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.

Rob Hof over at Business Week recently wrote about AdBrite and the launch of their new Open Targeting Exchange (OTX) in his Tech Beat column. The concept is an elegant solution to the challenge of high performance targeting for display advertising and we are excited to be AdBrite’s launch partner. AdBrite is “The Internet’s Ad Marketplace” so it is fitting that they are first to take what Rob calls “a sort of eBay for ad targeting technologies” to market.

Here’s the idea, AdBrite is aggregating and integrating multiple external display ad targeting technologies under one sort of free market system that advertisers and publishers can use to target their ads more effectively. When a pageview is called on an AdBrite publisher’s site, OTX calls out at all the potential targeting technologies in real-time to determine the most effective advertisement for the given property, user profile, and location. This fosters competition among all the targeting technology providers creating what our President and CEO Ajay Sravanapudi called a “Darwinian environment” where the fittest will survive and over time prosper. Publishers benefit from increased yield and advertisers get a better ROI. The proverbial win-win scenario. We were more than happy to throw our ClickSense® platform into OTX’s Darwinian savanna of 508M impressions a day and 60,000 publisher sites to sink or swim since it has already proven more than capable of handling some of the largest web properties for years now. But at the end of the day it is the user who gets an overall better experience with a more relevant ad and that is good for everyone in this business. We’ve let the lion out so keep an eye on AdBrite’s OTX in the near future.

I was reading Mike On Ads’ multi-part series on Ad Exchanges and I got to wondering what forces came together to create the current ad exchange phenomenon? There’s no denying the emerging ad exchanges are replacing the old yield management solutions out there. They are aggregating the supply to drive new market efficiencies and a new level of transparency in the non-premium marketplace. One of the early factors motivating this was the proliferation of ad networks which have been growing at a staggering rate. ThinkEquity Partners recently reported that there were over 300 ad networks in 2007 which means the number doubled in less than two years. They went on to report that the non-premium market will grow at 28% annually from $2.2B today to $7.6B in 2011 so it’s no wonder the number and the types of ad networks exploded. Vertical, contextual, behavioral, demographic, re-targeting, geographic, site specific, there is no shortage of ad networks out there now. Because of this explosion the mantra of the crowded, long-tail, remnant world of non-premium advertising has become differentiate or die. Why? Because there was (and still is) pressure from all sides to stand out. Pressure from eroding gross margins, strain from publisher recruitment, competition over inventory, negative stigmas about duplication and a lack of transparency, and a fast and furious industry roll-up. The growing revenue base and customer demand needed another solution and the ad exchange was the logical evolutionary path. Ad exchanges are streamlining the process with a whole new level of efficiency that the ad networks tried to deliver but lost along the way. The ad exchange is basically an ad server ecosystem through which advertisers, publishers and networks all manage their advertising business. They do this together and in an open, platform agnostic way that allows market dynamics to work their magic. So now the ad networks are feeling pressure from the exchanges too driving an ever increasing need to differentiate themselves. Think Right Media and the DoubleClick Advertising Exchange as examples. Advertisers and agencies rely on ad networks for the efficiency, reach, and optimization they bring to the table and are willing to give up some editorial control for it. But ad networks tried to control the whole process through proprietary means. This opened the door for exchanges to step in because they simplified and unified the trafficking process on an open platform that was transparent to the process. And there we have it, transparency is the final piece to the puzzle that unlocked the exchange phenomenon. Transparency takes the duplication out and removes the waste. We’ve all heard the timeless advertising adage, “Half the money I spend on advertising is wasted; the trouble is I don’t know which half.” Well transparency addresses that problem. So the ad networks out there will continue to differentiate themselves if they want to survive. The winners will be the exchange-friendly networks who can deliver the same transparency that enabled the exchange phenomenon in the first place.

I am happy to announce that this week we will officially become LucidMedia. We are changing our name from Entrieva to LucidMedia to mark our revolutionary new approach to contextual advertising. If you take a look around our new website you will find a lot more than just a new look too. Don’t worry, we are the same great people with all the same great technology and the strong focus on customer satisfaction as before, we’re just taking ClickSense in some exciting new directions.

What you will see on our new site is that our new ad network uses the deep categorization of ClickSense to deliver more than 14,000 micro-segments for content targeting far deeper than anything available before. This new level of insight is delivered through our detailed Proof Report which is, for the first time in history, putting complete transparency and accountability under the advertiser’s control. With ClickSense cataloging every impression we can show advertisers exactly where every ad dollar is being spent. This is the kind of complete transparency that makes real brand safety and quality control possible.

Because of all this we decided to become LucidMedia, the small media company with a big answer to the challenge of lifting display ad revenues. If you look around our new website you will still see our famous 31 industry channels and deep micro-segmentation, but you will also see us talking about our new contextual ad network with transparency and brand safety at its core. So let me be the first to welcome you to the LucidMedia Network!

Sincerely,
Ajay Sravanapudi
Founder, President & CEO
LucidMedia Networks, Inc.

Google recently announced a new service that Web publishers can use to manage their online ad sales and serve up ads to consumers. This news is extra interesting now that Google has DoubleClick/DART legally in their stable. I am waiting to see how much transparency they will be turning over to the advertisers and how much overlapping functionality they will have with their other technology acquisitions. I bet they parade this out with much fanfare as a beginner solution with plenty of easy links to upgrade and the upgrade solution is DART. It really comes down to how “advertiser-centric” you can be when you are talking about ad serving. What this industry doesn’t need is just another ad network. What this industry does need is to lose the opacity that has plagued it since the earliest days. Advertisers need brand safety today and brand safety depends on transparency. You can only rest assured that your brand is being represented properly in the Wild-Wild-West that is online advertising when you know where every single impression is going. Not to mention detailed categorization. If anyone can provide the industry with useful contextualization it’s Google but I doubt they will. I want to see some proof reports showing how well they target and every impression URL from this new offering before I make the call whether or not this is a good thing for our industry.

Adotas recently posted an interesting, albeit oddly written article on the value of the ad exchange. The real story seems to be the value of the vertical ad networks–with which I cannot agree more–but their analogy between mutual fund managers and ad exchanges is a fascinating one. They equate the ad exchange to a specialized mutual fund manager who can add real value to your portfolio and that is very true for the new breed of ad exchanges out there today. The scenario buy that they walk through truly highlights the value that an ad exchange can bring to a media planner. They point out that when an advertiser wants to maximize ROAS they need their media buyer (their agency folk) to create a balanced “portfolio” mixing direct investment in large targeted sites with the specialized engagement of the vertical ad networks and the broad reach from the many low cost remnant networks. The share of voice and audience is highest on the expensive premium sites, highly relevant on the vertical ad networks (vertical search sites for instance) and yet there is massive reach to be had across the broad remnant networks. It is the mix that is critical to getting the job done. This is how you nail the ROAS for a big branding campaign where audience engagement is a critical factor–and this is just what the exchanges are good at delivering. They have the mix all ready to go, you just need your media planner, your mutual fund manager, to recommend and execute that perfectly balanced portfolio and your investment will pay off. What an exciting time for interactive media!

Turn Networks has been making a lot of noise in the press recently with some additional capital and the launch of their fully automated ad network. I perused their literature and demo and really like some of the ideas they are taking to market. I especially like the fully automated nature of their targeting based on multiple factors including a mix of contextual site analysis and past behavioral. I also have to give them credit for what looks like a good pricing model for everyone. I would be very interested to see some data on how well their targeting works through their automated approach. All too often I see ad networks talk about contextual targeting and providing relevant ads but in the end I usually find out they are using just caveman-like site or network level targeting to get the job done. That means most networks will sell you categories of automotive related content or health related content but the determination of what content is about which subject comes from looking at the publisher’s overall theme. Cars.com is automotive content and Health.com is content about health. That sort of thing. The reality is that much of the content on these sites is not about cars or health. It can be about almost anything especially when it includes socially-driven content from things like forums or community features. The only way to truly target for relevance is to look at each URL and analyze the content you find there and not lump it into a broad, site-level grouping. Only then do you find that your ads really start performing and your KPIs go through the roof. In a recent case study we found that eCPC rates went up 76% over the typical run-of-site campaign when thorough contextual targeting was employed. That’s how you really lift your ROAS.

YieldBuild is in the news raising another $6M capital with a solution to “maximize advertising revenue for web publishers”. It’s an AdSense layer of code that monitors and tunes your ad for you. Nice. I mention this because it’s just another validation of the very real risk from ad blindness eroding the impact of your ad spend in the industry and I applaud it. The online ad industry has grown so huge and so multi-faceted that many advertisers and publishers become complacent with their campaigns because they are so easy to traffic now and that is when your KPIs start to fall off. Just watch the conversion rate of a campaign after a week or so and you will see the creeping effects of ad blindness setting in. Frequency capping and day parting may help but a good campaign is one that is constantly being evaluated and tuned against your KPI. YieldBuild’s whole business model is based on that truism! A good online ad partner should always be talking to you about tuning and optimization. But more importantly, your ad network should be proactively showing you every single impression down to the URL level. If not, what is it they are trying to hide? It’s the reality that your promised impressions are either eluding them or not having the contracted impact and they are farming out your ad to anyone who can get them some numbers so they don’t have to put up the “mea-culpa” make-good at the end. So please, for me, ask your ad network for a report of every impression and every URL where you are running. Ask them what content you are running on and don’t settle for site level or network level themes. Then re-tune constantly for performance where your ads are getting traction. And if your ad network doesn’t have that kind of real transparency and accountability baked into their DNA, then shop your ad network around until you find a partner who is confident enough to open their kimono and show you everything. Only then can you truly keep ad blindness out of the picture and make the most of your ad spend.

Rohit Bhargava recently wrote an interesting blog piece about online advertising. He ponders what it would be like if there was a site like Priceline for online advertising (he calls it Adline for fun)? He asks what it would be like if you could enter your flight dates, the demographic details of who you are trying to reach, the type of placement, and the maximum CPM you are willing to pay. Placements would need to be rated on some sort of neutral system so you would not be overpaying for obscured inside page placements, as well as by relative visibility of the site, but the idea is that I could decide to do a five star ad unit on a five star site and set my own CPM. The site could choose to accept or decline my offer. I liked this free-market Ebay-esque approach to online ads. But one of the great Achilles Heel’s of online advertising has always been transparency; this notion that ad networks have historically been opaque to the advertiser basically requiring advertisers and agencies to take them on their word that their ads are out there working. A new bidding system like this would work if every impression was audit-able, if every dollar spent was on the table for scrutiny. Only then would people trust the system enough to put their ad spend on the line.