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Yahoo, AOL and Microsoft’s premium ad exchange just might work September 19, 2011

Posted by David Card in Uncategorized.
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Last week, Yahoo, AOL and Microsoft pitched the idea of a premium online display-advertising exchange to advertisers and brand-name publishers. The object would be to raise the value of their ad inventory and compete more effectively against Google and Facebook, which are both gaining share in online ad sales. Could this trio of portals pull it off and rejuvenate their sluggish businesses?

An ad exchange is a “network of ad networks” that allows advertisers to buy big volumes of “remnant” inventory in real time in a highly automated fashion. Online publishers reserve their best ad spots, like large-format rich-media units that run on topic home pages, to be sold directly by their sales force. As I write this, Yahoo is showing a top-of-the-page banner plus related a rich-media unit from Transamerica on its personal finance home page.

Ad networks and exchanges can suffer from quality problems by mixing in mediocre content sites and not giving advertisers control over where their ads run. That matters a great deal to brand advertisers who want the halo effect of associating their messages with classy content.

How they could make it work

To address that quality issue, topic specialists and traditional media companies like NBC Universal and IDG have created private exchanges. But much of the industry momentum is toward the big, automated offerings like Google’s DoubleClick Exchange. So how could this trio succeed?

Outlook

Google claims it already offers a premium exchange. But if that’s the case, why does it have to buy AdMeld? Most of Google’s display prowess doesn’t come from brand advertising but from cost-per-click DoubleClick and AdSense network sales. Facebook doesn’t have an ad network yet, so it keeps every dollar spent. But Facebook’s strength comes from volume rather than price, due to the huge amount of time its users spend online.

If the trio could put such an exchange together within six months, they would have distinct advantages over Google and Facebook in servicing brand advertisers: similar or better reach, high-quality inventory and potential bundles with direct sales and sponsorships. Right now, the advertisers do not seem to be blown away. But few have actually heard the pitch yet, and no doubt the trio is still working out a lot of details.

Besides solving technology and governance issues, it’s always difficult for online publishers to manage an ad network alongside its sales force. The trio themselves — as well as their potential partners — will have to apply sales management and analytical discipline to make a premium exchange work. They’ll need to double down on page yield management processes and tools from companies like PubMatic, Maxifier and Microsoft. And they should consider protecting sales bonuses from “competitive” network sales to designated customers. If the portals can deliver the premium platform as described, advertisers and other publishers won’t ignore it. That could shift several hundred million dollars and two or three percentage points of market share per year away from Google and Facebook.

Question of the week

How do you rate the portals’ chances?
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The social-media advertising ecosystem is shaping up August 8, 2011

Posted by David Card in Uncategorized.
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A recent batch of product and funding announcements (Webtrends and Nielsen, CrowdTap and Hearsay Social, respectively) points to a real trend: The infrastructure and business ecosystem for social-media advertising is developing rapidly. That’s good news for marketers and online publishers — and even for Facebook competitors — as a robust ad infrastructure is critical for growing the market beyond the $3 billion forecast for U.S. spending in 2011. The tools and systems rolling out will help the 800-pound Facebook, of course. But they will also be valuable to smaller social-media companies and even traditional media, and they will generate revenue for tools, data and agency services.

A year ago, I wrote that the winning strategies belonged to whichever companies could help big-brand marketers reach large numbers of their target customers, integrate social marketing with traditional media and measure campaign performance. Now the social-media ecosystem is adding resources around social marketing management and advertising measurement, two pillars of those strategies. For example:

Getting “social” on company pages

Today most social-media advertising comprises boring display units on inexpensive social-network pages. It’s not particularly “social.” But marketers use it to drive audiences to company pages that feature interactive conversations, video and coupons, and that can access Facebook’s feed to build recurring use through fan-friending. Last week Foursquare added self-service tools for its own company pages, while Google is still figuring out its approach for Google+.

Facebook uses its EdgeRank algorithm to filter its feed for user relevance. That can limit the company messages delivered, fiendishly encouraging ad buying to remind fans to visit. Reportedly, Facebook may be reconsidering that strategy, but regardless, tools and services that coordinate page and ad management will be the winners. The companies I mentioned are among the early leaders, along with companies like Efficient Frontier, iCrossing and Buddy Media. And last week, Facebook announced that it was opening up its advertising API that had previously been limited to a handful of partners. That means there will soon be more management, analytics and services companies able to leverage Facebook data.

Measuring social advertising

Social advertising tools and services will need to integrate data from multiple sources for campaign analysis and optimization. Gnip, which licenses and resells Twitter’s “firehose” data, says that two-thirds of its customers are social media agencies. But to work successfully, tools also need offline consumer and enterprise information (ExperianAcxiom) and third-party online-traffic analysis from the likes of comScore and Nielsen.

As noted, those two both have new social measurement services that feature the TV-advertising concept of gross rating points, or GRPs. GRPs are arguably a simpler measurement than online metrics that track unique individuals and interactions, and advertisers use them to measure their efficiency in buying TV time. While an online GRP might seem like a step backward, it is necessary to make big brands spend more of their overall advertising budgets on social media. They need to be able to compare online-advertising efficiencies and effectiveness with traditional media. Integrating a GRP with measurement techniques that gauge audience engagement — something brand advertisers will pay a premium for — will grow overall online spending.

All of this action in social advertising is healthy: Its business ecosystem is too immature to demand much consolidation or pick winners easily. A year ago, I thought big players like Yahoo and traditional media companies could garner social ad dollars due to their advertiser relationships, multichannel experience and ad-friendly content. But they’ve done little, and the social ad ecosystem will aid Facebook and smaller social players just as much.

Question of the week

What is needed to grow social media advertising beyond $3 billion?