The article How About a Little Revolution in Display Advertising by Martin Betoni is a good, hard look at how display dollars break out of the total ad spending in 2008 according to the latest IAB annual report. Of the $187 billion spent on advertising in 2008, $24 billion were online dollars of which only 17%, or roughly $5 billion, went to display ads. In other words just 3% of the total ad spend in 2008 went to display. His point is that the banner has not progressed much and I find it hard to disagree. All the best optimization in the world is still completely reliant on the creative to engage the user. This is why I think technology around the creative, things like our new AdMatch capability which provide a dynamic creative directly from the advertiser’s database of products or services and matches them in real-time to the highest performing content, have the greatest opportunity to increase the display share of ad spend and tip the scales away from search or even draw dollars away from the larger pool of traditional media. A campaign is only as good as it’s creatives and as Martin points out we are still basically working with the same 728 pixel by 90 pixel rectangle from 1994 to get the job done.

We recently did a Q&A with AdExchanger.com about LucidMedia and our work with the Ad Exchange community.

Q: What trends are you seeing in online display advertising?

A: Trend #1 is performance.  All the trends we are seeing are towards performance-based advertising and increasing return to “do more with less”.  Advertisers are looking for new ways to increase their return with a flat budget but all the same growth pressure.  They are turning more and more to direct response, CPC, and CPA solutions to move the media risks as far away as possible and guarantee the backend performance.  Apparently our fully transparent platform with multiple optimization facets really resonates with clients in this tough new economy.

Trend #2 is exchanges.  We are seeing a dramatic shift from networks to exchanges.  The exchange model has matured at the same time the network model has had its reputation tarnished.  The real-time bidding and open, transparent nature of the free market exchange model has finally distilled to the top as the solution of choice when efficiency and return become as important as reach and scale.

Q: Is it fair to say that LucidMedia is the contextual solution for Right Media Exchange?

A:  Yes and no.  Yes, we are a contextual engine on Yahoo’s Right Media Exchange but that is not our core business, it’s just one of the many irons we have in the fire these days.  And our work on RMX is a two way street.  We provide contextualization services to publishers and advertisers there but we can also purchase media there.  We have many of these types of media arrangements because it is how we provide the scale, efficiency and performance that are so appealing to our advertisers.  It took years to do but we are now able to pass those benefits on to our advertisers and our agency partners.  That is a key to the current rapid growth and momentum I mentioned in the first question.

Q: Any plans to work with Yahoo!’s APT Platform?

A: We are watching APT closely, as many are, because it holds a great deal of potential scale.  Obviously we’d like to continue our close and positive relationship with Yahoo and Right Media and integrate with APT when it is fully operational.

Q: Can you take us through the process of how LucidMedia’s deal with Right Media works from a technological perspective?  For example, tell us how it all works for a single ad impression on a publisher’s site.

A:  Right Media has established 63 standard categories that correspond to a 4 digit contextual flag.  RMX publishers have to deploy new ad tags and then advertisers can target their inventory more effectively.  LucidMedia’s ad tags are distributed to RMX publishers instead of YieldManager tags.  Then, during ad call, the LucidMedia tag analyzes the context of the page in real-time to determine the most appropriate categories.  We then augment the YieldManager tag with additional Query String Codes that represent the most appropriate Right Media Exchange categories.  All advertisers have to do is use Right Media’s Query String Targeting capability when they setup a campaign in YieldManager and they can access the highly targeted contextual inventory right away.  Your readers can go online to find out more about it too.

Q: Can Lucid Media’s ClickSense technology contextualize social media other than, say, the “social media” category?

A:  Sure.  Our technology does not care about self-declared categories.  Rather we deal with exactly what the content is about and categorize it accordingly.  Our solution scrapes the page in real-time to determine precisely what each inventory page is all about.  What we find is that the majority of content is improperly categorized at a high level.  We find social media can be all over the map category-wise.  Technology, Arts and Entertainment, Automotive, Sports, Pets, Family and Parenting, Health, and so on.  So we tag media at the page level for what it is about and not what it is supposed to be about.  And our performance proves out the approach.  We’ve worked with advertisers who have studied this and their findings are always the same: that context is a true predictor of intent.

Q: How is the contextual engine for LucidMedia different than the competitors such as AdSense, Contextweb, Kontera and others?

A:  Although we all have a contextual solution in common, our focus is on providing a broad platform that encompasses a range of advertiser and agency services beyond just running media.  In fact, clients can actually utilize our platform as a compliment to some of the other contextual providers.  In terms of technology, our approach is a bit different as well.  At the core of our platform is a patented semantic solution that includes advertising industry-focused taxonomies which let us target content at a very granular level.

Q: In the future, can you see a network providing the essential services that an advertiser requires and, thereby, disintermediating media agencies?

A:  I think that is unlikely to happen.  For example, our focus is on providing a media management platform to agencies that allows them to outperform their competitors and pass on new levels of efficiency, transparency, and safety to their advertising clients.  So we are not trying to act like an agency, we’re trying to put tools in their hands that make us a crucial part of the value chain.  We feel our position between the agencies (and the advertisers) and the networks (and publishers) is the best place to do business.  This allows us to act as a media buying platform for the exchanges–and even the other networks out there–and provide our data as the new currency of performance.  It’s a very exciting place to be right now!

Q: How is LucidMedia ensuring brand safety?  And, how does LucidMedia provide access to the Long Tail?

A:  Brand safety is rising in importance these days.  Our Verified Inventory Platform (VIP) leverages our deep contextual technology to find the right content to meet the ever-tightening advertiser performance goals.  But we can also block content in the same way when they indicate something is inappropriate for their brand.  Because we evaluate the true meaning of each page for categorization, we get the by-product of knowing exactly what topics are on each page.  We have compiled an extensive list inappropriate topics that we call our Objectionable Content Filters.  With these filters enabled we can make sure that their brand won’t appear on pages about hate or pornography or even things like natural disasters or war.  And these are all customizable by the advertiser because what is inappropriate to one may be desirable content to another.

As for accessing the Long Tail for our advertisers, we deployed the concept of Media Classes within our platform to take advantage of the Long Tail.  We not only categorize the page content accurately, we also categorize the type of source it is found on like news sites, social networks, blogs, enthusiast forums, gaming sites, wikis and webmail portals.  We also categorize the sometimes undesirable media classes like peer-to-peer file sharing sites so advertisers can not only target specific media classes, they can also filter against certain classes of media if they want.  This opens all kinds of doors for our advertisers.

Q:  In your opinion, what will be some of the key drivers which will allow ad exchanges to progress from a remnant-only to a premium and remnant model?

A:  The key drivers will be their openness, a clear value proposition to the publishers, and their ability to support real-time bidding.  The exchange platforms have to be easily extensible so everyone can play.  And we’ll need the publisher side optimizers to keep advancing as well.  They play a key roll that the exchanges are not filling today and they exert a great deal of pull on the publishers drawing them to the exchange model.  I expect to see a lot of interesting changes in the next few years and LucidMedia plans to be right in the middle of it all adding value to the agencies and advertisers.

Have you noticed lately that everyone in this ad network business says they offer great, transparent, handpicked inventory?  Everyone calls it Premium.  But in the end it winds up being self-certification and adding no real value beyond perceived value.  And now LucidMedia has launched a Verified Inventory program.  We are saying our inventory is safe for brands and that we can accurately target 14,000 specific content categories. You can find out more about brand protection in this Adotas article called A Display Advertising Safety Net. So how is this any different from all the other networks out there?  The difference is in the how, not the what or the why.  The what (verifying inventory) and the why (for brand safety) is the same across the board.  Every network says their media is checked for brand safety.  And everyone has the same reason.  Get more big advertiser spend.  That’s the common what and why in the industry.  It’s the how that is unique to this new program.  We launched this program not because we do it like everyone else, we have this program because we do it differently.  To be specific, we use the most robust and patented form of natural language processing at the pre-impression page level to better determine true meaning.  But how is that different?  Most networks spot check a top level domain list as their way of making their inventory brand safe.  You begin to see the degrees of brand protection available to advertisers and the intricate subtleties that make it confusing.  There’s a huge difference in the degree of safety provided between the two methods.  And every other network usually says they categorize for accurate relevance matching of ads to content because everyone knows that engagement and relevance are directly related.  But what most other networks really do is ask the publisher to self-certify their inventory and then they push it out in those same self-certified categories.  But we look at the words and phrases on the page in real-time and tag it with a far more accurate and granular category before we serve it.  Everyone has the same what and why but it’s the varying degrees of how that makes our program different.  But we go so much further too.  We even filter out pages with objectionable concepts as defined by our clients.  We also categorize our inventory into 14 different classes of media to filter against or target to a specific type of pages like a blogs, news sites, enthusiast site, or shopping sites.  So the story here is not that we are doing the same thing, the real story is in the lengths we go to verify our inventory versus what everyone else does.  They are two very different stories.  And that is why we created the Verified Program, because we do it differently and with a much higher degree of quality.

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 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, 25 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 preemptive 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 14,000 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.