FTC Town Hall November 1-2, 2007

I’m in NYC for a few days before I head down to DC at the end of the week for an FTC town hall discussion. The topic is behavioral targeting and how it impacts consumers. Should consumers and for that fact, the government, be worried about these online practices? The quick answer is not at all, although I think some self-regulation may be needed. Companies participating in the two day discussion include Google, Yahoo, Zango and Undertone. Some are wondering if this town hall is being held as a way to get more attention on the GOOG-DCLK acquisition, since so few companies testified before Congress on the matter. Perhaps in this environment the FTC will be in a position to get more on and off the record commentary before making, or at least publicizing, their decision.

Social Networking

It seems the last week has been all about social networking, which I guess shouldn’t come as much of a surprise on the heels of the Microsoft investment in Facebook.  Facebook also announced they will be unveiling a secret advertising initiative to the world on November 6 which has everyone wondering what it will be.  The quick and easy answer: a behavioral/contextual/psychographic targeting platform for advertisers to leverage its more than 50 million members. 

As of yesterday I am a new member of Facebook. I was sitting with Derek Leedy from MediaSmith last week at the SF Big breakfast, where we both agreed to sign up, reluctantly.  I was then chatting with Holly Sanders from the New York Post on Friday for her most recent article and we both wondered out loud what happened to LinkedIn and why all the business types are moving to Facebook?  That’s the side that I find incredibly interesting, in that a service built for college kids has now splintered into two factions – the original target and now a host of business professionals connecting and keeping in touch.  I wonder what, if any, impact that has on valuation since many of the business types using Facebook are the investors and advertising agencies staffers who spend the budgets and have a significant impact on where the dollars go. 

CNET published a detailed article about social networking which is worth a read.  My opinion on the advertising opportunity today is twofold.  Running general ads on a these sites can be incredibly wasteful.  That is how many of the ‘long tail’ networks are getting their inventory and why new companies continue to enter the category.  It’s not hard to buy inventory from a media exchange, from another network, or even inventory from one of these sites directly.  The value is minimal, which is why the CPM’s are so low and why I advise advertisers to be wary.   

In contrast, advertisers using these platforms for integrated or unique content creation or sponsorships will be rewarded.  However, achieving success through a social networking sponsorship will become increasingly difficult as more and more advertisers want to have one and begin competing for the same advertising opportunities.

B-to-B advertisers leverage ad networks

I’m surprised it has taken so long to see some coverage on ad networks being used for b-to-b advertising.  This article which was recently published in BtoB magazine focuses on some developments in the category, including the use of niche b-to-b networks.  While I think some of the vertical networks have done a pretty good job, ultimately I’m lukewarm on their long term viability.  These vertical networks can sometimes perform well for advertisers, but in my mind they operate more like a general publisher and less like a pure ad network that has the experience, capabilities and manpower to optimize and manage campaigns.   

We actually approached BtoB Magazine about this topic months ago because we have seen an increase in this type of business. At Undertone, I estimate 15 percent of our clients are b-to-b advertisers.  They like the exposure they get on our news, business, finance and tech channels while keeping costs reasonable. While it’s great to reach the key business decision maker on the CNET News, CFO magazine, or Inc. magazine websites, it can also get expensive and the scale can be limited.  In addition to channel targeting, behavioral targeting is a great tool for b-to-b advertisers. You can use remarketing, from both your site and from your external ad buys, to continue engaging your customer much like a consumer advertiser would.

I actually was having a related conversation yesterday with a client who is trying to reach high-end kitchen appliance shoppers. The agency executive was asking us tough questions and, at first, was skeptical about how he can engage his audience with a network. I shared some information regarding a Dynamic Logic study we executed on behalf of Pier 1 which yielded very interesting results; it showed that while our performance on a brand scale was around 3 and the endemic sites (such as Ladies’ Home Journal and HGTV) were in the 6 range, our CPM was a quarter of the cost.  When you really look at things in an apples-to-apples comparison, we performed twice as well in certain key metrics, not to mention you were able to spread your message out to a considerable amount of more people.   Marketing is a very numbers driven business, so if at the end of the day you’re more effective via a broad campaign versus a niche one, which one do you renew?

You can apply the same logic for b-to-b as you do for advertisers trying to reach a very niche consumer. Of course a network like Undertone may not have as much pure penetration against a niche target, but you don’t need that.  There are plenty of smart and highly effective ways to engage a customer, and using a network is one of the best ways to do it, regardless of how niche the audience.

GM’s largest one-day online spend

The Chevy campaign launched this morning with the same ad running across a large portion of the Web. It features rich media and I’m guessing that was executed with PointRoll or Motif. I like the ad, it’s simple and highlights the vehicle features as opposed to just talking about the benefits.  If you check out the inside of the vehicle you will see this looks like no other Chevy.   

I found the ad on the homepages of the following sites today; MSN, Yahoo, AOL, ESPN, New York Times, USA Today, Fox News, and iVillage. What is interesting to note is that the ad is not running on MySpace and I only found a leaderboard on Edmunds.com – nothing on the other leading car research sites.  I would agree with the folks at GM when they say it is the largest one-day spend online to date – I don’t remember any advertiser going bigger.

Chevy launches Malibu online

I spoke with a reporter last night regarding Chevrolet’s launch of the new 2008 Malibu.  It sounds like they are investing a lot of money on this initial launch online.  It is supposed to include Yahoo, Edmunds and a host of both big and niche websites.  I’m going to keep my eyes peeled for the campaign to see what they are doing differently from a promotional standpoint.  It will also be interesting to see if they have built out new or unique car configuration capabilities that give you more insight into a vehicle online once you reach the site. As an aside, the car looks good, especially at the $20K price point.  You can get a quick glance by visiting Chevy’s site.

BIMA 2nd Annual Ad Networks Shoot Out

I participated in a panel discussion last night in Boston regarding ad networks.  There were six of the major players there; 24/7, Advertising.com, Burst, Tribal Fusion, ValueClick and Undertone. It was a fairly lively conversation, as the discussion focused on differentiation, quality controls, the use of networks for branding, consolidation and technology, amongst other topics.

One of the most interesting parts of the evening was when the moderator, Steve Ustaris of Carat (very smart guy who gets and uses networks about as well as anyone) said he heard that some networks are delaying the serving of their ad so it’s the last to be called on the page, thus getting credit for the view-through action. Everyone on the panel said they haven't heard of this and, of course, were not engaging in this practice.

Maybe my perspective is a little different, but I think Steve is absolutely right and that there are some shady companies doing this. I do agree that those on the panel represent the above board networks, but with 200 in the space I guarantee there are more than a few questionable operators. The barriers to entry are so low that it wouldn’t be hard for an individual or a few people to put together an ad network and try to build business by skewing the numbers. But to start an ad network today and gain any scale has become extremely difficult. I had six meetings in Boston before this panel discussion and I was asked by almost everyone how can a new network survive.

Steve said he considers 6-10, and that any new ones emerging are going to have a tough time cracking through. With that being the case, I’m certain some new networks launching will promise the world to get business, knowing that they are fudging the stats to inflate their performance. If it sounds too good to be true, it usually is, so be mindful of that. We taped the event, so assuming the video comes out okay, I’ll post it soon.

Check out Ask.com

There was a pretty good Ask.com commercial that ran the other day.  It was the first time one of their messages caught me as being more about the product and less about the ‘hip/cool’ factor when using a search engine.  Personally, I think there is nothing hip or cool about search.  Services that are user-friendly and offer the greatest amount of relevant results are generally the ones being used.  This is Google’s territory, with Yahoo, MSN and Ask.com doing all they can to grab any percent of market share.   

This recent ad was simple, yet it highlighted how a certain keyword can yield results that extend beyond text to include video, images, blogs, etc.  And while the other engines offer this, I was fairly impressed with the look and layout of the engine in the commercial.  As someone who defaults to using Google, I’m not necessarily planning to switch over, although I will try Ask.com for the next few weeks to see if I am surprised.

Google stock passes $600

While the Google folks are likely thrilled to see the stock price cross $600, especially those with big options, I am sure this attention is not what they need right now with the DoubleClick acquisition being considered.  MediaPost recently wrote that the market cap of Google now exceeds that of Time Warner, Disney and News Corp combined (for full article, click here).  Is this a bit absurd or what?  Don’t get me wrong, Google has a great business, but I wonder how people can justify these numbers.  As the stock climbs and the word ‘dominance’ emerges in most Google articles, I think it is becoming more and more difficult for the FTC to allow this acquisition to go through – whether or not they have the legal backing to stop it is another story.

Network diversity is important: Don’t put all of your eggs in one basket

I typically haven’t been commenting on opinion pieces in iMedia, but sometimes one really grabs me at being so self serving that I wonder how it was published in the first place.  

In a recent iMedia article, Advertising.com states that all you need is Advertising.com when executing a remarketing/behavioral campaign. I could not disagree more and think this is just bad business advice.  

A few months ago, I asked one of our large direct response advertisers why they don’t just work with one or two networks. He said they tried that a year ago and when the largest network poorly performed it had a drastic impact on their business.  This person, who works for a public company, said he could not afford to ever be in that situation again as earnings were nearly compromised due to poor customer acquisition results. 

Reach, to me, is one of the most over hyped statistics in the network business.  As a network, you need to have scale but you don’t have to reach 90 percent of the Internet to be successful.  Keep in mind, that just because one network reaches person “A” today, that it doesn’t reach them again over the course of the month.  So if your maximum reach/frequency is 3 to 5 times in a month, you will fall short because the network may not only find that person again, and even if they do, there is no guarantee that your ad will be served.   

Don’t forget, that the person being remarketed by Ford is also the person that Verizon wants to reach because they are looking for a cell phone, and Delta want to reach because they fly from New York to Atlanta on business and Macy’s wants to reach because they subscribe to their newsletter and visit their site weekly. Advertisers are competing not only with those in their category, but all marketers looking to engage that same person. 

Today’s biggest networks downplay the fact that the last cookie “wins” and that they have been able to leverage their technology in various ways to try to take credit for every action.  Smart marketers know how to sift through this and that the view through data, while valuable, can be misleading if you don’t know how to interpret and, in certain cases, discount.   

We all know that sometimes campaigns don’t work well and there isn’t always a logical explanation.  Maybe it started out poorly and never recovered; or maybe it performed well for months and suddenly burned out; perhaps a website(s) left the network, or maybe the reporting methodologies were modified.  Keep your options open and don’t put all of your eggs in one basket.  

Using a handful of networks for all of your campaigns is a smart business decision. Try telling a marketer to only buy Yahoo! and not MSN or AOL and see what they think of that.

Rich media – we’ll pick up the tab

I am very excited about our new partnership with PointRoll, as I see it being a big win for our clients. There is no debating the benefit of rich media and the interest it garners by leading advertisers and their agencies. The biggest issue with rich media has typically been the cost, especially when working with a network. With so many networks charging $1 cpm for the media, how can a client afford to pay 1-3 times that for the rich media deployment? They can't. Because the Undertone platform is focused on the top branded sites the value of the media is greatly increased, thus percent of budget allocated towards rich media is viewed much more practical. So with this new agreement, we will be picking up the tab when it comes to rich media, making it even easier to run a campaign with Undertone.