Shahar Solomianik

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Archive for the ‘Online Advertising’ Category

The RightMedia Problem, The Microsoft Lesson, And Why OpenX Will Eventually Win

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The RightMedia Problem

The advertising exchange model is very promising and great in theory. Letting publishers put their display ad inventory up for bidding by advertisers really sounds like something that can improve efficiency both on the publishers and advertisers end. In practice however, things are different.

RightMedia is probably the largest advertising exchange today. Yet, publishers still use it mostly for their remnant ad space, allocating their quality ad space for other advertisers and top tier networks. Advertisers – completely aware of this fact – prefer to spend their display budgets with established and reputed ad networks, and leave RightMedia bidding for the smaller advertisers and networks. The result is that the average CPM on the exchange is low.

It seems that the exchange still didn’t reach a critical mass that will bring the breakthrough in its performance. The only way for the exchange’s average CPM to increase is by adding more advertisers and publishers into the game. Only then will publishers allocate quality ad space to the exchange, and large advertisers and networks will come along.

How does an ad exchange grow?

The Microsoft Lesson

According to Yaron Galai, who had suggested Microsoft to offer a 200% rev-share to all publishers, growing an advertising network – and I believe rules apply here for ad exchanges as well – is by growing the publishers base:

While the advertisers are the ones paying for everything, acquiring advertisers is a secondary concern for an ad network. A distant second. The #1 key to making an ad network work is the publisher side. Even though the publishers are being paid, it’s much more difficult to win publishers than it is to win paying advertisers.

Whether or not someone at Microsoft have read Galai’s post, it seems that they had followed his advice. They realized the only way to win market share over Google is by attracting Google’s publishers – not advertisers. So the rumor about an high-paying AdSense alternative spread and many publishers were eager to join once the private beta tag is off. Few weeks later though, when Microsoft opened up pubCenter for the public, payout has dramatically sunk.

RightMedia shouldn’t be learning anything from Microsoft about publishers retention. However, with acquisition in mind, Microsoft’s experience can serve as a good lesson for RightMedia . Tempting publishers works. If RightMedia could only find a way to tempt publishers to join, it will be able to grow its publishers base and advertisers will follow.

But there’s a catch – unlike Microsoft, RightMedia can’t simply double or triple publishers payout. Being just the exchange manager, RightMedia is not involved in the money flow. In the exchange, money flows directly from advertisers to publishers and not via RightMedia as the middle man. RightMedia is not in a position to offer any financial benefits for their publishers.

That’s a problem. And not only for RightMedia, but for any ad exchange out there. How can an ad exchange tempt publishers?

Why OpenX Will Win

If an ad exchange can’t compensate their publishers with money, it may never grow. Only an ad exchange that is able to offer another type of compensation, a service or a added value perhaps, has chances to appeal to publishers. OpenX is such an exchange.

Wait a second. Isn’t OpenX an ad serving solution?

Well, it is. OpenX is an open source ad serving software that is becoming very popular. It disrupts the ad serving business by eliminating a great portion of the ad serving costs. Disrupting is great, but OpenX is a business and needs to make money on its own. Having already a big (and steadily growing) amount of publishers, with a very close affiliation to their advertising space, it was only natural for OpenX to eventually launch an ad network of some sort. Better yet, it decided to take the ad exchange path.

Though still small, I believe OpenX exchange has better chances to make it. It has a large base of publishers enjoying a free or very cheap ad serving solution, whether as an hosted solution or as a stand alone installation. Converting those publishers to participate in the exchange may be much easier for OpenX than it would be for RightMedia to find new publishers out in the cold market.

In a sense, OpenX is not an exchange that offers an added value. It’s an added value that offers an exchange. And that’s why they’ll eventually win.

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Written by Shahar Solomianik

May 25, 2009 at 3:13 am

Posted in Online Advertising

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When Will We Have Perosnal Targeted Advertising?

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Online-advertising targeting methods are great. As an advertiser, they allow me to narrow the distribution of my campaigns and reach out to my clients more effectively. So if I am after clients from Phoenix, AZ, I’d use geo-targeting. If – on the other hand – I look for people who are interested in dog training, I can keyword-target this term. Newly buzzed Behavioral Targeting can get me even further and enables me to target clients according to their recent tracked online activity.

However, what if I actually know who the people I target are? What are my targeting options in this case?

First of all, you may stress that if I already know who I am targeting, I shouldn’t use advertising as the method for reaching them in the first place. I can try to contact them personally instead. Isn’t that what social networks are all about? Especially Linkedin, which has the introduction mechanism so well implemented in its core.

To this I will answer that:

  1. The amount of people to whom I want to communicate a single message can be too big to justify personal connection. It’s a simple scale issue.
  2. The time it takes to become friends or get introduced to those people may be long. In some cases, I need the message delivered immediately.

Current targeting options do not allow me to personally target advertising campaigns. I can use a mix of other targeting methods to try to narrow the distribution as much as possible, but that’s not really it. Let’s say that the common denominator of all the people that I target is that they’re all video producers from NYC. They’re not just video producers from NYC. They are very specific video producers that I have personally and manually targeted. I can launch a campaign that is geo-targeted to NYC, and keyword targeted around “video productions” very easily. This campaign may as well hit the exact people I am after, but it can also miss. And – it may reach people that I have never intended to reach. If they are exposed to the ad or even respond to it can create useless noise for me or even damage.

What I actually need in this case is a method of Personal Targeting, so I can communicate my message effectively only to those people that I am interested in. I want to be able to put my ads on web pages that those NYC video producers – and only them – are viewing. That’s a truly targeting heaven.

Imagine that while you’re browsing the web, the ads that you see are not ads that are targeted for your “type” but rather, directly to you.

Of course, the only way to practically achieve this is by knowing when its you who visits a page. And in order for this to happen, you must have identified at least once in the path to the page where the ad is. The natural implementers of this targeting method should therefore be social networks. Social networks are the places where you are willingly identify yourself by your real name with the intention of it to be publicly known that you are you.

There are surely some privacy issues here. Although I am not sure those are much of an issue, since the only information the personal targeting vendor would use is the person name. It wouldn’t use any data that this person shared on their social accounts, or any information the person may not to expose to others. Users names are usually completely public on social networks.

Another issue is scalability. It sounds like personal targeting involves very small numbers of ad impressions and future transactions or user actions. Advertising networks are used to work with multiples of tiny figures (costs) with huge numbers of impressions, clicks and actions, and why would any of them develop a targeting method that will allegedly reduce their business?

I think networks business wouldn’t be reduced, rather become more effective. Advertisers targeting personals will be willing to pay a lot in order to reach the exact people they’re after (think Bill Gates), or for their future actions. So the multiples will be of relatively high figures (costs) with relatively small numbers of impressions, clicks and actions. The network will have to carry much less overhead. That’s a benefit.

All in all, having to deal with the pain caused by not having this targeting method, I can’t see many drawbacks of Personal Targeting. Can anyone else see them? I just hope that the major social networks will develop Personal Targeting soon, or are they already developing it?

Written by Shahar Solomianik

May 14, 2009 at 8:03 am

The Future of In-Text Advertising

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In-text advertising is a controversial niche advertising market that on one hand has huge reach and on the other hand has absence of big players. It was a virtual paradise for in-text players during the last several flourishing years, but how will this niche market survive the downturn?

What is In-Text Advertising?

In-text advertising according to wikipedia is:

A form of contextual advertising where specific words within the text of a webpage are associated with advertising content.

In-text advertising is not a new type of online advertising. In its primitive form, it dates back to the early 2000’s when a company named eZula distributed an adware client that turned words into links while surfing. Later on, VibrantMedia launched intelliTXT, probably the first ever online in-text advertising product. When eZula morphed into Kontera,  they joined VibrantMedia as a leader the in-text advertising market.

The basic idea behind in-text was to bridge the traditional separation between content and ad space derived from the newspaper advertising industry. Advertising was merged into the content itself. Kontera explains this nicely in their website:

In 1982, to increase the sagging sales for Reese’s Pieces, Hershey’s accepted a product placement deal in Steven Spielberg’s “E.T.”. After Elliot used Reese’s Pieces to lure E.T. from his hiding place, Reese’s Pieces experienced a 65% increase in sales and succeeded in reinvigorating the brand. Though this wasn’t the first case of product placement, it is one of the best examples of increasing sales and supporting brand marketing objectives through contextually relevant product placement.

Low click-through rates on graphical banner ads, in contrast to the relatively high rates and conversions of CPA ads embedded as text links, gave an additional push to in-text innovation during the early days. In-text innovators tried to implement an online advertising service that could take advantage of those high click-through rates from textual links.

The Controversy

In-text advertising was, and still is, somewhat controversial. For the content consumer, it may not be so obvious that a hyper link is a sponsored ad. Some publishers and critics claim that these links are deceiving in nature, and users’ reactions are mixed. I believe this is the reason that in-text advertising is not embraced publicly. Market leaders are also aware of this.

Yet this controversy served another purpose. It appears to have prevented the big players from joining the market. The absence of Google, Yahoo, Microsoft and AOL allowed VibrantMedia and Kontera to increase their distribution and control over this niche-market. In fact, VibrantMedia and Kontera have become so dominant that regardless of their niche, they are both considered to be among the top advertising networks today. With impressive numbers such as 42% US reach for VibrantMedia and 34% US reach for Kontera, they have proven that publishers do end up implementing in-text advertising, regardless of how controversial it may be.

Today

When the online advertising industry started to flourish we saw many other networks launching their in-text services. These networks were all trying to get in on one of the only niches from which the big players were absent. Exponential’s EchoTopic, AdBrite’s Inline Ads, Clicksor and others are examples of these smaller networks.

None of these companies threatened VibrantMedia and Kontera. But on the other hand, none of them relied solely on in-text.

The lack of real competition from the big guys had its drawbacks. It didn’t drive VibrantMedia and Kontera to increase their efficiency. One of the strangest things to me is that neither company introduced a self-service interface for advertisers. Both still rely on their sales force and target only large advertisers. Moreover, they seem to prefer sharing their CPC revenue with other providers over getting higher rates themselves. Kontera is known to link its ads to Yahoo CPC ads:

The company also has access to thousands of advertisers through a partnership with Yahoo.

We can assume VibrantMedia does the same.

The Downturn

Now with this economic downturn upon us, the in-text advertising market is fragile. Because it is a controversial niche market, it may be one of the first cut from an advertiser’s budget. Moreover, as their partners begin to focus on their core business rather then nurture their in-text partnerships, VibrantMedia and Kontera will realize that relying on deals with other networks may have been a major error. Perhaps they should have developed direct relationships with advertisers as well.

In a separate issue, both VibrantMedia and Kontera rely heavily on VC funding which may also fall short in the near future.

Launching a self-service option for advertisers could help, but it may be too late. Advertisers traction is hard to gain in this environment.

The apparent solution for both companies is acquisition. Yes – their valuation may not be as high as it was last year, and yes – maybe they will not be hurt so badly from the downturn. But after all, they are VC funded start-ups looking for an exit and this downturn could be precisely what they need – a special opportunity for them to be acquired by a big player, despite the in-text controversy.

Acquisitions?

Lately, Google has demonstrated an increasing willingness to experiment with innovative, questionable and controversial advertising products. Just a few days after launching expandable ads, they also announced behavioral targeting. They are becoming more aggressive in penetrating advertising in new ways. This is understandable since Google started laying off employees and shutting projects down, proving it is not immune to the downturn. Don’t be surprised if Google enters the in-text market as well.

The question is, will Google acquire an existing player? Or will they develop their own product?

Google has shown that it acquires companies either for their distribution (YouTube, FeedBurner) or for their technology (Urchin). The bad news for VibrantMedia and Kontera is that Google neither their technology nor their distribution.

While in-text technology is not a known Google product, it may have already been developed. Even if it wasn’t, it’s not difficult for them to do. I don’t believe that Google will aquire VibrantMedia and Kontera for the amount they would like to see, especially when the technologies are so similar and could be implemented much better by Google themselves.

As for distribution, Google’s publishers network is much bigger than both VibrantMedia’s and Kontera’s. This certainly does not justify an acquisition.

So Google won’t be acquiring any of them. Who will, then?

Maybe another network will see value in their technology or distribution. Lately, Yahoo is a mystery, which leaves us with Microsoft – a great candidate for the first buyer in this market. They have the cash, they wish to expand their ad network reach, and they may be interested in in-text advertising. And, they already are working with Kontera in some capacity, which could be a catalyst for acquisition.

The Future of In-Text Advertising

If Microsoft ends up acquiring Kontera, another player (AOL? IAC?) will follow and acquire VibrantMedia. In this case, Google won’t sit on the sidelines; they will launch their own in-text advertising solution for sure. By the time we’re out of this downturn, all major players will run in-text advertising, thus legitimizing it for the future.

So all in all, if these predictions play out, the downturn will serve in-text advertising well. It won’t be lead anymore by relatively anonymous companies, and it may loose some of its charm, but it will become a legitimate way of advertising and will gain public acceptance.

And what if my predictions are wrong? Can the in-text market survive? What do you think?

Written by Shahar Solomianik

March 16, 2009 at 9:10 am

Zemanta: Crowd Sourcing Contextual CPA Advertising

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Introduction

In my last post, I wrote that CPA needs to be the next revolution in online advertising. I stressed that because CPA is the most efficient pricing method for advertisers, a wide adoption of CPA by publishers will drive the entire online advertising industry forward simply by helping it to gain market share over offline advertising. This is especially true in the current economic downturn, when advertising performance is becoming more and more significant.

I suggested that due to the lack of a scalable system that deploys CPA ads on publishers’ sites in a way that will generate high returns, CPA is therefor not widely adopted by publishers. A lot of innovation is required in order to make it scale.

However, I didn’t suggest any real innovative solution. I still don’t have a suggestion for a solution. But, I think I just found a company that does.  Let’s take a look:

Effective CPA Implementation

CPA can be used very effectively as of today, but it doesn’t scale for most publishers. Filling pre-allocated ad spaces with graphical or textual CPA ads, contextual as they may be, simply doesn’t do the trick. Successful CPA publishers will tell you that the highest eCPM is gained when they manually embed a minimal number of text links and banners that link to the single most relevant product, in the right spot within the content.

Any solution for scaling CPA must answer these three questions with great accuracy, for every web page on which it is implemented:

  • What product is the most relevant to be sold on the page?
  • Where is the best location to link to the product within the content?
  • Which linking method is the best for the product?

What product is the most relevant to be sold on the page?

Things that are very obvious to the human mind are not always so obvious to a machine. While a machine may be able to suggest some products after extracting keywords from a given text, it has no way of determining which of those keywords is a relevant product to sell. A machine can’t understand tone, humor and cynicism from the text. It can hardly tell if a product is mentioned in a positive or negative manner. Furthermore, it’s even harder for the machine to name a single product with the best chance of being sold on the web page.

In order for a machine to do all these things, it will need to understand the context of the page. One can suggest that Google does this. After all, they run the best contextual advertising system out there. But even Google is limited. And the fact is, their system is not so contextual.

Google’s alleged contextual abilities are a derivative of its great search technology. Search technology is all about matching search queries to indexed pages and assigning a score to each match. When AdSense ads are embedded on a web page, the relevancy isn’t gained by understanding what the page is about, rather it is achieved through matching ads to pages as if the ads themselves were search queries. That’s about all that Google’s technology does.

In a sense, Google doesn’t try to find the most relevant ads for any web page. On the contrary – it finds the most relevant pages for any given ad.

If Google can’t deliver the most relevant product right away, then there is still work to do.  It seems like we need a whole new technology in order find the single most relevant product on a web page, something which is more contextual in its nature, and not based on search technology.

Where is the best location to link to the product within the content?

Let’s say we have a machine that understands what product to link to. Now, where should it embed the link? It’s a difficult decision for a machine, even harder than finding the relevant product itself.

It’s one thing to match ads to web pages (or web pages to ads) and fill pre-allocated ad spaces, but it’s another thing to actually allocate the ad space based on context. And we pretty much understand by now that even Google can’t do this.

This challenge doesn’t stop others from trying. In-text advertising is a somewhat new approach, implemented by companies like VibrantMedia, Kontera and even Amazon. All based on the assumption that a good link from within the content is worth more than a bunch of ads around it. Yet, those companies also don’t have the technology to determine the best spot for the link to be embedded.  All they do is turn extracted keywords into links. Those are not necessarily the right words to link, and not necessarily in the right spot. Again, we see that technology can not yet deliver what an advertiser needs, in this case placement.

Which linking method is the best for the product?

Is this a product that requires a visual instead of a text link? And if so, which of the available visuals will perform better? Surely, no machine can provide the answer, yet…

Crowd Sourcing

It seems to me like machine scalable CPA is a romantic idea that belongs to the future. The requirements are just to much for the current technology. Nevertheless, we need a solution now. So what can be done? Crowd sourcing.

If the technology doesn’t exist yet, there is no other way to achieve scalable CPA but to outsource the job to people. This has already been done in other areas of online activity, for example Digg, Delicious and uTest.

How can we use the crowd for contextual CPA? Using Mechanical Turk? Perhaps. However, I believe Zemanta offers a better and more organic way.

Zemanta Crowd Sources Contextual CPA Advertising

Since every page that contains content is generated by humans, what could be more natural than outsourcing the contextual CPA ad embedding to those humans – the authors themselves?

I can think of one problem; authors are not always commercial savvy. They are mostly concerned with writing and not with marketing.

What Zemanta does, however, is provide them with a tool to enrich their content with tags, images, links and more. Zemanta integrates smoothly into the author’s domain and provides them with a great value. What if  Zemanta offers some CPA links and banners in addition their other offerings of pictures, links and tags? And what if those links and banners would be seamlessly merged into Zemanta, thus providing a way for the author to integrate CPA in a truly organic fashion?

In an earlier post, I suggested that Zemanta would eventually look for revenue from the point of content consuming, despite that they recently announced a paid API model. Andraz Tori, a co-founder of Zemanta supports my assumption with his comment on CenterNetworks:

But we are definitely working on monetization.
For example when suggest link to Amazon and you specified your Affiliate ID, we insert it. If you haven’t specified it, we insert our own.

Presently, authors from around the world are using Zemanta and organically embedding CPA Amazon ads within their content. They embed ads to the right product, they embed them in the right spots within the content, and they decide whether or not to add a textual link or a product image. Best of all, the authors don’t do it with the intention of selling. They are doing it with the intention of increasing the value of their own content. As a result, ads are organically and naturally embedded within their content.

Of course this is just the tip of the iceberg. Those are just Amazon ads for now, and Zemanta’s method of revenue sharing is not yet solid. However, they have just recently started – and as far as I can see, Zemanta provides a great service, and it’s byproduct is crowd sourcing of contextual CPA advertising.

If that’s not CPA innovation, then what is?

Written by Shahar Solomianik

March 5, 2009 at 1:42 pm