Advertising Industry

Microsoft continues to try to find some way to climb back into the search engine game, nabbing European online company Greenpoint for $486 million. It ’s the largest acquisition for the company since talks of a Yahoo acquisition stalled out months ago.

Interestingly, Microsoft is planning to discard the core of Greenpoint’s business, online survey solutions, to an undisclosed buyer, and instead focus on Ciao, a shopper comparison site. From Forbes:

“It is pretty clear that the survey operation is not really consistent with what they’re about,” Brent C. Williams, an analyst for the Benchmark Co., said of Microsoft.

Microsoft’s top priority in making the acquisition was to boost its search and e-commerce offerings, rather than deepen a foothold in Europe, according to Williams.

I’m not so sure it’s not a move to at least gain a bit of a foothold in Europe, where Google dominates even more impressively than here in the States. Ciao pulls in a reported 26.5 million page views a month, which is nothing to sneeze at, and is aimed squarely at European consumers.

Microsoft, as I’ve written about before, as been casting about for different ways to up its search engine usage, including paying its users and offering advertisers Cost-Per-Action ads. While that seems to have failed to boost its search engine numbers, this acquisition is no doubt meant to add further power to Live Search. Microsoft has also acquired semantic search company Powerset in June for $100 million.

A few weeks back, I asked some experts in the ad world when interactive ad spend would surpass television ad spend. One of the most interesting responses came from Dave Martin, a Vice President of Interactive Media at Ignite, who said:

Online spend won’t surpass television, instead TV is going to become interactive with addressable cable and data-collection at the set top box level. As digital cable becomes more addressable, it will require interactive media specialists to take full advantage of the new targeting capabilities in the living room. We’ll see an appreciable shift within 3 years from “TV advertising” to “Interactive TV advertising.”

A new report, “Personal TV: The Reinvention Of Television,” authored by David Graves over at analyst shop Forrester, reinforces that point. The report lays out a much more detailed plan of where the market is moving, and how television advertising will be able to fight against the two main forces hampering marketers right now: fragmentation and ad skipping.

Graves foresees television networks teaming up with cable operators and telco companies to create what he dubs “Personal TV.” Set-top boxes will be set up, and marketers will be able to show non-skippable ads to viewers of both real-time events and to those watching Video On Demand services. Why would viewers, particularly those who have grown accustomed to zapping through ads on their TiVos and On Demand cable boxes, be willing to go back to non-skippable ads? Price, according to Graves. “The benefit for viewers is a free [Video On Demand] system,” he writes in the report’s abstract. Meanwhile, marketers are able to draw up tremendous amounts of targeting data on consumers, and use it to greatly increase ROI on television advertising. So essentially, think of it as a set-top box version of Hulu.

It’s certainly an appealing vision, but there’s significant obstacles in the way, to my mind. One, networks and cable operators have had historical problems playing nice with one another, and telcos and cable companies have been at each others throats for years now. Two, as television’s digital to analog conversion has shown, tech uptake is nearly always slower than anticipated. Many couch surfers are perfectly happy with the status quo, and significant advantages will have to be offered to get some to adopt a set-top box — subsidization from whatever amalgamation of network, cable operator, and telco offering these “Personal TVs” won’t be enough.

Photo from Flickr user Tim Pritlove, CC 2.0

AMC has every reason to be protective of its hit show Mad Men, but it came close to smothering a free and innovative way to market the show today, saved only by its own interactive ad agency, Deep Focus. Mad Men has established the network as delivering HBO-worthy dramas, and the show itself is a highly entertaining and well-shaded character study in the world of early 60s advertising. The show is so good, in fact, that anonymous fans took it upon themselves to start up and maintain Twitter accounts for the various characters. Show centerpiece and cooly charamastic junior partner Don Draper has been Twittering, as has office bombshell Joan Holloway and budding copywriter Peggy Olson, along with a host of other characters both major and minor.

Normally, this would seem like exactly the type of viral marketing put out by AMC, but in this case it can be safely assumed AMC isn’t behind it. Why? Because the network sent Twitter a DMCA request to shut the accounts down, according to Venture Beat. It took, according to Silicon Alley Insider, some “gentle prodding” by AMC’s Web advertising agency Deep Focus to allow the Twitter sites to remain active. After all, if fans are crazed enough to microblog about the characters for the show, then why not let them? As of yet, none of the people involved have used the Twitter accounts in anyway that AMC could interpret as harmful to their property.

Which isn’t to say that the takeaway is that every time a random person on the Internet starts appropriating a company’s brand, the company should let them. As Alan Wolk over at The Toadstool points out, many brands would have much to lose by letting someone off the reservation take on any role as their spokesperson, as Exxon found out when someone created a fake Twitter profile as an Exxon spokesperson.

What exactly constitutes marketing is in flux, and this episode shows how some companies are struggling (and why it’s great to have a good agency on your side).

Cutting coupons out of the Sunday mailer went out years ago, but the coupon is alive and well, just in a different form. A BusinessWeek article looks at the trend of “prewards,” essentially coupons given with speciality debit cards. They seem to be one way of reaching Millennials, those kids aged 12 to 26 that have proven nortoriously difficult to market to.

It works like this. Facecard.com, a site run by Nashville agency Edo Interactive, users fill out of a profile (full of valuable demographic information) and sign up for a card that can be used as a prepaid Mastercard debit card. Kids (13 and older) can sign up for a card, while parents can load the card with a set amount of money. The company pitches the card as a way for young adults, particulalry college students, to learn how to handle plastic without getting into the minefield of credit cards. Retailers can then send “prewards” to targeted consumers — a set amount of money on the Facecard that can only be spent at their store. From the BusinessWeek article:

When [sandwich shop] Jersey Mike’s McDonald sent prewards to 300 high school seniors, his expectations weren’t high, since 18- and 19-year-olds are notoriously nonresponsive. But the gamble yielded an “overwhelming” 17% return rate, he says, which is “way above” the numbers direct mailings produce. Moreover, it cost Jersey Mike’s less than $150: $2 for each redeemed preward, plus a 5% processing fee.

It’s an interesting gambit on two fronts. The first, of course, is dressing the traditional structure of the coupon into a new media format. Even more facinating, however, is that because the payment is done using the Facecard, the metrics and targetting available to a marketer are finer than anything a newspaper could offer, and even more than direct mailing — the targeted consumer, and only the targeted consumer, can take advantage of the offer.

In the New York Times today, a new survey has been put out showing that among kids aged 10 to 14, the Internet has surpassed television in usage.

For children ages 10 to 14 who use the Internet, the computer is a bigger draw than the TV set, according to a study recently released by DoubleClick Performics, a search marketing company. The study found that 83 percent of Internet users in that age bracket spent an hour or more online a day, but only 68 percent devoted that much time to television.

Paired up with the data point that the average television viewer is now aged 50, and it’s clear that the next generation is going to have much less patience with traditional broadcast television. The disruptions that the Internet has wrought in other mediums like print and radio will be felt in television eventually. A report from IDC this February found that the average person spends 32.7 hours/week on the Internet, versus 16.4 hours watching television. As services like Hulu gain their feet, that number will shift even further.

For advertisers, it means gearing up for ad campaigns that stop making TV buys the centerpiece of a campaign. It’s something smaller shops have already learned, while the four major holding companies seem slower to adapt. Publicis has made some smart acquisitions in digital, while WPP has been stumbling, and indeed, lost another client as our pal The Founder reported over at Tribble Ad Agency.

Photo from Flickr user *ejk*, CC 2.0

Todd Teresi, a ten-year veteran over at Yahoo, has jumped ship from the company to join up with metrics company Quantcast as its Chief Revenue Officer.

Teresi, who was most recently the head of the network business unit at Yahoo, will begin at Quantcast starting September 1st. Quantcast, which uses more granular census-style reporting to measure website traffic, has seen a total of $26 million in investment. The company is going up against some serious heavyweights, Neilsen and comScore, both of whom are firmly established leaders within the marketspace. And Quantcast’s major selling point — it’s free to publishers — is somewhat tarnished by the fact that Google Analytics is also free. And while Google sells ads, Quantcast doesn’t. When asked by Ad Age what, exactly, is the business of Quantcast, Teresi’s response doesn’t exactly inspire confidence:

“We’re not going into the ad-network business, so to speak,” Mr. Teresi said. “We look at how we enable the existing players to have a better digital-advertising opportunity.”

Clear as mud? The company said an actual product rollout would happen within the year. CEO Konrad Feldman said Quantcast’s business is built on the idea that display should eventually be as targeted as search ads.

“The tailoring of content and media to individuals should apply to all aspects of advertising, not just the bottom of the funnel,” he said. “We operate in unit-based media economy where everyone gets the same content and sees the same ad. We’re moving to an impression-based economy. We’ll provide the platform that will enable the industry to do that. And as we introduce those sorts of services, we’ll charge for them.”

So why would he leave Yahoo for uncharted waters? Valleywag guesses it was corporate rivalry that forced Teresi out, writing:

But we’re still betting that when Teresi saw top management’s new favorite exec former Right Media CEO Mike Walrath was moving to the Bay Area, Teresi went back and listened to a few old saved messages from a headhunter or two.

Which is possible. More likely, I think, is the miasma of failure hanging over Yahoo, and Teresi’s desire to be out of it for good. Ten years at Yahoo would mean Teresi watched Yahoo’s slow motion slide into decline, without any strong plans as to how to pull itself back into shape.

A new report from eMarketer looks at the numbers for the numbers from Ofcom, the country’s authority on telecommunications,  and finds that while online ad spend has rocketed an average of 70.2% in each of the past five years, to nearly £2.8 billion, or $5.6 billion last year, it still has just a bit more to go before it surpasses ad spend on television.

This is because, while Ofcom shows that the top TV channels in Britain, ITV1, Channel 4, S4C and Five, drew in £2.4 billion or $4.8 billion, these channels are all over-the-air broadcasters, and fail to take in the significant ad spend spent on digital channels in the UK. From the eMarketer report:

“Though this milestone is imminent, it is difficult to believe that it has already occurred,” said Karin von Abrams, senior analyst at eMarketer. “No other source claims to have confirmed this event—and in fact the Ofcom statements do not really say it either.”

Ms. von Abrams noted that the four TV channels mentioned by Ofcom are terrestrial, “free-to-air” channels, not digital, and that they did not account for all TV ad spending in the UK. Digital-only channels accounted for almost one-third of TV ad spending, and the proportion is rising.

I’ve written about online ad spend surpassing TV in the UK before. It’s become something of a lodestar for the online advertising community, showing the ever-rising potential for interactive advertisers to become the new big players in the advertising market. It should be noted that due to the differences in the UK and US television market, it will likely be a few more years before the same thing happens in the US.

Still, US companies involved in interactive advertising have reasons to be optimistic. ClickZ put out an article today, citing a ContextNext report, showing that investment in companies involved in online advertising, if declining a smidge overall, is actually drawing larger amounts of money in individual investments. This is despite the doldrums the economy is currently finding itself in. From the ClickZ article:

ContentNext estimates the overall investment in online ad companies during the period — including the investments where money wasn’t revealed — totaled more than $2.1 billion with the average investment coming in at about $14 million.

In a quarter-to-quarter comparison, ContentNext says that, while the number of investments in online advertising companies declined slightly, the money involved increased by about $100 million, going from $300 million during Q2 of 2007 to $400 million during Q2 of 2008.

Nielsen Online released their search engine numbers for July today, and I think its safe to say that Microsoft Live’s Cashback initiative, which saw the company offering money back to consumers and Cost Per Action pricing for advertisers, isn’t gaining much traction. Number from comScore last month seemed to show the software giant (and search engine midget) slowly gaining ground, but unless comScore’s July numbers show a marked difference, I think it’s safe to call this plan DOA. The numbers are below:

Table 1: Top 10 Search Providers for July 2008, Ranked by Searches (U.S.)

                                    Searches                    Share of

Provider                              (000)      YOY Growth     Searches

                                  ------------- ------------  ------------

All Search                            7,996,956            3%        100.0%

                                  ------------- ------------  ------------

1. Google Search                      4,812,974           16%         60.2%

                                  ------------- ------------  ------------

2. Yahoo! Search                      1,393,723          -11%         17.4%

                                  ------------- ------------  ------------

3. MSN/Windows Live Search              951,882          -10%         11.9%

                                  ------------- ------------  ------------

Microsoft, as always, has turned what should be a frown upside down. From an article in today’s Ad Week:

“We are going to take a long-term perspective,” [Satya Nadella, Senior Vice President of Microsoft’s search, portal and advertising platform group,] said during a keynote presentation at the Search Engine Strategies conference here. “We clearly have the wherewithal to invest. If we can hunker down and come at it again and again, we will have the opportunity to gain our fair share.”

Also interesting to note is Yahoo stands as the biggest loser Year Over Year currently. Of course, if Microsoft had been able to complete its acquisition of Yahoo, the search engine advertising market would look significantly different. As it now, hope you like Google’s AdSense — odds are it’ll only continue to gain ground.

A very interesting read from the Epicenter blog over at Wired News today, looking at a study of clickthrough rates on the four standard advertising methods for online advertising, and finding that at least for young men, pre-roll is king:

Today, Break Media, an entertainment community for men, and Panache, a video advertising delivery-platform, released a study showing high rates of success with video ads since the standards went into effect.

Over an 11-week period, the study tested the success of the four standard formats for in-stream video advertising established by the Interactive Advertising Bureau: pre-roll, interactive pre-roll, non-overlay ads and overlay ads. Tracking advertisements for three large corporations — Honda, T-Mobile, and truTV — the study found that viewers had a high tolerance for pre-roll and overlay ads.

All of the four formats had high click through rates. Completion rates for 15-second pre-roll ads were 87 percent, and 77 percent viewed videos with overlay ads for at least 15 seconds.

All of these formats were recently standardized by the Internet Advertising Bureau, but pre-roll has always seemed to be least glamorous of the four — useful, perhaps, but not what most forward thinking video ad networks such as VideoEgg were moving into.

But is pre-roll really that bad? From Comedy Central’s digital reinvention of The Daily Show and The Colbert Report, to Hulu dragging an incredible amount of content online in an incredibly short period, its obvious consumers are willing to watch some shilling if it means the content they want follows and they don’t have to hunt and peck around YouTube for it. Also, a great many of the moans about pre-roll may come from those least inclined to be susceptible to it: early-adopter techno savants whose patience and time runs thin. Attitudes towards having to sit through a pre-roll could be very different between a group of giggling dudes in a dorm room and a Silicon Valley blogger on their sixth cup of coffee.

More to the point, perhaps, is the recent ClickZ article pointing out that when the going gets tough, advertisers revert to true-blue pre-roll ads. Talking to BrightRoll CEO Tod Sacerdoti, ClickZ’s Fred Aun notes:

Sacerdoti is now bragging these days about a client that’s spending a million dollars on a pre-roll buy executed over one month on more than 30 branded sites. Catch is, BrightRoll declines to identify the advertiser.

“Due to the highly competitive nature of the online advertising industry, the client has requested anonymity,” explained BrightRoll in announcing the deal.

The vendor said the campaign is the latest in a series of exclusively pre-roll campaigns it has completed for brands including The History Channel, Chili’s Grill & Bar, National Geographic, Blackberry, Supercuts, and Land Rover.

This week, I’ll be asking  some of the big questions I have about the advertising industry to people who have skin in the game.

BNET: Can the market bear so many online ad networks, or is there a round of consolidation coming?

Dave Martin, Vice President of Interactive Media, Ignite: There will no doubt be consolidation in the ad network market. Free advertising exchanges will empower advertisers to create and administer campaigns without having to pay margin to ad networks. Only the best will survive and they will likely become part of larger media companies who can compliment their offerings with cost-effective reach.

George H. Simpson, President, George H. Simpson Communications: The challenge to that question is the tendency to lump all ad networks together when in fact vertical ad nets (Jumpstart, NetShelter, Travel Ad Network) are VERY difference from big mass reach ad nets (like Adv.com or Valueclick) which are in turn different from behavioral and the newly emerging semantic targeting networks. Newer still are ad networks that target based on relationships established and nourished in the social graph. In short, there are too many ad networks and with ad exchanges and new launched companies like AdMeld  optimizing nets against the highest price paid to publishers, there is no way you won’t see consolidation and failures. Ad network Burst, gone public in the UK, is trading at an historical low.

Michael Sprouse, CMO of Epic Advertising: Some industry sources have issued a statistic that there are hundreds of ad networks, maybe even more than 300, of varying types. The market itself can bear it, since there is clearly demand right now which I don’t see diminishing. But I think it’s foolish to think there won’t be at least some consolidation, contraction or other jockeying in the space soon.