Jun 28 2012
Basis Team

Is the Online Ad Industry Too Obsessed With Technology?


Robert Hof of Forbes recently published an article titled, “Is the Online Ad Industry Too Obsessed with Technology?” which featured panel discussions from a recent Google online advertising event for advertisers, agencies, and publishers. The panelists included industry experts such as Terry Kawaja, CEO of Luma Partners, Omar Tawokol, CEO of BlueKai, Kurt Unkel, President of the digital ad buying unit of VivaKi, and more. The discussions shed light on how technology can be the answer and the problem for marketers.

In reaction to this piece, we tasked our leadership team to answer the same questions. Read their responses below:

Q: How do we get to $300 billion to $400 billion in display ad revenues? Is the fragmentation of media that people worry about actually a way we might get there?

Charlie Thomas, SVP of Sales – We can’t look at display in isolation, or it will grow more slowly than it should. We have to start thinking and talking about display, along with all other types of advertising, in context with owned and earned media. Clients want to lower advertising expenses while increasing productivity. They can do this by building integrated marketing systems that leverage their own branded networks. This approach can drive measurable business results, not just advertising metrics. We need to start thinking of advertising as fuel that makes these systems and networks run and begin aligning with the higher business outcomes they produce. This is what will make all advertising grow and raise inventory value. The question will become “What fuel do we need to run our systems and networks… regular or premium?”

Q: We’ve got hundreds of companies doing a variety of point solutions. Who’s going to simplify this, besides Google?

Shawn Riegsecker, Founder and CEO – This is the right question because it’s a huge and difficult problem.  And because it’s a difficult problem that takes years to solve, there are only a handful of companies with the scale, experience, long-term vision, and sustaining power to fix it.  The three most likely companies with the vision and ability to fix it are Google, Centro, and MediaOcean.

Q: Agencies are criticized as being unable to sort out the technology choices, and also criticized for how they make money from clients [with agency trading desks, or internal ad buying units]. What’s the answer?

Shawn Riegsecker, Founder and CEO – Agencies are too often unfairly criticized in many areas such as the ones you mentioned.  What’s most important for a vibrant and successful industry is that we have strong, creative, and healthy advertising agencies.  It’s difficult for anyone, including agencies, to sort out technology choices because there is a lot of poor technology offering incomplete solutions for the industry.  As for agencies making money in new and different ways, I think it’s great.  The old agency compensation model is broken, and in order to find the right new one, agencies should be trying and testing different approaches.

Q: How does that change how you’re paid?

Shawn Riegsecker, Founder and CEO – As software transforms how the advertising industry operates, the model of hiring more bodies to throw at problems and attempting to charge for those bodies is a model of the past. The pricing model of the future will be based on value, not labor.  Those agencies who provide greater value and are able to communicate that value will be able to charge significantly more.

Q: Two of the solutions to this fragmentation are standardization and consolidation. It feels like in display we’ve got hundreds of vendors reinventing the wheel, so we could use an operating system. You can’t have 12 of them, but don’t we need it?

Shawn Riegsecker, Founder and CEO – First, we feel standardization is a terrible objective for our industry.  Standardization leads to everyone designing and developing for the lowest common denominator which breeds poor quality.  That’s not a rich, healthy, and vibrant landscape.  We believe in creating seamless and automated workflow software that allows an agency to scale highly complex, custom, and beautiful advertising across hundreds of publishers with very little effort.  So, yes, there isn’t going to be 12 of them but there are going to be a couple of amazing platforms that help create a happier and healthier industry.

Q: TV benefits from everyone agreeing on the value of the GRP [Gross Rating Point], which has $70 billion in spend behind it. Thoughts?

Ben Pashman, VP of Business Development – Increased advertiser investment in the digital space is inevitable based on shifting world-wide media consumption habits. It is undeniable that this investment shift is happening more slowly than it should and a lack of reporting standardization is partly to blame. The GRP works in TV because every ad looks and feels the same and TV is a one way conversation. Due to the bi-directional nature of online advertising and the many sizes and formats online; GRP is a start but it is not the complete answer to unlocking massive online spend increases.

In order to achieve real scale the online ad measurement system must be torn down and re-built from the ground up. Our two standards of measurement (CPM and CTR) are both fatally flawed. CPM rewards the sell side for serving impressions and therefore all sorts of games are played by publishers to serve as many ads as possible.  These impressions are mostly ignored or never seen at all.  A recent Comscore Study quoted that an average of 31% of impressions served are never seen.  The industry shift away from cost per impression served to cost per impression viewed is a great first step.

The fact is that online is so much more than TV.  There are multiple devices, multiple ad formats and sizes, and many ways a consumer can engage with an online ad.   Re-purposing the GRP is just one piece of the increasingly complex puzzle that will help unlock significant lift in online ad spend.

Q: What about upper-funnel [brand/image] advertising? Is there enough time, attention, and money focused across this ecosystem to address that kind of advertising?

Martin Betoni, VP of Creative Services – Currently there isn’t enough of anything across this ecosystem to address it, and that has been the problem. However, I believe we’re at a crossroads. DR dollars have saturated digital advertising, and we’ve mined as much data and analytics as we could possibly exploit across it. The recent ‘cookie licking’ revelation is a great example – does this equal effective, immersive advertising? The enormous opportunity is brand and image advertising, but to do it effectively the environment has to change, and it will change. Consumers are already changing their content consumption behaviors, and the ecosystem itself is changing along with them. We have to get ahead of what’s happening and come up with meaningful, wide-scale advances to reinvent the medium.

Q: Is there really a space for creative anymore?

Martin Betoni, VP of Creative Services – To me, this question is almost a kicker. Space anymore? We haven’t even begun to put out great creative online yet! All we have is space… space to re-form, re-imagine, re-think, and most importantly, come to believe that we CAN do meaningful brand advertising digitally.

Q: Whose responsibility is it to create this kind of thing (apps as an experience)?

Martin Betoni, VP of Creative Services – The responsibility surely falls on the shoulders of the two groups most directly involved in these transactions: the sellers and the buyers. The sellers, or publishers, have to realize that consumers are speaking with their actions. They are aggregating content in much different ways than ever before, but the content they’re aggregating hasn’t changed. This content is still very important, which means its owners have a valuable commodity to deliver. Consumers are demanding a better way of delivering it. At the same time, the buyers, or agencies, have to get back to what they’re good at and where their value lies: their ideas. They do need to spend 80 percent of their time thinking and creating and 20 percent of their time on technology, and we have to help them get to that place. If publishers can implement a delivery method of content and advertising that pleases consumers, and agencies can rethink advertising as content, digital display (across all screens) becomes a viable way for advertisers to make their mark.

What is your reaction to these responses? Do you agree or disagree?