Mobtown Labs

Guest Post by:  Matt Patton Esq. Director of Optimization and R&D at DoublePositive

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Among the many nuances in the debate about which optimization algorithm represents the best RTB media buying strategy, the most prominent might be the audience retargeting v. audience agnostic approach.  Although exclusive to our business, this dichotomy is conceptually no different than two Wall Street analysts debating about whether a pure qualitative approach is better than a numbers-only quantitative method in purchasing securities.  My engineering training tells me that the only inferences that should ever be drawn as a basis for any decision should originate with the story told by what was actually measured.  But my legal training tells me what I think is the more correct approach, which is, as every law school professor professed so eloquently, “It depends!”

The truth is that measured performance numbers, i.e. impressions, clicks, conversions, and audience data, i.e. categorical audience profiling, both have their own benefits and drawbacks, and will almost always provide you different oscillating returns on your media investment.  On the surface, the only real difference between the two is that one is instinctual while the other is empirical.  With audience data, we infer that a group of users with certain online buying habits will purchase what our clients are selling based on the categorical distance between things previously purchased and what we are currently selling.  With fundamental performance data, we just care about which pieces of inventory have already yielded a statistically significant number of conversions regardless of who actually converted.  Thus it is blatantly clear under the surface that both methods offer the same benefit, which is a calculated a priori probability of a conversion from which we can derive an expected value of an impression, or what my mentor at Advertising.com used to call the “Crown Jewel”, of DR advertising.

The obvious drawback of both approaches is and will always be the cost of learning.  Because of the random nature of Internet advertising, we need to survey the biddable landscape before we can make any type of calculation, qual or quant.  In the quant world, it probably takes more time and thus requires a longer discovery period, while in the audience buying game, those “selective” impressions can get quite expensive when we are still learning which audience represents our sweet spot. Since there is no such thing as a free lunch in this business, both are going to require some upfront cash that will initially skew our calculated CPAs.

Instead of simply accepting this as truth, I want to treat this as an opportunity to thwart the economic black hole of overcoming a campaign’s inertia when starting from rest.  I see opportunity to utilize both approaches as a function of time and campaign maturity in order to get campaigns running more quickly and performing better long term.  I see complex regression analysis and time series plots that will tell us on a campaign by campaign basis of when and how to use audience targeting and when the stats tell us that the audience is worthless.  I see recurring real time cost benefit analysis algorithms telling us that we are paying too much for an audience or that an audience is underpriced.  I see this as a first step towards creating a RTB marketplace where being smarter actually translates to being more successful. For the first time, I see a scientific approach to an age-old art and an artistic approach to centuries-old mathematics.

Will this be accomplished and will it even make a difference? I leave you as a lawyer by saying “it depends”.

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This is a continuation of my post on Friday discussing how the Supply side was affected by attribution modeling and, though I’m confident it will be a good thing for the ad market because I think online ads sell for too cheap these days, I can see how publishers are worried and advertisers could be too opportunistic.  That said let’s examine the Demand Side.

Supply = Publishers (Friday’s Post)

Demand = Advertisers (This Post)

Demand

Attribution modeling is truly an Advertisers dream.  Many publishers attempt to offer it like Doubleclick and Atlas’ Engagement mapping or the Advertising.com custom data mining offerings but there are inherent flaws because data is limited, the whole puzzle isn’t visible to the publisher, or advertisers are just skeptical that there could be a conflict of interest in that they are just trying to sell you more advertising.

Every marketer’s job is to buy advertising and make creative and then align the cost of doing so in an attempt to make it drastically cheaper to acquire new customers than what you are charging the customer.  The problem with this is that without a solid attribution model, you never truly know what piece of media and creative is actually driving that customer.  Furthermore it rarely is just one ad impression so the question becomes what combination of media over what time period (and what time interval) is the most cost efficient. 

Couple that with the fact that you either need to pay for each individual ad (like a homepage) or you pay for a result and you have no control over or have no way to track how and when the ads were shown (like a pay per click search text link) and you have quite a messy scenario.

So in the grand scheme of things there is only upside for the advertiser with attribution modeling but there is a major philosophical flaw.  Most marketers if they look at their marketing plan have customers that they think are for free.  Natural search traffic, organic traffic to your site, customers walking in or calling in and just buying a product.

So I will be bold enough to lay down the Cardinal Rules of Attribution Modeling:

1. There is no such thing as free traffic

2. There is no such thing as a free customer

3. If you have free traffic and free customers, your attribution model is BROKEN.

I will end with a ridiculous scenario and  prediction.  I personally think that the demand side of attribution modeling could be the fix to ad market growth and economic growth.  The reality is that we are doing less work and incurring less costs to acquire new customers, so therefore companies like Amazon, Google, and Yahoo can deliver sales to customers at a much lower overhead than newspaper, TV, and radio have done in the past.  This concentrates dollars in marketplace pricing scenarios and those dollars are then compressed because these businesses use their low TAC to offer low ad prices.

Based on economic principles alone, if every advertiser knew what ads truly drove their sales right now, they would double down their ad dollars.  That would double the ad market and pump twice as much money back into our economy and all problems would be solved.  THE END!

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I came across a post by Brad Terrell talking about the Appnexus Innovation summit and he highlights the topic of targeting sites vs. targeting audiences.

He goes on to talk about two different ad networks, their differences and gives emerical evidence of his thoughts:

Adam also illustrated the value creation potential of the audience-driven approach to targeting by pointing out how the enterprise value of a representative “old school” ad network, Burst Media, paled in comparison to the much higher enterprise value of a newer “audience-driven” ad network, interCLICK

 - Please read the whole post as this could be considered out of context and its worth reading the whole post http://loca.ly/couk6j

So I think about this from a entrepreneur’s perspective and I completely agree.  Advertisers and Marketers cling to what is new and there is continual pressure to do a better job and take advantage of the newest technologies and methods possible.

That said, DON’T OVERLOOK SITE TARGETING.  Audience targeting if done properly with re-targeting or search keyword re-targeting such as with Magnetic.is can be very powerful and literally spin gold when it comes to bottom of the funnel and making sure you get in-market sales.  

Beyond this however lies the ocean of ad impressions that are still being boiled by the likes of the big ad networks and exchanges.  I recently had a conversation with the VP of Operations at one of the larges online ad agencies pitching my business and knowing that I used to sell to him I asked, well what do you think I should be buying.  He responded, that when you are doing direct response advertising where you need to hit a specific ROI to continue to invest, what you do is buy all of the ad networks and optimize the best you can.  He said DSP’s are great for getting that re-targeting audience and a couple other segments but largely a lot of the audiences do not work and there are so many of them that even if there is an optimal audience, you will waste a lot of money trying to find it.

From my experience on the sales side on any given campaign there were 2-3 audiences that really worked on any given campaign (one being re-targeting) and the rest of the heavy lifting was done by site optimization and frequency within site optimization.  In fact the most important driver is something that I rarely hear people selling on or creating business models on, which is site frequency and the fact that the first few impressions (1-3) are in fact the most valuable by a long shot.  Most publishers know this and technology lends to selling this easily but for some reason it is not sold out there on the open market.

Furthermore there is also a lot of evidence that brand name new sites and mail sites such as LA Times, NY Times, Yahoo Mail, AOL Mail and others similar create the most ROI impact if bought at the right frequency and attributed properly…..which leads to attribution modeling which is a whole other post which I probably need to write more on.  That said, if bought through an ad network or exchange often you get the higher site-frequency impressions and these sites don’t appear to work as well.  If bought directly, you have the burden of paperwork and exorbitantly high prices to get access to the right impressions of this media.

So because they have such a broad view of their buys I think a great new frontier for ad networks SSP’s, and DSP’s is to sell based on site-frequency.  They have this data and often know where they are in the publisher daisy chain and can aggregate supply across many sites and can efficiently convert this into a fluid buy.  

And, I would buy it…..

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So I’ve been trying to keep myself contained waiting but it has finally happened….

Someone has officially linked the offline product sales tracking world to the online advertising world.

Yes, that’s right, I know you’ve all been waiting for it too!

Stickybits has opened up their api to the public http://code.google.com/p/stickybits/

Mark my words, this point in time is the opening of the proverbial floodgates of online to offline sale tracking.  Now any old schmuck who can get their hands on a python developer can put Ticketmaster, OpenTable, Live Nation, and any major retailer out of business.  I mean seriously….these guys ought to just file for bankruptcy now…cut your losses!!!

Why is this, might you ask?

Well for those who don’t know Stickybits is a company that issues bar codes and connects them to a url.  This url can theoretically be anything.  It can call an image, it can call a website, and it can also trigger a purchase or redemption through a URI call.

I will be curious to see what restrictions and what type of load Stickybits handles.  Also there’s the fact that taking a picture of a barcode on a smart phone is kind of unreliable and a clunky user experience, but all of that will work it’s way out the base framework for the business model is there.

I look forward to seeing the innovation that comes out of this.

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So everything about what I do and what I’m interested in professionally is based around breaking the Linear Media cycle.  Social media, twitter, online advertising, ad optimization is all predicated upon the fact that on the internet, rarely do you have an opportunity to tell a user a story with media in a linear fashion.

By a linear fashion, I mean a story having a start a middle and an end or a stream of consciousness where the message is given to you in bits and pieces on a set path.  For example on the radio a DJ plays songs in order and makes you wait to hear who the artists are or you’re watching a movie and to understand the movie you need to watch it all the way through.  This is a linear media experience.  You can’t pull out bits and pieces and consume them because…..either you physically can’t (like you can’t fast fwd the radio) or it won’t make sense like the movie.

By a non-linear media experience I mean most on the internet.  For example, you can download songs and organize them and mash them together however you want (aka Girl Talk) or on a website you can start by clicking any link you want or organizing news stories in an iGoogle type page so nothing is in a specific order.

Non-linear media experiences take work.  I have to contribute to the social media machine and I have to organize the news and make my own playlists.  There are no editors, there are no content curators, I am taking on that work for myself.

Well, guess what?   I’m lazy.  I like being told a story.  I like a DJ that I know and trust and like their personality and taste in music to create my playlist.  When I go to LaLa, I love that listening to music is free, but the first place I go are the mixes every time because I want someone else to put together my playlist.

I’m also sick of On Demand.  I don’t want to pick through hundreds of reality TV shows.  I want TGIF.  I want the Thursday night lineup with Sienfeld and actual real stories being told.

I think the only real haven for this right now is HBO.  They still create incredible Premium Content that I will pay for.  They are great shows with great stories with real talent in them.

So when people talk about premium content these days and try top pass of NY Times new stories that are syndicated and are just updates and details on what people are saying for free on twitter, I don’t buy it.

Real Premium content is Linear Media.  Stories being told with talent and a beginning, middle and end.  A place where your mind wanders, where you get passionate, where you think about things and that plays on your emotions.  In my opinion these are the last true sources of premium content.  Now the challenge will be for the iPad, iPhone, Internet, and other devices to enhance them, not destroy them.

HBO

Showtime

Saveur Magazine

Netflix

Movie Theaters

Harry Potter

Live Music

Howard Stern

Here’s a video of an old Esquire Magazine executive talking about the iPad and the premium experience of a good magazine.

Conversations with Mr. Lois PART III from SPD Videos on Vimeo.

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So one thing I’ve realized through the years of working in online advertising is, sometimes it doesn’t hurt to go back to the basics.  With everything thats going on with Engagement Mapping, Realtime Bidding, DSP’s, SSP’s, Dynamic Ad Optimizers, and everything else, sometimes it helps to go back to the core pieces of a media plan and make sure you are taking advantage of the basic tenants of online display advertising.

With that, I’ve decided to start a series of blog postings on some of the basic techniques of online advertising and we’ll start with Re-Targeting.

What is it?

Re-targeting is probably one of the most powerful methods of display advertising available today.  In plain terms what you are doing is running display banners ads to users that have already been to your website.

How does it work?

It work by placing two pieces of html code on your website.  One you would place on the entry point that users access your website by, and we will call this the “ON” pixel.  This can be either your home page or a specific landing page that you are driving traffic to.  The code gets pasted into the body of your website (probably want to do it at the end of your content code so if there are ever any issues loading, it doesn’t hold up your content).

The second pixel goes on the ‘thank you’ or ‘confirmation’ page of the action you are trying to value and we will call this the “OFF” pixel.  You want to place this to show after the user has taken the desired action you want them to take.  For instance if you are advertising selling a product or service that is purchased by credit card on your website, you would place this after you collect the credit card info and confirm the sale.  If you are generating leads, say for a car dealership for salespeople to follow up on, you probably want to place the pixel on the page that shows up after the user submits their information.

Essentially what happens is that when a user goes to your site, the pixel loads and the Ad Server writes a cookie on that users machine.  That cookie then has a variable.  Let’s say for example the variable can have two different variables and when the user sees the first pixel “ON” is written in that variable.  When the user sees the second pixel, “OFF” is written in that variable.  Then when your campaign is out there running and showing ads on websites, it will be set to only show uses who have that cookie and you can specify, that you only want to show to the “ON” people and not to the “OFF” people or you can decide to show to both.

Now why would you want to show to both?  Well, for the car dealership example, you would probably only want to target the “ON” audience because theoretically people only buy one car every few years so after someone has completed a lead, you probably don’t want to advertise to them anymore.  An airline, however, may want to target both audiences and show different ads to both of them.  Maybe the “ON” audience should get ads about booking a flight, and the “OFF” audience should get ads about their frequent flyer program.

Advanced Re-Targeting - “Cascading Re-Targeting”

If you haven’t realized already, in most cases the variable that is written to the cookie is pretty flexible so you can assign a variety of values to that variable and create a variety of audiences.  This can be very powerful to an advertiser who has a purchase with a longer consideration cycle.  This method of Re-Targeting, I like to call “Cascading Re-Targeting.”  Lets take an online retailer for example.  Most retailers have a variety of products and then have accessories to go along with those products that they want to sell a user.  For example lets say you sell laptop computers as well as monitors, mouses, printers, and printer paper.  You have a search campaign going where you are driving people to your homepage as well as product research pages.  Consumers typically either come in on the homepage, or a specific product category page or a specific product page.  You might want to set one variable in a pixel on your Home page called “ON”.  This will be your largest audience and it’s probably all of your users.  Then you might put another pixel and set the variable to “laptop_product” on your laptop product category page.  This will over-write the “ON” value and now you know that you should be showing that user banners that focus on advertising Laptop computers rather than your general site or brand.  You can take that a step further and set variables on specific Laptop computer pages and show that user a specific ad for the specific laptop that they were looking at.

Lets say this works an the user purchases a laptop computer and on the confirmation page of the purchase you have that same Re-Targeting pixel that would normally set the variable to “OFF”.  You may want to have this actually set to something else more specific.  Lets call it “OFF_Laptop” for now.  Now when we see this user out there on the internet again and we have the opportunity to show an ad to them, we know that they have purchased a laptop and we can try to sell them a printer, or mouse, or monitor.

Where do I get it and how much does it cost?

A lot of audience targeting is based on audiences owned by other companies these days and you need to not only pay the website you are showing the ad on for the impression but you have to pay the audience provider as well.  The great thing about Re-Targeting is that you are using YOUR OWN audience so you don’t have to pay for it.  So all you need to pay for is the media that you are buying the site on.  Most ad networks offer this as a service as well so if you don’t have your own Ad Server that you use, the ad network will most likely provide this as a free service and consult you through the setup process for free.  The only catch here is often times ad networks and websites will charge a higher CPM for Re-Targeting because they need to make sure you are eligible for every impression in your Re-Targeting audience that you have created but the higher price point is well worth it for the opportunity to access those users because after all, they have already shown purchase intent in your products so why not advertise to them to bring them back and close the deal!

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So all of this buzz about DSP’s and Realtime Bidding has gotten me thinking.  Why exactly are we so obsessed with these standard IAB sizes?  What’s the deal with banners anyway?

Anyone who knows anything about programming, flash, html, and javascript knows that the size and shape of the banner really doesn’t matter when it comes to scheduling and the technology behind adserving.  It’s probably the business people and management that are so detached from the technology and mechanics of online advertising that have painted us into this corner.

Well Facebook is not so dumb.  I guess that’s one of the benefits of having a twenty something developer as a CEO.  For what they lack in big business management experience they sure are creating a massive revenue and profit machine.

“The biggest income stream seems to have been performance advertising, which likely accounted for more than half of Facebook’s 2009 revenues at $350 million. Next was brand-based advertising, which accounted for an estimated $225 million in revenue. Microsoft advertising came in at $50 million and virtual good income was only $10 million according to these numbers.”

From Mashable Article - Facebook Could Surpass $1B… http://loca.ly/bfA3ho

So why are all of these data companies like Blue Kai, eXelate, and DSP companies like Invite Media, MediaMath, Turn, Triggit so obsessed with the banner?

It sounds like the real value is outside the banner!

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Further evidence that online is becoming the research vehicle of choice for consumers and that online advertising is proving to be a more efficient expenditure for advertisers.

“A lot of clients have been investing more online as opposed to TV,” she said. But Femiak said the sites that are winning those dollars are direct response-oriented.  From Click Z  http://bit.ly/8P5l8F

I think this is obvious as in a down market you see companies like Amazon seeing yoy growth.  But furthermore than that the article in Click Z goes on to talk about how Kontera is seeing some serious growth.

“Kontera, an in-text ad network, has trumpeted an 80 percent growth in advertiser spending since last holiday season. The performance-based ad seller said it’s trafficking twice the number of consumer electronics campaigns and that the average budget is about 40 percent larger than it was the previous year.”

from Click Z http://bit.ly/8P5l8F

I have to be honest.  I’m not the biggest fan of Kontera.  I just met with a large Auto Agency in Detroit and they were saying how Kontera was in thier office and that they were allocating a small budget to them.  There is an obvious connection with the research consumers are doing on blogs and the relevancy of in-text ads.  I just see the way Kontera doing it as intrusive.  There’s got to be a better way to get these eyballs and integrate with the content in a useful way.  But apparently it’s working so far for Kontera.

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