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Challenges Online Advertising

Source: Online Spin by Dave Morgan

I was fortunate to hear an extraordinary talk last night at the Interactive Advertising Bureau board dinner by David Kenney, the CEO of Digitas. He spoke about the challenges that online advertising faces. His message was simple, engaging and, in the end, a clear call to action. Online media buyers like Digitas and the entire roster of Publicis agencies and their clients would like to spend dramatically more money in online advertising, but they can't. He even quantified it. Last year, Publicis recommended to its clients that they spend $10 billion in online. They were only able to spend $3 billion. Why? Because there are three enormous bottlenecks in our business -- and until they are solved, we should not expect the industry to grow as fast as it could.

Here are the challenges that he identified:


* Operations. Operational bottlenecks in the online world have created a "wall" that is almost impossible for buyers to surmount. When it comes to managing insertion orders, billing, reconciliation (of everything from impression counts to audience metrics to billing and invoices) things are, well, horrific. The agency-side costs incurred in dealing with this is overwhelming the agencies and making it impossible for them to manage online advertising buys cost-effectively, certainly as compared to what they are used to in television and print, where the "friction" costs are so much less.

* Metrics. Online advertising -- certainly the most quantifiable form of advertising -- can be measured by lots and lots of different flavors of metrics, and we do. This is bad. There is very little consistency in our metrics and how we use them. Not only does this magnify the industry's operational problems, it also hurts the industry's credibility with agencies.

* Talent. There is a talent crisis in our industry. There is no other way to describe it. We need many more smart, creative, well-trained and highly motivated folks to make our businesses work. Virtually every agency in the U.S. has an inordinate number of open positions. If they don't have the people to manage the planning, buying and execution of online campaigns, the money will not flow. It is that simple. Kenney's points are right on target. We had better take them as seriously as we take the headlines touting our industry's opportunities. If we don't acknowledge, address and solve these problems, we are going to find much, much slower growth than we want. We need to heed this call.

Impossible is nothing

As a former employee at adidas-Group I am positively biased towards any adidas campaign. I have worked on several global campaigns during my time at adidas. Therefor I just love the new adidas campaign, Impossible Is Nothing.

Web 2.0 too much a challenge for Google?

Is Web 2.0 Bad for Google?
by Mark Simon, Monday, March 12, 2007

SINCE THE START OF '07, Yahoo's price per share has jumped about 20%. From Feb. 1 through last Thursday, Google's share price dropped by around $50. That certainly looks like a reversal of fortune for the two giants.

Of course, Yahoo's uptick is largely a product of its re-org and its Panama launch -- both signs that business is getting back to where it should be, and not an indication that Yahoo will crush Google. Google's stock dip, meanwhile, might just be Google coming back to earth after being slightly overvalued. Neither Google nor Yahoo's change in stock price needs to signify a revolution.

But even so, I do see a revolution in the works. It seems that Web 2.0 favors media companies, and can wreak havoc on search-focused ones. That's good news for Yahoo, but spells real challenges ahead for Google.

To see what I'm talking about, look to Google/YouTube.

In the summer before Google bought YouTube, Google Video trailed as the eighth-most popular source for video online, according to comScore. MySpace, Yahoo, and YouTube took the top three slots. As many industry experts have it, Google bought YouTube to buy into a video market it couldn't crack.

As a search company, Google, not surprisingly, was facing a popularity problem in online video. Search destinations are places where you find what you're looking for, and then jump off into content that lives elsewhere. Search engines provide a wealth of navigational information, but they provide little in the way of the richer experience you'd associate with video.

Which is why, when they're seeking video, video consumers would not tend to associate video with search engines. They'll associate video with sites that already do provide other kinds of rich experience -- sites that are rich in their own content, like MySpace, YouTube, or Yahoo.

To overcome that content barrier, Google bought YouTube. But buying its way into video created an entirely new problem for Google as a search engine. If video is a richer experience than most online content, then video search needs to convey more than just raw information about what a video will contain. It needs to convey the whole experience that a video offers. It needs to bring searchers to the video itself.

Which is why video clips live within video search results, in a way Web pages tend not to live within text-search results. That, though, is a copyright nightmare waiting to happen, as there's little to distinguish directing searchers to a clip, and grabbing the clip and hosting it yourself.

We got the first glimpses of that problem last year, when adult publisher Perfect 10, which brought a suit against Google claiming that, in presenting thumbnails of Perfect 10's pictures within Google Image Search, Google was stealing Perfect 10's content. A federal judge agreed.

Newspapers' complaints against Google News, and a pending lawsuit against Google Book Search, are further examples. Google argues that they're providing their searchers with information; the newspaper and book publishers claim that Google is stealing copyrighted content.

YouTube's additional problem of user-generated piracy is an extra twist to the story, but it's still a variation on the same theme. YouTube's piracy problems, after all, only exist because it's so easy to search for any kind of material -- pirated material included -- within YouTube. By providing the capability to easily search for copyrighted material, YouTube --which is to say, Google -- makes YouTube a more effective hosting service for pirated content, even if it conducts that hosting against its will. That opens Google up to copyright complaints.

And so search engines find themselves stuck between a rock and a hard place in Web 2.0. Media consumers aren't just looking to find material on the Internet any more. They're looking to have a total media experience, and to have that experience within one place. And as that trend grows, the line between search results and hosting will get fuzzier, and the copyright issues will proliferate.

For media sites like Yahoo and MSN, which have large amounts of unique content, these problems are far less serious. First, their unique content creates other avenues of monetization, should copyright issues ever threaten a part of their search business. Second, experience as a publisher makes it easier for them-both because of technical experience and corporate culture-to send searchers away from copyrighted content, and toward the content they own themselves. Pure search engines have neither of these options.

To be sure, an ability to help searchers navigate will only become more valuable as time goes on. Google is the leading provider of that navigation, which is why I predict a very healthy future for Google, for a very long time. But there are undeniable troubles ahead for search-only players. And as search and content leaders, Web 2.0 might provide portals like Yahoo and MSN with advantages that Google doesn't have.


Mark Simon is vice president of industry relations at Did-it, an agency for search engine marketing and auctioned media management based in New York. You can reach Mark at msimon@did-it.com.

Build your own social site

I think I have found a new possible hit for 2007 and it's called Ning. A social community website, but different from it's ancestors like MySpace, FaceBook and here in The Netherlands, Hyves. The biggest advantage of Ning is that you can literally add anything you want and not being restricted to the limits of a pre-set community website.

Keep your eyes open for it, for I believe it will be quite a blast.

On another note; I am testing Joost for Mac 0.8 beta. I will keep you posted on my experiences there.

ViaCom to sign deal with Joost

Joost is still in heavy development fase, but is already forging business deals. In this case Viacom - owner of for instance MTV, iFilm and the likes - is talking with Joost to set up a content deal.

Interesting because ViaCom recently ordered YouTube to delete all copyright-protected content owned by Viacom from YouTube.

Article

The Big 3 Compared

In social media there are currently 3 big players in the market of social media.

Digg
Reddit
Netscape

Although Digg is the most common known and most visible, these 3 websites define the social media tree. Therefor it is nice to read a comparison between these 3 sites.

Article

World Economic Forum: Web 2.0

An interesting web-cast with quite a line-up:

Caterina Fake, Founder, Flickr, USA
William H. Gates III, Chairman, Microsoft Corporation, USA
Chad Hurley, Co-Founder and Chief Executive Officer, YouTube, USA
Mark G. Parker, President and Chief Executive Officer, Nike, USA
Viviane Reding, Commissioner, Information Society and Media, European Commission, Brussels

Challenger

Dennis Kneale, Managing Editor, Forbes Magazine, USA

Moderated by

Peter Schwartz, Chairman, Global Business Network, USA

The rapid rise of online social networks is both a social and business phenomenon, the impact of which is only beginning to be understood. The consumer-powered Web 2.0 creates innovative ways for businesses to operate and people to communicate.

What is driving the emergence of virtual communities? Is the rapid rise in their valuations justified?

How are companies beginning to use social networking strategies for product and market development, as well as for communication?

Webcast

Come again?

I am about to install Vista soon on my Macbook, using Parallels. I am quite interested on what it can do and if it really be a positive change in regard to XP. I will keep you updated once I get things running smoothly - contridactis in terminus?

Get a First life

All the commotion on Second Life may be passing by normal people, but people spend quite some time on the web know what Second Life is pretty well known. In fact, a lot of people write about it on their blogs.

I've tried it a while ago. Installing the Second Life client on my Macbook, but after spending some time in this virtual world I have come to the conclusion I am no Second Lifer.

I'd rather have a First Life :)

Joost

Last week I signed up to be in the beta-testing team of Joost.
For those who do not know what Joost is, here is an interesting article about it on Wired.

Article

Transformers - Alternate Game

Perhaps you've seen it already, perhaps not.
Transformers, once known as a tv-series is soon to be released as a feature film.

Anyways, I was watching the trailer and something caught my attention. In certain parts of the trailer words are shown. At :37 and :39 you can see the words: Sector Seven Org and Takama 83.

After looking up something about it I found the following.

The words actually stand for an alternate game.

Go to the url Sector Seven Org and use the password Takama83. A pop-up will show up with, what I believe to be a game related to Transformers. I could use some help however, I find it hard to understand it all.

Office 2008 for Mac

Good news from the Microsoft Mac Business Unit. They just announced Microsoft will launch a totally new and updated Office for Mac 2008 version later this year.

I am glad to hear this and like the fact the Mac BU keeps developing software for Apple.

Kudos

Squirt :)

Oh my gawd!

http://www.apple.com/iphone

Squirt! :)

The Pirates of Silicon Valley

I ran across this docudrama through a Dutch marketing-weblog (Marketingfacts) I visit often. Take your time watching this film. It's 10 parts of 10 minutes.

Have fun.

Pirates of Silicon Valley (1999) is an unauthorized made-for-television docudrama written and directed by Martyn Burke. Based upon the book, Fire in the Valley: The Making of The Personal Computer, by Paul Freiberger and Michael Swaine, this film documents the rise of the home computer/personal computer through the rivalry between Apple Computer (Apple II and the Apple Macintosh) and Microsoft (DOS, IBM PC, and Windows). The central story of the film begins in the early 1970s and ends in 1985 when Steve Jobs resigned from Apple Computer. The film is also structured by a set of "book ends": it begins and ends with Jobs' return to Apple in 1997.

Back

So, it has been a month ago the last time I posted something on the weblog. To be honest, I was too busy in December to spend time to post interesting articles. But a new year, hence a new start.

I will keep it short, but wanted to post something I have been waiting for some time now.

The combination of social communit website wih a virtual life "game". LinkedIn just started a new service where one can asks questions to people in their network. I have received some questions as well, but one request stood out.

LinkedIn Meeting on Second Life, would you be interested joining in a virtual meeting??
On Saturday Jan 20, 18.00 hrs Central European Time there is a virtual meeting on Second Life for LinkedIn networkers. What is your opinion on virtual meetings? What is your experience with Second Life sofar?

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

Here is the hyperlink to join SL: http://secondlife.com/?u=f807b03d565583d6aae3a4e02324bf7d

Joining is free and in order to accomodacte the different LinkedIn user groups:

- Network (45,198,28 IBM)
- LinkedIn networkers (45,198,28 IBM)
- Recruitment (197, 229, 22 ABN-AMRO)
- Jobhunting (197, 229, 22 ABN-AMRO)
- B2B Networking (45,198,28 Laguna Beach)
- Marketing & Sales (62,89,25 Spaceport Alpha)

These are all pretty stable properties. Linking you to a group will show other people your special interest and thus help in effective networking. We'll meet at the different coordinates.
The main meeting will be held at IBM but if there are too many people in one place, the system gets sluggish thats why I also added some alternatives.

I hope to meet you there on Saturday Jan 20, 18.00 hrs Central European Time! Naturally everything, including the groups is for free. You can forward this message to other LI users in your network if you want to.

Sincerely,


Ray van den Bel (Ray lange)

P.S.: any donations to buy land on Second Life for the Network group will be welcome!

---

I will try to attend. It will be interesting I am sure.

Getting paid to blog

Not a very recent article, but I remembered it due to another weblog entry.

Getting paid to post on Digg/Delicious/Flickr etc.

Hmm, I should ask some money as well :)

The Future of Web Advertising

If you want a glimpse of the future of advertising, you can hire a consultant — or you can travel to Britain.

Online advertising is racing ahead in Britain, growing at a roughly 40 percent annual rate, and is expected to account for as much as 14 percent of overall ad spending this year, according to media buying agencies. That is the highest level in the world, and more than double the percentage in the United States.

There are big differences between the advertising markets in Britain and the Unites States. In Britain, much of the advertising is national, while there are strong local and regional ad markets in America. Still, some believe that online advertising in Britain provides somewhat of a roadmap for where online ads in the United States and elsewhere may be heading. “The U.S. is so behind,” said Terry S. Semel, the chief executive of Yahoo, in a recent speech in London. “It’s certainly lagging the U.K. by at least a year or two.”

More than their American counterparts, British marketers seem to have bought into the oft-touted benefits of Internet advertising: that it is easy to track, enormously effective and a relative bargain. In Britain, as Internet ad spending surges, the overall advertising pie is not growing much at all, and traditional media are the ones losing out.

However, British media are nearly all aimed nationwide in contrast to the United States newspaper and television markets, where local and regional markets are big players. These local markets in the United States have, so far, been slow to move ad money online.

As recently as 2002, many British advertisers were reluctant to go online, too. That year, British advertising online was 1.4 percent compared with 2.5 percent in the United States, according to the Internet Advertising Bureau in Britain and the Interactive Advertising Bureau in the United States. Each bureau tracks online ad spending in their respective countries.

In the following year, Britain overtook the United States, and it has not looked back. In 2005, nearly 8 percent of British ad dollars went online, compared with 4.6 percent in the United States. And, this year, the two bureaus say, the Internet will account for 10.5 percent of British ad spending compared with 5.6 percent in the United States.

Media buying agencies like Group M, the media-buying division of WPP Group, estimate that online ad spending in Britain will be even higher — close to 14 percent of the total this year.

Similarly, broadband access in Britain at first lagged access in the United States, but has since surged. In 2002, 15.7 percent of American households had broadband compared with only 5.1 percent of British homes, according to eMarketer. This year, Britain is ahead, with 47.4 percent of homes having broadband, which is more than the 43.9 percent in the United States.

Some analysts say British advertisers may simply be quicker to embrace new marketing ideas than American companies. “I’d like to think there’s a cultural factor in the U.K., where we’ve been a bit more experimental on some of these things,” said Rob Noss, European chief executive of MindShare Interaction, a new media division of Group M’s MindShare unit.

In the United States, major advertisers are more dependent on traditional media, particularly television. The top 50 advertisers in the United States spent just 3.8 percent of their budgets in the first half of this year on online ads, excluding search-related advertising like that sold by Google, according to data from TNS Media Intelligence.

“Partly driven by scale but also by legacy, there are a lot of traditional budgets that are already laid down,” said Antony M. Young, president of the American division of Optimedia, a media-buying unit of Publicis Groupe.

Ad buyers at the major American brand companies may be reluctant to commit larger sums to the Internet because they believe they do not have control over where their ads appear, analysts say. Many Internet advertisements in the United States are still sold through online networks that place ads on member sites. In Britain, more advertisers work directly with Web publishers, giving them greater say in where and when ads appear.

In contrast, large advertisers in Britain appear to be leading the push onto the Internet. British financial-services companies have been particularly aggressive online spenders, in some cases allocating 30 percent or 40 percent of their advertising budgets to the Internet, Mr. Noss said.

Big British advertisers have also been quick to jump at the opportunities provided by paid search advertising, like that sold by Google and other search engines. Search accounts for 56 percent of Internet ad spending in Britain, compared with 42.5 percent in the United States, according to the Internet Advertising Bureau. “We’re all searchaholics,” said Guy Phillipson, chief executive of the bureau’s branch in Britain.

Since retailers in Britain typically operate nationally and deliver online purchases anywhere in the country, searches often lead directly to sales, said Andrew Edwards, European president of Arc, a direct marketing agency affiliated with Leo Burnett. About 3.9 percent of visits to British online retailers’ sites yield purchases, compared with 2.5 percent of American site visits, according to Coremetrics, an e-commerce tracking service.

In Britain, analysts predict that it will not be long until Internet advertising catches up with TV advertising. Group M, for instance, says the Internet could account for 25 percent of British ad spending by 2010. That would place it ahead of television, which accounts for just more than 20 percent now.

Hardest hit has been Britain’s biggest commercial broadcaster, ITV. Analysts at Numis Securities estimate that ITV’s advertising revenue will fall 13 percent for 2006. Weakened by its loss of advertising, ITV has become a takeover target.

On average, Britons spend 23 hours a week on the Internet, according to the Internet Advertising Bureau. The Internet accounts for about a quarter of Britons’ time spent with all media, according to Citigroup, nearly double the percentage in the United States. Americans use their computers an average of 14 hours a week, according to Nielsen Media Research.

TV advertising has held strong in the United States, where about $72.56 billion will be spent on TV ads this year, according to Universal McCann, which is part of the Interpublic Group. That represents a quarter of all ad spending, and that proportion has held roughly steady since 2000.

Local advertisers in the United States have been slow to move money online. This year, for example, local spending on online ads in the United States will be $1.3 billion — or 8 percent of all Internet spending, according to eMarketer. But local ads make up a little more than a third of overall ad sales in the United States.

Ad executives said American TV networks were unlikely to lose as much ground as British networks had. “TV’s just too important for our society,” said Martin Reidy, president of Modem Media, which is part of Digitas. “I don’t think the Internet will ever surpass it here.”

In Britain, the growth of Internet ads seems to be bringing down the amount of money spent in the overall advertising market as well. Growth in spending on advertising and marketing services is set to slow to 0.3 percent this year, according to Group M, after growth of 4.3 percent last year and 6.7 percent in 2004. To many ad executives, this makes sense: online ads are generally much cheaper.

“Every pound withdrawn from traditional media either to be saved or spent online, where supply is in handsome surplus, exerts more deflationary pressure on the total market,” said Group M in a recent report on the British ad market. “And if online proves more productive, advertisers have the option of investing less.”

Source: NYT

Yahoo vs Google?

WITH GOOGLE ANNOUNCING THAT IT'S launching both a newspaper advertising program and contextual radio ads, I'm left wondering if Yahoo will ever follow suit, rolling out a traditional media arm of its own.

For now, obviously, Yahoo in traditional media is out of the question. Yahoo's facing tough times after poor Q3 performance, and it's not in a position to extend its reach as dramatically as Google has. But that doesn't mean traditional will be out of the question forever, and it's a worthwhile question to ask.

I'll save you the anticipation and get to the answer right away: the answer is no, absolutely not, Yahoo will never enter the traditional advertising space. I'll explain why that's so, but I'll need to take a detour through the very non-traditional channel of the mobile Internet.

Along with Google's new traditional ventures, recently both Google and Yahoo made advancements in mobile. Through Gmail Mobile, Google launched its e-mail service into the mobilesphere. Google also joined forces with Samsung and wireless provider Helio; together, the three now provide a satellite-powered Google Maps that helps you locate people. Meanwhile, Yahoo was pushing mobile ahead in a different direction: you can now deliver display advertisements via Yahoo Mobile.

These are very different paths to making mobile better. Yahoo's mobile display ads will help mobile directly, immediately making it more valuable for advertisers and for Yahoo itself. Google's mobile advancements, on the other hand, are more indirect; they're focused on using mobile to get more value out of other channels-specifically, e-mail and social networking technology.

That distinction is consistent with the overall Google and Yahoo mobile strategies. A visit to google.mobile.com shows that Google Mobile services are essentially Google's core online offerings (Google Search, Gmail, Google SMS, Google News and Google Maps) served up to your mobile device. That's very different from mobile.yahoo.com, through which Yahoo Mobile provides online standards like e-mail and search, but also offers very mobile-specific items like mobile screensavers and ringtones. Again, Google's using the mobile medium to get more use out of preexisting non-mobile channels; Yahoo, meanwhile, is embracing the mobile channel directly.

That's a difference that reaches far beyond mobile. Actually, it's a difference that runs as deep as each company's mission statements. Google says it exists to "organize the world's information and make it universally accessible and useful." What that means in practice becomes clear when you look to Google's oldest and most popular product: Google Search. Search organizes information and makes it accessible; more important, though, it creates that accessibility and organization by using a new channel (search) to improve the accessibility of an older one (the Internet). Which is the same strategy that we see Google using in Google Mobile.

Yahoo's stated goal is different from Google's. Yahoo aims "to be the most essential global Internet service for consumers and businesses"; it's looking to be the world's most powerful new-media empire. That goal makes each new media channel valuable in its own right, as it's one more potential piece of the empire that Yahoo is trying to build. That emphasis on the channel itself is why Yahoo's mobile strategy focuses directly on the mobile sphere by offering ringtones, and why Yahoo has built its own enormous publisher network--while Google's publisher-related activities are limited to searching publisher sites and advertising on them.

And it's this difference in goals that explains why Google's a natural fit for the newspaper business, and why Yahoo isn't. Running newspaper ads might be a divergence from Google's stated goals of organizing information, but Google-managed print media is very much in keeping with using newer media models to enhance older ones. There's really not much of a leap from using search engines to make the Internet work better, to using search thinking to make traditional advertising work better. Both tactics are about using one channel to improve the next.

But Yahoo isn't interested in improving older media. Yahoo is focused on dominating in newer media. Which is why Yahoo would really have no interest in traditional advertising, even if the option were open to it. And it's why Yahoo won't enter the traditional space, even after it gets its house back in order. And finally, it's why the underlying differences between Yahoo and Google are starting to cause the old online rivals to drift further and further apart--and why Google and Yahoo might not be rivals anymore in Web 3.0.

Stephen, don't leave YouTube!

An interesting open letter to Stephen Colbert, known from The Colbert Report, written by Mark Glaser from MediaShift.

I agree with Glaser. Stephen, don't let us down.