Do Not Track: The Death of Metrics or Catalyst for Innovation?

It was a matter of time before the winds of regulation blew over the mysterious world of digital advertising and behavioral targeting, just as they blew out the telemarketing-junk call industry in the 1980s, email spammers in the 1990s, and pay-per-post blogola two years ago. I think it’s inevitable that the government will regulate online tracking and I believe the result — counter to fears it will decimate digital advertising — will be a much needed catalyst for innovation in online advertising.

From the 12.6.10 New York Times: “If the vast majority of online users chose not to have their Internet activity tracked, the proposed “do not track” system could have a severe effect on the industry, some experts say. It would cause major harm to the companies like online advertising networks, small and midsize publishers and technology companies like Yahoo that earn a large percentage of their revenue from advertising that is tailored to users based on the sites they have visited.”

Nothing gets the public’s libertarian hackles up like a threat to their privacy, even though 99% of them have no clue what constitutes identity and personal privacy in the digital age. The declared intentions of the Federal Trade Commission to crack down on online advertising use of tracking beacons, pixels or cookies is inevitable and has been brewing since 1995 when Mark Andreesen and  Netscape first introduced the cookie to great consternation and misunderstanding.

This is an old issue, one that tracks back to the mid-1990s and was embodied by the famous comment by Sun Microsystem’s CEO, Scott McNeally: “You have zero privacy. Get over it.” McNeally uttered those words at a time when the technology and media industries were trying to head off government regulation by forming the Online Privacy Alliance (OPA). Evidently self-regulation hasn’t been enough, and now the industry is on the brink of having some new regulations to conform to.

Let’s look at what the issue is and how things got to the point that the issue officially was blessed as the most significant story of the day in early December by the front page of the New York Times. The Wall Street Journal’s Julie Angwin gets the most credit for raking the privacy muck in a shrill series that is encapsulated on this page on the Journal’s site which is actually a very comprehensive and chilling catalogue of news about the state of digital privacy in modern America. While some critics like Jeff Jarvis have accused the Journal of being breathlessly alarmist and turning the practice of cookie-based advertising into the modern equivalent of Reefer Madness, the Journal has persisted, making it an inevitable outcome that sooner or later some bureaucrats and Congressmen would take up the  call and file a bill.

Let me attempt to simplify the issue in lurid terms: Web publishers and digital advertising companies are colluding to sneak  invisible tracking devices onto your computer which report back personal information about you so they can deliver targeted advertisements to you and share your personal information with marketers, and other interested parties.

The issue comes down to whether or not a web user has the right, by default, to ban the placement of  cookies or “invisible tracking pixels” on their PC when they visit a website or click on an ad. These cookies are  the digital equivalent of a tracking device snuck under the bumper of your car so your whereabouts can be tracked by the cops or enemy spies.

One of the most prevalent digital bugs or tracking cookies is the Adobe-Omniture 2o7.net tracker.  Omniture is a very powerful web metrics tool that web publishers and corporate web sites use to analyze traffic patterns and user behaviors.  Most major e-commerce sites use the tool and I’ve spent a lot of time in its dashboards analyzing metrics at CIO.com and Lenovo.com. This is an expensive tool, not something a typical Internet scam artist would use to hatch some evil plan, and it never reports back any personal information about site visitors. Your name, your address, your phone number, your social security number …. none of its transferred back to the analyst.

Yet the 2o7 tracking cookie it classified as spyware and a threat by most spyware scanners. Why?

Privacy is becoming a matter of degrees. While your name may not be passed without your knowledge, your IP address is. And someone with a subpoena and some diligence can, in theory, track you down to a specific geographical address. Your personal information — from your online medical records to your bank account numbers — all of it exposed and can be stolen by a criminal clever enough to trick you into parting with that information on a fake site or through so-called “social” engineering.  Identity theft is a very real threat online, and tends to trick the nontechnical, unsophisticated users the most.

But what does a ban on tracking cookies do to online advertising?

First, it will have an impact on re-targeting. This is where a site like Lenovo.com or Filson.com (two online retails I happen to visit occasionally) plant a tracker into your browser and then use it to trigger ads for their products when you visit other sites. So, if I go to Lenovo’s ThinkPad store and check out a T410S, I can usually expect to see a lot of Lenovo ads as I surf around to CNET, PC Magazine, and any other sites that Lenovo’s advertising agency deems appropriate to display the client’s ads on. Do these ads greet me by name? No. Are they intelligent enough to distinguish my interest in one product over another? No. Do they get progressively more aggressive in offering me a better price as time goes by? No.

In some regards, re-targeting is somewhat pathetic. It sounds semi-intelligent to follow a visitor around and throw more ads at them, but in reality you have to keep in mind one very real fact: online advertising is, for the most part, completely ignored by most users. Click through rates have been declining on most display (graphical) ads since they were introduced in the mid-1990s, and only so-called rich media ads featuring video or some form of dynamic multimedia are getting higher CTRs. We’re talking click rates under 1%.  Digital ads remain noise for the most part, and the only stuff that seems to have legs — witness the phenomenal one-trick pony known as Google — is contextual search advertising (which does not use tracking cookies).

As tracking and re-targeting comes under fire a few things will happen. First, advertisers will lose insight into the buying patterns or behaviors of customers, and selecting media for their advertising will become more difficult. Will advertisers regress to what is known as last-click attribution, where credit for a sale, registration or other “success event” be credited to the last ad or link the user  clicked before arriving in a store to make a purchase? Perhaps, but I think what will happen is the 2011 equivalent of New York City’s solution to the threat of being buried under too much horse manure in the late 19th century — technology (in NYC’s case the automobile) will simply cause the problem to become moot. Advertisers and agencies have been lazy and deceiving themselves that they have some semblance of intelligence in their metrics — which they laud as “behavioral targeting” – when in fact it’s ad insertion based on cookie triggers, nothing more. Take away the cookie and I guarantee some motivated entrepreneur will rush to the table with a new ad format that performs without them.

So, bottom line, bring on the era of regulation, punish the most egregious offenders, and stay tuned for the online advertising industry to evolve into a more intelligent form of advertising which has been overdue since the invention of contextual search ads by Bill Gross.

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Groupon? Riddle me this ….

Sorry, but $6 Billion for a service that sends a daily email containing a coupon to a local restaurant or nail salon?  Has Google lost its mind? Is its $33 billion in cash burning that big a stupid-hole in its pockets that it feels compelled to pull the 2010 equivalent of Time Warner  buying AOL? This may be the deal that signifies the shark jumping of the social networking craze. Especially given that Groupon shows absolutely no social tendencies that I can determine other than a call to action to share the spam with a friend.

I signed up for Groupon — the Chicago local online social coupon whatever service — last month, and every morning get an utterly useless email containing a spammy offer to get a plate of cheap BBQ or a pedicure for half-off the list price somewhere in Greater Boston. Sorry, call me dense, but I just don’t get the secret sauce that makes this deal worth $6 billion.

In other words: Sign up to receive a daily deal. Receive the deal. Maybe share the deal. Then redeem the deal.  What am I missing here? The NYT goes for the jugular when it questions the payoff for the merchants.

Not all small businesses are sold on the golden promise of Groupon. Ina Pinkney, the chef and owner of a cafe called Ina’s, in Chicago, said she was curious about Groupon when she first heard about it a couple of years ago. She ultimately decided against using it.

“We did the math up front when they first started coming around to us and I said, ‘No, it really doesn’t make much sense,’ ” she said. “If we were to offer a $25 coupon for $50 worth of food, it doesn’t work.”

Groupon’s cut is half the dollar amount of the coupon, so the average amount of money Ina’s would collect for each Groupon customer was around $12.50, she said.

“I would never produce that much food for such a small amount,” she said.”

As this deal is questioned by analysts and investors, the most plausible explanation appears to be the most insane: Google bought Groupon to keep Facebook from buying it.

This could go down as one of the dumbest deals since Yahoo paid a billion for Mark Cuban’s Broadcast.com.

New York Times Digital Ad revenues up 13%

Peter Kafka at AllThingsD reports on the New York Times’ earnings as a bellwether for digital advertising trends. Taken as a barometer for display revenues — I assume paid search is a minor contributor to the Time’s revenue stream as the channel is dominated by Google, et al — it indicates that display is holding its own during a period of general economic malaise and the old prevailing wisdom that display was dead as CPMs trended lower and click-throughs continued to deteriorate. The Times is fairly innovative without being obtrusive with its display inventory, so my take is they are seeing strong demand for their supply.

“Here’s the full breakout for the Times’ digital properties NYT.com About.com, etc, which appear to be doing pretty well:

Total Internet revenues increased 13.3 percent to $89.4 million from $78.9 million.

Internet advertising revenues increased 14.6 percent to $78.3 million from $68.3 million.

Internet advertising revenues at the News Media Group increased 21.6 percent to $47.4 million from $39.0 million mainly due to strong growth in national display advertising.

Internet businesses accounted for 16.1 percent of the Company’s revenues for the third quarter of 2010 versus 13.9 percent for the third quarter of 2009.”

via Ad Dollars Shrink at the New York Times, Again | Peter Kafka | MediaMemo | AllThingsD.

Interesting fact – The Times has more Twitter followers than paid subscribers according to Journalistics:

“When it comes to Twitter followers, The New York Times is the top bird with more than 2.6 million followers. To illustrate how impressive this follower number is, The Wall Street Journal only has 464,591 followers in the #2 spot. The New York Times is the ONLY newspaper from the Top 25 with more Twitter followers than print circulation.”

Out of the box empathy in marketing

At some point last fall, some smart and brave person at Hyundai made the brilliant decision to look ahead into the future a few months and realize that consumers would place a new car nearly last on their list of life’s necessities come January. By being the first automaker to promise a money-back guarantee should the buyer lose their job, Hyundai accomplished several brilliant marketing moves.

1. They established empathy with their customers.

2. They beat their competition who thought “employee pricing” — letting consumers buy at the same price as insiders — represented empathy. The competition has followed suit and looks like followers.

3. They tapped into the zeitgeist without resorting to the unimaginative marketing message most brands follow these days which is lower total cost of ownership — the aftersale expense which few consumers want to depress themselves with in the elation of acquiring something new. Do you want to talk about depreciation, mean-time-between-failure, and service costs? Meet my accountant.

Marketers have diminished options in a down economy if they cling to their old campaign playbooks. Those playbooks are what I call megaphone tactics. Yell a lot in the right places with the right people by your side and good things will happen.  This is good for selling cigarettes, booze, and hairspray circa the Mad Men Era of the 1960s.

First to go overboard — sports sponsorships. Read Bill Simmons’ great obituary on the NBA “The No Benjamins Association” on ESPN and look at the NASCAR cars rolling around the ovals with white hoods where the sponsor’s logo used to go.

“Here’s a little game to play during your next NBA outing: Look around for how many suites are dark. (You’ll notice them specifically in the corners or behind the baskets.) A dark suite means either that nobody bought it or that somebody did buy it for the season, then made the decision, “Screw it, let’s save the $1,200 [or whatever the number is] on food and drink and not give tonight’s suite tickets to anyone.”

Sports marketing has been whacked. Corporate home rentals for the Masters in Augusta is off 20% this year and woe to the recipient of government bailout money who buys a hospitality box in a baseball stadium this spring.

Second to go overboard: feel-good branding. Those “eagles-on-proud-wings-standing-on-a-rock-spire-in-Utah” ads are done.  If it doesn’t have a solid call to action (please buy our crap now, please), then it’s not running. Just for grins, next time you’re on the mid-town tunnel approach to Manhattan or on any prime billboard region, count up how many are paid and how many are public service announcements.

Third to die: print ads. Sorry, read the remaining headlines while you can, this is the season when dead-tree publishing gets slammed. Business rags are seeing ad counts down 33% year on year. I won’t echo-chamber the terrible news of newspaper bankruptcies in Seattle, Denver, etc. …. The print puppy died and daddy isn’t bringing home a new one.

So, I could wring my hands and be all dour, but no. Instead I want to point out that for those marketers who still have money to put in market, they seem to cling to last year’s playbook, just tuning the message around the advertising equivalent of a slasher flick to say everything must go, go, go at prices too insane to believe. I see it in the airline spam: Lufthansa offering off the wall fares to Paris —  $200 roundtrips to Europe.

What is happening at places like Hyundai is a realization that the rules have changed. Consumers are sitting on their wallets and will continue to. The question marketing needs to consider is not how to align to a corporate strategy built around volumes and market share — cascading strategy based on sales yields little more than direct marketing and demand generation tactics which do nothing to distinguish the company from its competition.

Standing apart from the competition is the heart of the whole branding thing. Differentiating on price is a fool’s game and leads to the whole slasher flick thing. Tossing the brand overboard in a down market strikes me as the equivalent of eating next season’s seed corn.

My modest proposal? If your marketing budget has tanked, and is down 50 percent from last year, the last thing you want to do is spread yourself thin trying to cover last year’s tactics.  This is the time to take a flyer, to do something innovative, to take a risk and consider the high risk tactic that was dreamed about in good times. This is not the time to fall back on classic Four-P marketing. Of those four p’s — Product, Price, Place, Promotion — I recommend.

Product: not the time to roll out a premium luxe model. Nor is it time to start reducing features around the product.  Example — this is not the time to reduce warranty terms, replace stainless steel screws with plastic screws, or cut any corners. The customers are more vigilant than ever. I saw an amazing presentation by the marketing reporter at Businessweek at Google last week and he showed how peanut butter makers are screwing us out of an ounce not by making the jar smaller. Oh no. They use a concave dent on the bottom of the jar (called a “punt” for you oenophiles) to reduce the volume. This is dickheaded and will come back to bite people.

Price: See my screed on taking the marketing message down to the gutter. Anyone can cut a price.  Smart brands like Hyundai go a step further and say “we feel your pain and fear and will do something about it.”

Place: I would not recommend buying the naming rights to a baseball stadium. I would slam the brakes on all traditional media and go 101% online.  Call me digital, but there it is. The traditional media has lost its mass audience effect big time. Media has exploded and fragmented into a million niches. The only way to accurately chase the audience is with a ninja digital team.  I am serious about this. This  Deprecession is the catalyst that is killing the generational gulf between digital immigrants and digital natives. You stand up and wave a traditional campaign, media plan and I guarantee your days are numbered.

Promotion: This is where the opportunity to put on the thinking caps is. No, no viral. No UGC on YouTube. I’m talking killing the notion of the campaign — as Charlene Li said yesterday on a panel, “campaigns are designed to end” — and move to an organic, ongoing, pervasive conversational model with the crowd. This is not social media marketing hand wringing — 99% of the self-annointed gurus couldn’t run a valid social plan if they were paid to do it. This is 180 degree flip from one-way blah-blah message marketing, expensive research and focus groups, and dumb people saying “I know half my advertising works, just not ….”

Promotions need to die and be replaced with full marketing empathy. This is the time to design a product with the customers, the time to listen to their feedback, give them something in a novel way, and break the model being chased by the competition. This is the time to break out with no questions asked service, with golden-rule customer service, with beyond the pale actions that will define the organization and make it beloved, not loathed. This isn’t about freebies, giveaways and concessions. It’s about constant listening and response. ComCast, JetBlue, these are the listeners and doers.

Anyway, enough dour ranting. Bottom line — this recession is the opportunity to kill off the tried and true and invent something new. Even if you decide to only risk a small portion of your seed corn this year, do it, and do it with every expectation of failing, but do it knowing that the customers will notice and maybe even like you for it.

I recommend a re-reading of Doc Searls’ seminal definition of conversational marketing, it’s worth the time.

Digital Governance in a Global Org

I spent part of past Wednesday at the the New York Googleplex with some fellow digital marketers and  agency people as part of Google’s Global Advisory Council.  I consider the content and conversations as unbloggable/off-the-record, but wanted to share  one excellent line from Scott McLaren at General Motors, who in the course of presenting how GM was able to centralize search marketing said:

Centralize the science and localize the art.”

That brilliant insight goes into my collection of business koans along with McKinsey’s Dick Foster’s line:  “Loosen control without losing control” and that anonymous jazzman who told another musician “If you don’t know what to do, then don’t do anything.”

What Scott summarized in that one-liner, is probably familiar to anyone in a global digital marketing role who has tried to evangelize a unified (credit to Carol Kruse at Coca-Cola for recommending “unified” over “centralized”) approach to planning, spending and executing a marketing discipline across many oceans and borders.

Decentralization is the rule in a massive global organization, a throw-back to the Roman Empire when the edges of the empire were too far away from the center of power in Rome and the Emperor had to divide c0ntrol between four Caesars. When I was at International Data Group in 2005 I felt the 1970s edict by owner and founder Pat McGovern that decentralization was the way the company would be organized and run was out of date and a worn out necessity born from a pre-fax/pre-email era, one that ignored the economies of scale of consolidating 300 websites onto a unified analytics and content management system.

Information Technology tends to consolidate and unify. The oldest story in the IT playbook is the hub, the router, the server, the data center.  All discussions of mesh architectures and complex matrixed “edge” computing models have been speculative structures, but in the end, the men in white coats want the users to be on dumb diskless workstations, working in unity off of one central processor. But – IT aside — money likes to be decentralized. If you want “feet on the street” to take accountability for sales targets, then you have to push fiscal responsibility down to the regional and country level — otherwise there will be no accountability or insights into local markets.

Back to McLaren’s statement and why I think search engine marketing must be centralized.

  • The auction model punishes organizations that have two or more people bidding on the same brand terms.  This is classic Three Stooges behavior. Search bids are science. Not art.
  • Analytical conformity. What’s the dashboard by which activities are going to be measured? How do you value search interactions and analyze search against other media in market? Can you compare the effects of a television campaign to searches? The answer is yes …. if you have a well controlled environment and are reasonably assured that your results are not being skewed by dealers, channel partners, or affiliates bidding on your branded terms against you. Analytics are science — not art.
  • Expertise. Most, if not all major search budgets are managed by search speciality agencies. They have to.  Search campaigns are complex, rigorous organisms that require deep, repeatable expertise. An agency accustomed to running complex global search for multiple clients will generally beat the efforts of a single internal operator or team of search operators. Dispersing SEM expertise regionally makes utterly no sense.

What else can be centralized in global digital marketing?

  • Display advertising, for the most part, can be negotiated, bought, trafficked, executed and measured centrally.
  • Display advertising should have a 15 or 20% set aside for local sites and local trafficking. There is art to display media plans, and local teams have the best insight into what local sites have local readership. That said — supporting many countries with many display media agencies is insane as non-working dollars explode and working dollars decline.

What can’t be centralized?

  • Display creative needs to be locally verified. Holiday promotions tend to drive ecommerce discounting and only a local team can declare St. Patrick’s Day over Golden Week.
  • Social media relations. Bloggers, forums, high profile users — all should be related to on a local, face to face basis. Local meetups and in-person relations are vital to any community efforts.

More later, but it was good to hear two very global, very capable marketers confirm the issues I’ve seen the past three years.  Digital marketing needs to be unified around IT, analytics, and discounted volume negotiations but localized around creative and customer/blogger relations.

Bartz Takes the Hot Seat – Digits – WSJ.com

Yahoo CEO Carol Bartz in the WSJ on not divorcing Yahoo’s search and display assets in any discussions with MSFT:

Yahoo’s search and display businesses are greater than the sum of their parts, she said. The two businesses are “linked in the minds of the top 200 advertisers,” she says, noting that Yahoo’s salesforce can sell more advertising because they sell the combined concept. She also said that any deal between the two parties would have to give Yahoo access to the raw search data to enable it to optimize all its other ad offerings. “We would never debone the company,” she said.”

This is reaffirming the obvious — that search and display advertising are inseparable and enhance each other’s yields. Looked upon at large, Yahoo’s value pitch is around the targeted of its tier one display inventory — the Yahoo sales team spins a compelling vision of targeting and detection of consumer intentions much better than their counterparts at MSN or Google.  But … (big but), Yahoo search is not regarded as the defacto standard to the extent Google is (though it certainly beats Microsof’t’s efforts like a drum).

To revive Yahoo search I think the company needs to make an overt engineering committment to improving the quality of its SERP (search engine result pages) and make a convincing argument that its “black box” has attributes that distinguish it from Google. Until Yahoo can turn itself into a verb, it will hobble along, strong in a weak medium — banner ads, but weak in a strong medium, paid search.

The best asset they have going for them: reach. We did a big push through Yahoo during the last week of the Olympics and the results were impressive and the buy, for all its global complexity, amazingly efficient (thanks to Neo@Ogilvy and their fast moves to nail down availabile inventory).

via Bartz Takes the Hot Seat – Digits – WSJ.com.

“Sponsored conversations” are a dumb idea …

… even if the august analysts at Forrester have convinced themselves that as long as the bloggers disclose the payment and are permitted to say whatever they feel, that pay-per-post sounds better redubbed as a “sponsored conversation.”

I still think it is one of the dumber marketing manuevers in the social marketing bag of tricks.

Call me a purist but I like my critics to be objective and my reviewers to be uncomped. Product changes hands to be reviewed, not as gifts. Cash is spent on advertising, not on payola.

As long as bloggers don’t hide who’s paying them and have the freedom to write whatever they want, we think sponsored conversation will fit in well with the other forms of marketing through blogs,” writes Forrester analyst Sean Corcoran. The report – written in conjunction with Forrester analysts Jeremiah Owyang and Josh Bernoff – also includes advice for interactive marketers considering using sponsored conversations in their marketing arsenal, much of it centered on the critical issues of authenticity and transparency.

Whether you agree with Forrester or not, we’d love to have you (and your readers) engage in this dialogue with us. Please let me know if you would like a copy of the new Forrester report, “Add Sponsored Conversations To Your Toolbox.”

There are so many more intelligent ways to get a blogger or group of bloggers to talk about your brand without resorting to cash payments. And I don’t buy this re-tweet/give away for charity dodge either.

I will continue to unsub from “posties” and have long given up following analysts and experts who condone these tactics. The world is slipping into the Idiocracy quickly enough without the “experts” undoing all semblance of objectivity and honesty in the higest potential communications channel ever invented.

Links withheld in protest.

update: Owyang is determined to bait me into a pissing match on this one, now by citing Lenovo’s Voice of the Olympic Games program as an example of a “sponsored conversation.”  I am not going to get semantic with him on “sponsored” and “conversation” definitions. Lenovo did not pay any athlete to blog nor once suggested, demanded, hinted or discussed that the athlete mention the word Lenovo. We gave them free laptops and FlipCams with no strings attached. The point that just won’t sink in with him — no matter who huffs and puffs, is payola is wrong, cash-for-blogging sucks, and Forrester is on the wrong side of the whole pay-per-post debate. I revert to Mark Cahill’s pointer to the concept of journalistic ethics. I suggest every blogger with a shred of dignity read it. And yeah, yeah, I know. Bloggers aren’t journalists. I’m suggesting they may want to avail themselves of some journalistic best practices and take the high road. http://en.wikipedia.org/wiki/Journalistic_ethics

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