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Social media and analytics counter online ad crisis December 3, 2012

Posted by David Card in Uncategorized.
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UBS Securities’ annual media investment conference gets underway today, and media buying agencies are lowering their ad spending forecasts. Even online advertising – that looks relatively healthy with projected double-digit growth – is facing a bit of an identity crisis. Content and media sites are struggling to accommodate the polarizing forces of programmatic ad-buying and so-called “native advertising.” While there’s no single solution to thriving in digital advertising, several social media-driven angles bear watching.

Brand-name online publishers have been uncomfortably coexisting with ad networks since the beginning of the internet, but what used to seem an efficient way of unloading remnant ad inventory now threatens premium slots sold for high CPMs. Early last month, Federated Media Publishing, itself a network of mostly tech blogs, cut back its sales force to shift emphasis to its automated display ad Lijit Network. And depending on your perspective, real-time bidding exchanges from Google, The Rubicon Project, and Facebook, are either the latest scourge driving down CPMs or, in Facebook’s case, a way to raise the value of its bargain-basement inventory. As we wrote, third-party big data audience analytics plus real-time bidding enable advertisers to buy targeted audiences across the web, without relying much on media companies.

Faced by network-driven programmatic buying, and former premium ad spots going unsold, companies like Federated, and even the New York Times, are responding via native advertising. Native advertising is the latest buzzphrase describing content marketing, sponsorships, and advertorials – marketing vehicles that blend in more naturally with content than banner ads, and that often take advantage of social media technologies.

Countering the crisis

Here’s how some companies are thriving amidst the digital advertising disruption:

  • Facebook’s sponsored stories – that blend users’ Facebook activities with marketing messages – are a prime example of native advertising. But that approach is most useful to content or retail sites with large volumes of users that do a lot of posting. Facebook and Twitter aren’t renting out that technology to other publishers, but it might be an opportunity for Amazon or Best Buy. Likewise Facebook’s exchange only uses its own inventory, notwithstanding the usual talk of a web-wide Facebook ad network. Its exchange is driving investment in marketing companies like Triggit, but it doesn’t help other sites. Facebook won’t even sell ads on Zynga anymore. But content sites should pay close attention to tracking and analytics techniques Facebook is trying out. Its View Tags are new, but potentially offer better attribution analysis, something other content publishers could emulate.
  • LinkedIn has been firing on all cylinders lately, but most of its revenue is tied one way or another to jobs and recruiting. In an effort to expand its advertising business, the company launched very limited access to a new Ad API. LinkedIn is positioning the API as a way for preferred partners to buy text or small image ads. The approach seems overly cautious in not letting its three designated marketing partners (Adobe, Bizo, Unified) do much creatively, although they can better track and integrate LinkedIn inventory with broader web campaigns.
  • Spiceworks is another B2B advertising business that is thriving. Spiceworks offers free, SaaS network management and help desk tools to IT professionals at small and medium-sized businesses. In doing so, it has built up a pretty targetable audience of 2 million highly engaged users that participate on message boards, reviews and ratings, and self-help systems. Advertisers like Dell and Rackspace can do the native advertising thing, and Spiceworks is an effective distribution channel for white papers and product info.
  • There are plenty of tactics to increase audience engagement on content and retail sites. Two that play off the data analysis theme come from Demandbase and Bloomreach. Demandbase enables site personalization based on its analysis of what company a site visitor is coming from. Companies like Cisco, Dell, and NetSuite do account-based targeting of ads and content. Bloomreach draws on web-wide analytics that drives content personalization, which, in turn, makes SEO more effective. Bloomreach’s platform is most effective for merchants with lots of products and content about them; customers include blue-chip retailers like Bluefly, Williams-Sonoma, and Nieman Marcus.

The countervailing forces of programmatic buying and native advertising will wrench online advertising back and forth for at least the next 24 months. To prosper, publishers and other content-oriented sites must emulate analytics and targeting tactics driven by sites with active user communities.

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Running the online advertising numbers October 29, 2012

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Several big digital advertising companies reported their third-quarter results over the last week or two. Those reports reveal a few key trends: Google and Facebook are gaining share, mobile advertising is growing but still tiny and search-dominated, and slow progress in digital brand advertising means that television isn’t going away.

Google. Google’s ad revenue grew 16 percent to $10.9 billion. For once, its ad network sales grew faster (21 percent) than sales on its own sites (15 percent), although its own sites still make up two thirds of the total. That likely means that Google’s display ad network sales grew faster than search. While paid clicks were up 33 percent, the average cost per click was down 15 percent, which most observers blame on mobile search pricing. Google dropped broad hints, rather than clear guidance, about its overall mobile business, including Motorola, but it appears to be on the way to $2 billion/year in mobile search and advertising.

Facebook. Facebook’s ad sales grew faster than Google’s, showing a 36 percent improvement year over year to $1.09 billion. Facebook has a relatively small search business based on some revenue sharing with Microsoft, so it will probably maintain its number one spot in U.S. online display advertising this year. Some forecasters had been predicting that Google would take the lead, based on its ad network growth. Facebook revealed that it had over $150 million in mobile ad sales for the quarter. That figure is still only 14 percent of Facebook’s total, and much smaller than Google’s, but it relieved investors and might very well give Facebook second place in mobile ad revenue.

Yahoo. Yahoo’s display ad business was flat at $452 million. While search was up 11 percent to $414 million, that was due to guaranteed revenue from Yahoo’s search partner, Microsoft, rather than to organic growth.

Microsoft. Ad revenue from Bing, MSN, and Microsoft’s ad network business was up 15 percent to $655 million. Microsoft said search was up, but display ads down across the board.

The other big U.S. online advertising player, Aol, will report its earnings next week. Aol had over $335 million in ad revenue in the second quarter, with its ad network business growing twice as fast as sales on its own properties, and search (via Google) slightly down.

Key takeaways

Earlier this month, the Interactive Advertising Bureau released its 2012 first-half report, showing overall U.S. growth at 14 percent. That’s healthy compared to most traditional media categories, but slowing versus last year. According to the IAB, search still dominated, but mobile and digital video were each worth over $1 billion in first-half sales.

Search and free online classifieds decimated the newspaper business, but I would not expect online video and display advertising to gut the television industry anytime soon. TV is still best at delivering emotional messages to big audiences. The TV industry is likely to add targeting techniques learned online to multi-channel campaign selling sooner than online delivers mass-reach video. And much of the recent action in online advertising is in ad networks and real-time bidding. Those technologies better suit direct marketing, though they offer some efficiency in brand ad-buying.

Mobile advertising still feels like search right now, although Facebook is mixing some social flavoring with its direct-marketing mobile ads. Brand advertisers are still figuring out what to do with social media, whether it’s mobile or web-based. To-date, ads on social media have proven only modestly effective for direct marketing, and proponents believe branding is the true promise for the medium. Quite a bit of brand advertising spending depends on buyers measuring the efficiency of their buying, based on assumptions proven years ago on television. Testing for branding effectiveness achieved via TV and print is costly.

Social media could not only provide a vehicle for harnessing an audience’s social connections, but also a relatively cheaper way to test results by measuring interest and incorporating CRM data. Ad sellers who can put together programs for delivering and measuring that combination will make lots of money in years to come.

Yahoo Q3 still seems sluggish October 23, 2012

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Yahoo’s mediocre third quarter seems to have pleased Wall Street. Profits came from an asset sale, and its most important business – online display advertising – was flat at $452 million after paying out revenue-sharing (ex-TAC). Search was up 11 percent to $414 million, but only because Yahoo continues to get guaranteed revenue from Microsoft. Its search business is not growing organically, despite its “upside” potential.

Google’s quarter was “disappointing,” but it grew advertising (search and display) 15 percent on its own sites and 21 percent on partner sites. Google partners use both its search and display ad network, but that growth was probably driven by display. Yahoo’s woes come not from losing money but from stagnant growth. But critically, Google continues to gain share against Yahoo in display ad sales. Facebook is set to report its results later today, and will almost certainly gain share versus Yahoo, and probably against Google. Facebook may even be growing mobile ad sales.

So why did investors react so positively? They’re probably happy to see new CEO Marissa Mayer looking comfortably in charge, and saying she’s going to shift resources into mobile development. I dunno. Mobile advertising is barely getting started. I’d rather hear more about ad targeting, brand advertiser products, and what Yahoo intends to do about ad networks.

 

Yahoo leaks give few strategy hints September 26, 2012

Posted by David Card in Uncategorized.
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The impressions that are leaking out of Yahoo’s strategy presentation to its employees are pretty vague. Om is probably too harsh in reacting to their lack and to other sources, but there’s not a whole lot that seems new or counter-intuitive. Business Insider seems oddly better sourced than AllThingsD, but take it all with a grain of salt. Personalization seems to be the main theme, but with little on product or implementation of it. Projects will have to hew to a “rule of 100 million” (dollars or users?), which is perfectly sensible for a company of Yahoo’s girth. Acquisitions will be for talent rather than tech or businesses.

As I’ve written before, Yahoo has significant assets and should be salvageable, if not returned to a high-growth superstar. It has a big, still-loyal audience that uses it quite regularly for a broad mix of content and communications. It has the potential to be an advertiser or agency’s good friend in targeting mass-reach audiences in a variety of contexts. It should focus on quality content and brand advertising. It should use search primarily in support of its display advertising business. If Google comes a-knocking, it should answer the door, but Microsoft might still be a good partner, especially if Yahoo can get an even sweeter deal of of Redmond.

Yes, Yahoo’s ad targeting should be much better than it is, given the amount of data it should have been collecting about its users. Yahoo historically applied its personalization skills better on content than on ad support. There’s no way its home page will look like this. And if its premium content efforts result in corrections like the one in this NY Times story (confusing YouTube for Yahoo video), then it has a lot of work to do in getting the news out.

 

How vulnerable is Google? June 4, 2012

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Last week, Google received an ultimatum from the European Commission’s antitrust head. Simultaneously it re-introduced its vertical shopping search site as a pay-to-play program for merchants. Regardless of whether you think it is “evil” or not, Google has shown a lot of me-too products with lagging innovation. While it’s a mistake to characterize Google as a one-trick pony, it’s worth examining just how vulnerable Google may be in its core businesses.

There is no predicting how government regulations and lawsuits will turn out, but there’s no question Google faces a mess of them. Gigaom Pro analyst Greg Sterling thinks the EC may be bluffing a little, as it is offering Google a chance to accommodate or settle early, even as it threatens massive fines. Google has already made some changes to its controversial “Search and Your World” results page re-design that appeared to favor Google services in the name of personalization. There’s likely some more room for give and take, though Sterling’s probably right that Google will have to go to court over search neutrality. Meanwhile, Google probably won’t have much luck making Microsoft and Nokia look anti-competitive to European regulators. But at least Google appears to be winning its expensive battle with Oracle over Java copyrights and patents.

Google used to deride “paid inclusion,” whereby sites pay search engines to guarantee their content is indexed speedily. It denies that its revamped Shopping program constitutes paid inclusion, but Google is arguing semantics here. It is charging for listings, and it will show some of these listings on its mainstream search results page. Initial reactions from merchants and retailers are mixed. Some think the new program will offer better control and analytics, but no one knows what will happen to between Google Shopping and SEM, or how conversion rates might be affected.

Signs of desperation?

Is Google franticly searching for new revenues? Is that why it is replacing a free service with a paid one for the first time, and why it seems vulnerable to antitrust charges? Its core businesses seem safe, with spots of accelerating growth:

Google is trying to charge for some platform services – but API fees for Maps may chase developers to alternative suppliers. Likewise, much of Google’s Android success is based on its open source model. There’s pressure on search click-through volumes and pricing coming from mobile. Google says web search is increasing, but is cagey about sharing actual numbers. While it’s safe to assume mobile activity is additive to web activity now, that’s a condition that could change in 24 to 36 months. And mobile’s where the growth is. Google’s core businesses are pretty secure, but it needs to tap into new budgets to accelerate growth: brand advertisers are a better fit for its sales force than enterprise IT departments.

Question of the week

Where will Google find growth?

Yahoo’s growth options dwindling July 25, 2011

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Yahoo reported another disappointing quarter, with ex-TAC revenues (i.e., revenues minus the money it shares with ad network partners) down 5 percent, to just over $1 billion. Its core display advertising business was up 5 percent, but it appears to be losing share to companies like Google and Facebook. Yahoo is still one of the biggest online properties in the U.S., with fairly sturdy content and communications assets, but its options for restoring growth are getting fewer.

The reason? Yahoo has missed the most important new digital consumer trends. It might still have a shot at adding social media; after all, after many failures, Google’s Google+ project to add social elements to its services appears to be gaining traction, at least among early adopters. But Yahoo failed to translate a solid position in casual gaming into social gaming, and it is only dabbling in social commerce, even though it coined the phrase. And its acquisition of “content farm” Associated Content doesn’t seem to be increasing profitable traffic. Meanwhile, outsourcing its search business to Microsoft hasn’t paid off yet. So what is the company to do?

Yahoo blamed its display-ad sluggishness on a sales re-org that delayed some big deals. Let’s give Yahoo the benefit of the doubt and assume it still has good relationships with big-brand advertisers like GMC, Visa and Target (all of which are serving up rich media ads or sponsorships on Yahoo as I write this). If Yahoo cashed out its assets in China, it could use that money for other acquisitions and investments to bolster online advertising and gain a little social media momentum.

Yahoo already has a decent number of online video viewers – it’s a distant No. 3 after YouTube – but it is relatively weak in how much time those users spend with its content (35 minutes per viewer compared with Hulu’s 185, according to comScore). Buying Hulu might be too expensive: Apple and Google are rumored to be interested, and Hulu may not get long-term exclusive contracts for TV shows. But Yahoo’s brand-advertising expertise is still better than Hulu’s, or Netflix’s or Amazon’s. Its IntoNow TV check-in acquisition is already focused on synching twin-screen activities with on-air ads, and Yahoo Connected TV is showing signs of life. Yahoo could make a compelling social TV pitch to advertisers like Coke and Verizon, for example, connecting an on-air ad to an on-screen or PC-based check-in or other activity.

Yahoo could try to be the social-media advertising marketplace for everybody but Facebook. Even a social network as big as Twitter needs help creating and selling ads. If Yahoo didn’t choose to acquire a real-time ad network like OneRiot or 140 Proof that places ads near social streams, it could still bulk up its social targeting and analytics via Lotame, 33Across or Media6Degrees. With some acquisitions and integration, Yahoo could ease the effort a publisher or ad buyer has to make to cobble together customized solutions.

Yahoo is reportedly working on a hybrid content/ad syndication network. Instead of just renting out ad space, a second-tier online publisher could get related personalized content and advertising from Yahoo in a single package. Yahoo has plenty of high-quality content, and it could make Associated Content create advertorial-like opportunities. Newspaper publisher Gannett attributed a solid online quarter partly to its ad network partnership with Yahoo, proving that Yahoo has some success dealing with quasi-competitors.

With some effort, Yahoo could reenergize its business around video, a social advertising network and/or syndication over the next 9 to 18 months. Its costs are under control and its ad business is growing, albeit slowly. If investors or its board don’t have the patience, I suppose it could try to sell itself to Microsoft or AOL, assuming they’re still interested. Either would be a pure consolidation play among general-purpose content portals, combining audiences, tech infrastructure and sales forces. That kind of cost-savings merger is always brutal, and brutally difficult to execute.

Question of the week

How can Yahoo start growing again?