Category: Advertising

The McKinsey Quarterly: A reality check for online advertising

The McKinsey Quarterly: A reality check for online advertising

“…recent McKinsey research finds that supply bottlenecks could limit the pace of online ad growth and drive prices higher. Moreover, a dearth of ad agencies that can manage both traditional and digital campaigns could further slow the shift in spending to online ads.”

The cost of online advertising has been a strong meme for the past six months as online publishers enjoy the lift of the interactivce renaissance that started in 2004. The problem is page views are not keeping pace with advertisers’ demands for impressions and targeted placements. Dow buys Marketwatch to get page views after limiting itself with the WSJ’s cost wall. AOL drops the last of the walled-garden walls. Every online publisher from Yahoo to niche trade sites needs impressions — the crack cocaine of the business — and more impressions. Now, discount those impressions due to click fraud, the fact that banner and skyscapers and IMU’s are old-school, and you turn to the fringes of the craft — behavioral targeting, RSS ads, viral, word-of-mouth and non-traditional tactics.

What’s an online marketer to do? Higher prices at a .02 click through rate makes “traditional” online advertising a non-starter. Keyword bids for commodity terms and the corrosion of click fraud makes that a non-starter as well.
If you’re in durables — autos, real estate, cars — you lean towards behavioral. If 25% pf the population is in the market every four years for a new automobile, then figuring out how to surround them with a car ad at that specific point in time is a huge bonus. This leads to detection of the intention and folks like Yahoo are masters at detecting it. Which leads to the insane prices being commanded for Yahoo’s auto placements.

For consumer non-durables — a pair of pants — well, is the agency going to go above a $50 cpm for a banner campaign to build the brand or a search campaign with a predictable cost per click model?

Me, I predict a collapse of the current blind impression model, a breakthrough in the behavioral side, a big shift to word of mouth and consumer-to-consumer activation, and more grassroots transparency. Couponing, just-in-time discounting, and other affiliate driven tactics will rise as well.

Sitting in the middle of this, I can say with some assurance that there is a massive generational gulf in marketing right now between traditional offline tactics and online. While online marketing is now nearly 20 years old, the competency and realization of its potential is only now beginning to creep into the CMO’s office. I’m fortunate to work for a CMO who gets it, but it’s still an evangelical sell to persuade many to take the leap of faith out of traditional marketing tactics into the new world, let alone the new-new world of WOM.

The dawn of the online metric revolution

The Internet Knows What You’ll Do Next – New York Times

This morning’s (Wednesday 7.5) New York Times carries a David Carr Leonhardt column on Battelle’s meme of the “database of intentions.” In that column, Hal Varian, probably the smartest media and content economist in the country, predicts that online metrics are about to do to advertising what the spreadsheet did to corporate finance in the 80s. I wholeheartedly agree. The precision of the medium and its measurements will drive online advertising to the top of any marketer’s bag of tricks over the next two years. While this promise has been held since 1995, it’s coming into fruition now thanks to easily accessible tools such as Google Trends, and high end metric services such as Omniture, Coremetrics, and Hitbox.

“Hal R. Varian, an economist at the University of California, Berkeley, who advises Google, predicts that online metrics like this one have put Madison Avenue on the verge of a quantitative revolution, similar to the one Wall Street went through in the 1970’s when it began parsing market data much more finely. “People have hunches, people have prejudices, people have ideas,” said Mr. Varian, who also writes for this newspaper about once a month. “Once you have data, you can test them out and make informed decisions going forward.”

Genuine VC: The Simple Online Inventory Equation

Genuine VC: The Simple Online Inventory Equation

Great post by David Beisel at Masthead on online advertising and the transformation of CPM to “cost per reaching the right customer.” Developing this efficiency is not going to be fun, but expect the behavioral targeters like Tacoda to lead the charge. Online advertising is beginning to walk upright from its old posture of crawling on all fours and measuring CPM, CPC and other blunt “stupid” measures.

“The beauty of the interactive medium is the ability to more effectively target the right consumer for the advertiser’s message. Whether advertisers realize it or not, the right metric to view media buys isn’t CPM, but rather effective cost per reaching the right target customer. And while television and print advertisers have striven towards improving this measure though demo- and geo- targeted buys, the interactive medium allows for much more granular targeting. Witness e-mail marketing, contextual CPC campaigns, and search. Now with behaviorally-targeted networks like Tacoda, advertisers can reach consumers with even more precision (e.g. demonstrated car buyers who are surfing ROS news, weather, or sports pages). So while publishers are earning higher CPMs for their pages (thus raising the weighted-average CPM on the ‘net), the technology allows advertisers to more effectively reach who they want, which is the true goal in the first place.”

Chinese Site Design and Display Ad Models

Let’s begin this lesson by my pointing out the obvious, and that is I am pompously attempting to sweepingly discuss the design of websites written in a language I have no hope of ever learning how to read.

 

That said, I must also confess to have a grand total of ten days inside of China, time enough to see one major city, a village, some suburbs, the usual tourist spots, and the airport. Therefore, I have no sense of the rich cultural gestalt that drives Chinese design, assuming most of my Jungian design insights from the decor of bad American Chinese restaurants which serve food that is about as related to real Chinese food as a can of Chef Boyardee Spaghetti-O’s is to a good tagliatelle con ragu in a trattoria in Porto Ceresio.

When I was at IDG, one of the world’s few truly global online publishers, with master brands such as Computerworld, Infoworld, and PC World translated independently at the country level in dozens and dozens of languages, I arrived with the misbegotten notion that brand hygeine demanded a templated design across all sites. Then I met the folks from IDG China, who were delivering traffic numbers that essentially blew the original US brand sites out of the water, and who were following an ad model completely unlike the CPM, impression-based, lead generation dog fight we all have come to know and hate in the US and West.

In other words, the Chinese sites were kicking ass in terms of traffic and money and not spending a lot of time worrying about eye-tracking, heat maps, golden triangles, and audience development.

To the Western eye, they are an utter hash. What Steve Gillmor at ZDNET calls the “Las Vegas” approach to online publishing, where everything blinks, slides, pops-up, takes over, and otherwise — to plagarize from my own earlier post — induces epilepsy to someone enamored of the stripped down Web 2.0 design gestalt pioneered by Google and exemplified by Fiickr, del.icio.us (neither of which has much if any in the way of ads) and the user interface genius of the iPod (of which I saw none in ten days in Beijing).

There are some rules of thumb in U.S. online publishing models which say that two ad impressions per page is great, three is acceptable, four is pushing it, and five is insane. Some Chinese sites are throwing off ten to 14 impressions on their homepage. The skyscraper unit — the vertical “tower” that runs in the margins (and which I claim to have invented at Forbes.com in ’95 when I had the insight in the shower that the first thing to vanish during a scroll-down was the 468×68 horizontal banner pioneered by Hotwired) — on Chinese sites the things follow you down the page, skipping along, and, in some cases, there are units that float all over the page, impossible to kill or stop.

If you want to read a good explanation of the chaos, I suggest you check out Virtual China and it’s post on the aesthetics of abundance. They write:

Hans Juergen-Bucher (Media Studies, University of Trier) has a provocative 2004 paper titled Is There a Chinese Internet? which reports the results of user studies he conducted in Germany with Chinese Internet users. One of his most interesting points is about what he calls an “aesthetics of abundance” that shapes Chinese website design and interface.

In Chinese culture we can find two different kinds of aesthetical systems: the “aesthetics of abundance” and the “aesthetics of emptiness” (see Pohl 2004). Websites in China are usually designed along the principles of the “aesthetics of abundance” which refers to the Chinese popular culture and what can be seen in New Years pictures, calendars or paintings on dishes. The “aesthetics of emptiness” is part of the Chinese high culture and heavily influence by Zen and Chan Buddhism. The principles of this kind of aesthetics did not influence web design up to now in a significant way. The attractiveness of the “aesthetics of abundance” not only relies on its integration into popular culture but also on its symbolic meanings: strong and rich colour, density, and opulent presentation symbolize happiness and wealth.

I’ll add some links later. It’s past midnight in Durham and I need to be up in 6 hours.

Breaking through the clutter in Beijing

I’ve been keeping an eagle’s eye out in the chaos and confusion of moving through Beijing for marketing impressions from Western Brands and comparing them to how Chinese brands represent themselves. To keep the discussion simple, I’ll first look at outdoor advertising and then in a second essay, look at online.

Outdoor advertising — and by this I mean bus shelters to buses, billboards to storefronts — really should be separated into nighttime and daytime effects. Nighttime is a battle of neon. Not a lot of it, saturated Vegas style, but islands of it that really stick out. Daytime is a war for space. The Baidaling Expressway, which runs north out of Beijing up to the Great Wall, has its share of billboards, but only once one gets inside of the fourth ring road (Beijing is defined by concentric circles of ring roads, like Washington D.C.’s Beltway). Then things get interesting. No Western brands appear until one gets into the heart of the city, and the most effective ones are actually building brands — IBM, Ericsson, Microsoft — which interestingly enough are not out in the main technology park in the Shandi district where Lenovo is based and one can see Western companies like Peoplesoft and Nordisk.

Once in the city proper, the advertising starts going nuts.

Here’s a few photos:

Then, one starts to notice some familiar brands, but still competing for attention:

And right around the corner ….

The situation in the stores is even more chaotic, according to my colleagues who visited a tech mall last night (which I need to do before the week is over.) Lots of machines competing for attention — like your average 42nd St. electronic store in NYC.

Bus shelters and sidewalk displays seem focused on mobile phones. Lots and lots of Lenovo impressions for our handheld business. This one is for a Lenovo PC.

And finally, my favorite impression of the day. From lunch:

Next up, online advertising for PCs in China. This is mindblowing stuff.

China Internet thoughts

Things are too chaotic on the morning of day two to compose a reasoned essay on what the situation is regarding computing, Internet, mobile telephony, and branding opportunities in China. and I need to get outside and explore more on one of my precious days off in the country before a week of meetings.
So here’s a random list:

  • Right off the bat I saw a Yahoo ad on a bus. I love bus ads. CNET used them to great effect in Manhattan in the mid-90s. Yahoo was the only U.S. internet brand to make an impression yesterday and this one was sighted outside of the northern entrance to the Forbidden City.
  • Internet access in the two hotels I’ve visited is hardwired and fairly fast. I moved a ton of images up to Flickr without any problem. I’ve been googling with no hiccups and have seen no examples of censorship. There may be different “zones” for hotel access, but I can’t say I have seen any blocked messages or sites.Wikipedia is not loading, but running a politically sensitive search on Google permitted click throughs to sites critical of the government. I have not looked for any porn or other objectionable content. In no way have I felt that any online activities are being delayed, blocked or impeded in the four hours I’ve spent online.
  • There aren’t a lot of American brands in evidence. Microsoft has a large office building with their logo on it. But it seems to be European brands such as Lufthansa, Nestle, Volkswagen, Audi, and Mercedes in the highest abundance. This history plaque in the Forbidden City was sponsored by American Express. And on every plaque carrying this, there appeared to be smears of mud or clay where someone tried to obscure the tagline.
  • I have seen no Internet cafes yet.
  • Wireless phones tend to be either local brands, Nokia, or Motorolas. People use them incessantly. My step-sister, who is a film executive, has one glued to her head at all times. No one appears to be using them for email (I have not seen a Blackberry in use) and I don’t see many people texting SMS nor any advertising calls to action that use SMS codes.
  • I saw the word “Mashup” on a poster at this Beijing art gallery. The art here is amazing and the gallery district in a former factory in the 7-9-8 district is right out of San Francisco’s SOMA.
  • Blogging is big. I am going to meet some bloggers later this week, but I understand from my step-sister that a lot of business people blog here in Beijing. My China blogroll only now holds:
  • Virtual China: “Virtual China is an exploration of virtual experiences and environments in and about China. The topic is also the primary research area for the Institute for the Future’s Asia Focus Program in 2006. IFTF is an independent, nonprofit strategic research group with more than 35 years of forecasting experience based in Palo Alto, CA.”
  • ChinaTechStory: which isn’t working at the time of this post.
  • ChinaTechNews.com: a good frequent news feed.
  • There is a Starbucks inside the Forbidden City. Of course. The other big American brand is, of course, McDonald’s. While eating gyoza in an awesome little cafe, the family at the table next to us was tucking into a great meal while Junior ate a Big Mac and fried from the Golden Arches. The world isn’t flat, but it sure will be fat.
  • Chinese “OOH” — Marketing lingo for Out Of Home — billboards to you and me, is big. Like really big. The stuff is huge. It screams. We whisper. I’ll get some pictures of how we advertise Lenovo here. I got tons of Lenovo impressions yesterday. Big billboards at a convention/tech center and those mechanical rolling ads. All such brands are in English and Chinese.
  • The entire city is under construction. The locals blame a lot of the dust and air quality problems on construction. Apparently a construction moratorium is going into effect along with a coal ban inside of the third ring road to try to clean things up in time for the Olympics. Tons of Olympic branding everywhere and a big countdown clock of the days remaining before they open in ’08 at Tianamen Square.
  • That’s all for now. Time to lace on the hiking shoes and start exploring after a congee breakfast.

    • Musings on media, advertising, measurement, and optimization

    The tracking of an advertising spend has traditionally been the personification of a lost cause, with everyone harking back to the old cliche that half of advertising works, no one knows which half.

    I’ve blogged my anger over the high degree of precision which agencies and vendors hold internet advertising to, when print publishers and other traditional media have no idea other than specious reader surveys, fudged circulation numbers, newstand sales, and that ultimate in fuzzy logic: “pass along” figures to base their efficiency case. When I was an online publisher I basically wanted to tell the advertisers and their agencies to go take a flying leap at a rolling donut, and made a good initial kick off to the Forbes Digital Tool by selling flat day-sponsorships with competitor blocks and no guarantees of impressions, and certainly not click-throughs.

    Move ahead a decade and now I’m the buyer of the impressions, not the seller. And you know what? It’s the measurement and precision, the promise of optimization that is exactly why internet advertising is the fast form of advertising in the world today. I’ve been looking at the results of some recent campaigns we’ve run in the general, business, and IT press and it is truly astonishing the variance in click-throughs (the diminutive number of click-throughs, measured in basis points), and the lack of measurement on our end of what happens to the click-through once it lands on our pages.

    This will change and it will change soon. We should be able to track the life-time value of a visitor from first arrival via a search term or banner clickthrough, across multiple sessions and repeat visits. I’m not marketing impulse buys — no gums and cigarettes — but serious durable goods that the user expects to hang onto for at least three years. That means my marketing spend — if measured only against initial action — can’t show a true ROI or expense to revenue ratio if I don’t keep tracking that user from first click to checkout.

    This is basic stuff, it falls on me, not the publishers, and …. it means I need to get much better at getting my messages in front of those people who are in the market for my stuff at that particular point in time. This is where Battelle’s theory of the “database of intentions” and search engine marketing comes in. This is where the chimera of behavioral targeting comes in. This is why the smart people at Yahoo know that the most valuable impression in the world is a car ad at that point in time every four years when the average American turns to the web to help them decide what four-wheeled vehicle they will buy next.

    It’s statistical chess and it’s hard. But the people who are good at are few and far between. This is going to be an education as we reform our spending, our measurement, and our optimization.

    Genuine VC: Where Mobile Advertisements Roam

    Genuine VC: Where Mobile Advertisements Roam

    Good post by David Beisel at Masthead Ventures on the impact of mobile advertising on operations, he’s riffing off of Rafat Ali’s observation that mobile advertising will need mobile friendly landing pages.

    “All advertising eventually leads to some type of commerce transaction. However, there’s a spectrum along which advertisers fall that covers how immediate the transaction occurs. On one end, there’s metric-driven performance-based advertising which measures it success directly by whether or not commerce happens immediately (or in the trackable near-future). On the opposite end is brand advertising, which supports the general perspective and attributes of a brand, so that eventually a constituent who sees an ad influences a future purchasing decision, either individually or as part of an organization. And then there’s everything in between, where the ad isn’t direct response per se, but is still aiming towards a transaction sometime in future, to varying degrees.”

    David is referring to the need for commerce advertisers to track, from first click through, the lifetime value of a visitor from consideration to commerce conversion across multiple sessions. For large ticket purchases (like notebook PCs), the customer is generally flipping in and out of the vendor site multiple times, seeking prices, reviews, and competitor information before ultimately committing to the sale. This is a matter of persistent cookies and smart metrics.

    What was the last web ad you remembered?

    In all your browsing, searching, clicking, and meandering through the thickets of online advertising — be it a piece of spam to a blog ad to a big honking banner on ESPN — can you recall a single web ad?

    Other than Punch the Monkey?

    Just curious.