AR&D - Audience Research and Development

Behavioral targeting is very much like direct marketing, and that industry understands it well. The caveat is that for it to "work," it requires enormous groups of like-minded behaviors, because the laws of reach and frequency still apply.

Direct marketing specialist Craig Macdonald, Vice President of Marketing, Alliances and Product Management for SEMDirector, explains it this way:

The more cross-referenced databases that can be mined, the more specific the targeting and the more effective the advertising.

This new capability presents a set of opportunities and challenges for advertisers. In certain verticals, advertisers will be able to target display ads with increased specificity, as is being done now in the search advertising market. This should lead to better response rates and conversions.

There are, however, some caveats on the wide distribution of this technology. The effectiveness of behavioral targeting requires large transaction volumes in order to have the data set necessary to segment ads by geography, age group, sex and purchase preference. This limits the application to specific verticals.

While the opportunity to enhance precision in targeting exists, it also brings forth a significant challenge: the application of more advanced targeting technologies that reveal hard ROI will increase advertising rates.

The burden will be placed on the advertiser to determine whether this increase in rates is offset by increases in performance, which requires investment in technologies to evaluate display advertisements versus search at the ad level.

For Yahoo, the newspaper consortium gives this concept a greater chance of success, because it provides another database that can be blended with its own to produce the volume required for these ads to "work." The jewel in the deal for the papers is that they can access a much wider online audience through Yahoo than they can with their own portals, and one has to assume that SmartAds will be available to the newspaper sales staffs as well.

The problem is that all revenue is shared (see Steve's NBBC report above), and I've always thought that Yahoo gains more than the members of the consortium.

So what we really have here is an enormous, complex and sophisticated advertising machine built around the Yahoo brand and its view of web use, the portal. As long as the company can get its arms around the playing field, these types of Media 1.0 plays will do them well.

However, we're in a distributed media world today, where advertising needs to move with the distribution, and advertising is content itself. These realities aren't addressed by the SmartAds concept, so what's it really worth in the end?

Stay tuned.   <Permalink>

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THE SEMEL MOMENT (Jarvis Coffin, CEO BurstMedia)
I have been trying to recall some of the teachable moments that have occurred in the short life of the Internet advertising business since 1995. One obvious moment will be the dot com bust of 2000 from which we learned that new media is a journey (a lesson learned by Cable TV) and that business fundamentals are relevant to survival on the trail. Other moments, such as the retreat of push technology, the advance of privacy legislation and the introduction of spyware, pop-up and spam blockers, taught us that the online user is the customer, and that the customer is in charge. The careful dismantling of AOL’s "garden wall" and the rise of Napster and Craig’s List instructed us that while information may be proprietary, it does not guarantee privilege.

Today’s teachable moment has a name, Terry Semel, and it is the most recent in a series of lessons describing the future of online media as dependant on the ability to create content and audience networks. Thus, Google, which paid $3 billion for DoubleClick and Microsoft which paid $6 billion for aQuantive and Yahoo! which paid $680 million for Right Media and WPP which paid $650 million for 24/7 Real Media. These moments are connected, adding up to the knowledge that success as a media company in the consumer-driven, fragmented media world of the future requires different skills and vision than you get from the "hits" business model of Hollywood and television.

As an object lesson, Mr. Semel is neither a scapegoat, nor demon. He was hired six years ago to build a portal that would gather loyal users to it and trump competitors with its size and substantial breadth of content. He did that job. Today, Yahoo! is certainly large and its content and content partnerships are substantial, attracting users and trumping other large and substantial web sites. Unfortunately for all of them they are not large or substantial enough to make more than a gentle lapping sound by the time their waves reach the shores of Internet user desktops the world over. Therein lays the online problem for an advertising and media culture reared on big fish and small ponds: it’s not about splash, it’s about ripple effect.

Google’s AdSense program got the jump on ripple effect with its zillions of text boxes. The model was a success making money by using the Internet the way people use the Internet, fanning out in search of stuff they need and want to know, sometimes in only bite-size pieces. Paid search and companion text boxes scaled beautifully and effortlessly by going with the flow of the market. Behind them, you could practically hear the sound of the portals groaning under their own weight.

It didn’t escape anyone’s attention, of course, that Google got big -- big media kind of big -- by fanning out across all those smaller places. To visit www.google.com, however, is still to be impressed by a plain and simple presentation that says it’s not about me, it’s about you. Where would you like to go today? Feeling lucky? No one I know who works with Google would list humility as one of their positive business attributes, but long ago someone inside that company posted a fearsome, giant beast to guard the homepage and that has made all the difference to their ability to think about the world in which they live.

Famously, Yahoo! took the other path (and hired Terry Semel), but it is too soon to say that Google won and Yahoo! lost. After all, we have teachable moment number one to consider, which is that the evolution of new media - television, radio, etc. -- takes a long time, revealing itself not in years, but in generations. I worked for USA Today which broke the four-color newspaper barrier in 1982. Twenty years later, in 2002, the Wall Street Journal was the last major daily to introduce color to its pages. It took a generation for newspapers to embrace the change begun by USA Today.

The emerging generation of online audiences doesn’t use search engines. It doesn’t use portals, either. It’s facile and familiar with the Internet and unafraid of social network content and user generated content and independent content without pretense of any sort. It is comfortable with the wide or small screen. It is deeply suspicious of advertising and presumes an ability to skip, close or opt-out of messages. It is accustomed to power. Yahoo! knows more about these things than Google after years of selling brand advertising. It has been knocked down and kicked around and its skin is much thicker today. It is too soon to be picking winners, therefore, and not too late to learn.

The Semel moment teaches us, once more, to face the consumer. Be outward looking, not inward looking. Place a premium on understanding consumer attributes not product attributes and align your media (and/or your media business) accordingly - with those consumer attributes. Paid search enables this, simply, in the same way that the Yellow Pages do for the telephone. Yet, no one thinks of the telephone book as the telephone, and no one thinks of search as the Internet. As users, we think about the conversations that happen next.

So, we can make sense of the urgency to acquire network capabilities exhibited by major players over the last few months and understand the departure of Terry Semel as Yahoo!’s response to think less about developing content and more about developing distribution, both paid search distribution á la Google and broader display distribution with Right Media. But, there are more lessons ahead. Within the next few years, when the amount of money spent online is expected to more than double from what it is today, having distribution won’t be enough because, of course, everyone will have distribution. That’s when Terry Semel, or someone like him, will be back at the head of the class helping publishers and advertisers sort out the differences between networks by investing in the substance of those differences. And that’s when, perhaps, the Internet will finally graduate as a mainstream medium with full honors.   <Permalink>

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EVEN EINSTEIN HATED NEW IDEAS (Steve)
I'm reading "Einstein," the new biography by Walter Isaacson, and there is a passage that struck me as relevant to local media companies. We all think of Einstein as the ultimate revolutionary. He stood up to very old notions of nothing less than time and space. (Try explaining to people that time is relative and you'll still get puzzled looks, 100 years after Einstein figured it out.) Many of his contemporaries hated him. He looked at old science and paid it no deference at all, and along the way redefined physics.

Einstein's theories of general and special relativity were so controversial, even among his fellow scientists, that he didn't win the Nobel Prize for them. Everyone agreed he deserved a Nobel, mind you - it's just that relativity was so controversial, that the committee decided to sidestep it completely and they gave him the award for his discovery of the law of the photoelectric effect.

That's right: E=MC², the most famous formula of the 20th century, did not win Einstein a Nobel Prize. It was too controversial.

So there was no mind more open in the 20th century than that of Einstein's. Except that after he turned 40, he didn't care much for new ideas.

Quantum physics came along and started to throw a wrench in some of Einstein's elegant thought experiments. Suddenly, the man who was open to breaking the rules hated the new rule-breakers. Isaacson's biography portrays a man who was gleeful in tearing up the established way of thinking - until he turned 40. From the book (p. 317)

Why was Einstein so much more creative before the age of 40 than after? Partly, it is an occupational hazard of mathematicians and theoretical physicists to have their great breakthroughs before turning 40. "The intellect gets crippled," Einstein explained to a friend, "but glittering renown is still draped around the calcified shell."

In one of his most revealing remarks about himself, Einstein lamented, "To punish me for my contempt of authority, Fate has made me an authority myself."

But then fate makes us authorities ourselves.

Suddenly, like Einstein, we fear The New Thing. And the internet is that New Thing. We can't let the calcified shells around television and local journalism prevent new innovations. We can't rest on our laurels - or, as Einstein did, on his laureate - and wish away the web. Just as quantum theory did not negate E=MC², the web does not negate journalism and does not do away with our business. But it does change the approach and the questions.

Toward the end of his life, Einstein recognized he had been too stubborn in fighting ideas that other scientists postulated after he had turned 40. We don't have that long. The quantum leap has already happened. It's up to us to recapture our spirit of curiosity and adventure and make sure our business never "gets crippled."   <Permalink>

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BUILDING A LINK MACHINE, AND WHY ITS IMPORTANT (Terry)
In the big money world of big websites, every little thing counts, and it can be a beautiful thing to watch as places like The New York Times online or The Washington Post online evolve. One thing that strikes home is how much these folks realize the value of links and the database-driven web.

Take a look at this paragraph from a Times story on the iPhone:

There are three links in this paragraph, presumably generated by the content management system of the Times. The links lead to dynamically-generated pages based on data that the paper stores or has available on each of those topics. In many cases, the page generated is just search results, but the point is that every link goes back to the main domain, nytimes.com.

The links accomplish two things. One, they create additional inventory in terms of page views for ad impressions. But more importantly the practice enables them to play the internet game of flooding the search engine algorithms with links to its own property. This "weigh," albeit artificial, pushes the whole domain upwards in searches, and that's likely worth more than the ad revenue they might get from people who click through.

Ever wonder how Wikipedia gets its listings so high in Google searches? Take a look at their pages sometime. They're filled with cross-links to other content on Wikipedia (e.g., the Wikipedia page on "algorithm" contains 86 links to other Wikipedia content). This is the same thing that the Times and other big players are doing.

Look at the lead paragraph from the Washington Post's article about the death this week of opera singer Beverly Sills.

There's a search link for Beverly Sills, one for Brooklyn and a third for New York. There may be editorial value in clicking on the link to Sills, but New York and Brooklyn? Here, the decision is made that the link weight that these offer this page is more significant than the content value of the links themselves.

From their perspective, this is smart, elegant and sophisticated.

In reality, however, it's quite boorish, because you won't find either of these papers routinely linking to URL's outside their own domains. In the case of Beverly Sills, why not link to her official site? That means they're online personas are entirely one-way, and while that may be good for Media 1.0 revenues, it will ultimately lead to decay in the Media 2.0 world. The British newspaper The Guardian regularly runs outbound links that are helpful to the reader, even including governmental information websites.

The Times and the Post aren't the only sites to play this linking game. ESPN is another example, but some sites, like MSNBC, run advertiser links -- those dreadful green double-underlined things that pop-up an ad when you mouseover one of them. These are the product placement ads of the web, and they can be very dangerous in news items, to say nothing of being a major irritant.

Local media companies are far behind in using links to build web "weight," largely because we don't really understand how it all works and why it's important. However, as we begin to organize the local web -- and third-party metric machines begin to measure it every which way -- we'll find that our position therein will be determined by how well we play by its rules. And that will certainly mean linking both internally and externally.   <Permalink>

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PVRS DON'T KILL COMMERCIALS; PEOPLE KILL COMMERCIALS (Terry)
This simple truth is what makes efforts to keep the 30-second ad paradigm alive so counterproductive and sometimes rather silly. Take the announcement this week from NBC's head of research Alan Wurtzel that their studies have determined that people are just as engaged when watching a fast-forwarded commercial as they are when they're watching an actual program.

You have to read that twice to get the full impact.

Wurtzel wants to make a case to advertisers that their fast-forwarded ads are just as valuable as their full 30-second versions. He's on a mission to create tips to help advertisers optimize ads for fast-forwarding. Folks, this is just sad. If, in fact, people are just as "engaged" while ads are fast-forwarding, it doesn't say much about how engaged they are when the commercials run their full 30-seconds.

A story about Wurtzel's work in the New York Times quotes Joe Plummer, chief research officer for the Advertising Research Foundation, as saying, "Whether people watch or not is not a useful measure of anything." He goes on to talk about how "engagement" is a much better measure of ad effectiveness, something people have been saying for a long time.

But if people watching isn't a useful measure of anything, then why do we have ratings?

This is what I mean by counterproductive and silly.

The truth is that TiVo doesn't kill commercials, people do, and those people are now armed with a myriad of different options to help them flee the relentless bombardment of unwanted commercial interruptions. It is what it is, and Mr. Wurtzel and his team would do us all a favor by investing in ways to work with this reality rather than trying to disprove the obvious.

This isn't breakthrough research; it's denial.   <Permalink>