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.

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

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.

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.

The LucidMedia Network is an interactive online advertising network based on our patented ClickSense technology for precise impression-level targeting designed from the ground up to boost advertising revenues. The LucidMedia Network uses advanced, custom developed linguistic resources to categorize inventory into 31 industry channels and more than 13,000 micro-segments. This is all based on open APIs for easy integration into any ad management system, network or ad exchange. The LucidMedia Network is the right choice for advertisers and agencies who are looking to boost online revenues and get more out of their ad spend. The LucidMedia Network is also the right choice for OpenAds users, Facebook developers, Right Media Exchange members and bloggers offering everything from brand safe campaigns to contextual feeds including solutions for RSS and email campaigns. When you join the LucidMedia Network you get not only precise, impression-level contextual targeting but also real transparency and real accountability down to the impression-level. Being on the LucidMedia Network means 100% targeted impressions with no waste. It means a new level of quality control and brand safety applied to every one of your campaigns and every single impression. The LucidMedia Network lifts your online revenue across the board and increases your Return on Ad Spend (ROAS) by transforming run-of-site, remnant inventory into premium-like inventory.