exchange. This was no small achievement and has been in testing for scale, robustness and accuracy since May of 2008. But the effort has been well worth it and industry publications like MediaPost, Adotas and ClickZ are recognizing this as a significant milestone within the interactive advertising industry. Even more general media like CNET News and DMNews decided to cover the story. So how does one set out to improve on the world’s largest advertising exchange? And what does it take to integrate with a live exchange currently juggling 50,000 active traders with over 175,000 live creatives in circulation across 6 billion daily transactions? For us it took almost 10 years of active development, testing and versioning to bring our hosted contextual platform—called ClickSense—to fruition. And that was only after cutting our teeth with the likes of AOL Search through their Web Offers program and in some of the world’s largest pharmaceutical organizations, Government agencies, and even other large ad networks. And then there was the accuracy side of the equation that had to be rock solid before it would get the green light. Driving real eCPM lift (and maximum yield) for publishers and at the same time creating significant ROI lift for discerning advertisers means you have to provide real-time, almost instantaneous, categorization that is backed up by tangible proof. This then becomes the data providing mechanism that advertisers need to develop their optimization strategies and publishers need to expose their inventory in the most profitable manner. In the end we got it done and it is working far better than we had ever dreamed it might. So if you are already on the exchange or wondering how this all works, visit our new Right Media section and get started using our contextual targeting today.

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.

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.