Jonathan Mendez's Blog

Pubs Need to Get the Performance $ignal

 

There is growing debate about the future of journalism and to a greater extent publishing in the digital age. The axis of the conversation is revenue generation or lack thereof. The problem in this space is one that frustrates me enormously because the answers are there. We know how to make money on the web but old mindsets continue to impede progress and have consistently over the past decade allowed upstarts to control both the delivery and revenue generation associated with digital publishing of news and information.

One core issue I continue to witness is the fundamental misalignment between the advertising publishers want and the advertising that works in a news and information medium, be it digital or analog. To this end the OPA (Online Publishers Association) and the IAB have been vehement that it is lack of creativity preventing brand money bags from flowing into the space. I couldn’t disagree more.

The fact of the matter is that when prime-time television CPM is $12, your audience is 12 million and your ad runs for 30 seconds this offers more ad value (and will continue to) for demand gen than online. Also, despite grasping at straws for excuses (clicks don't matter, we're not using the right attribution metrics, etc. etc.) branded display ads don’t work. The facts are:

1. Unit performance sucks for everyone
2. Any demand gen created goes right to Google

Look at AM Radio - maybe the most comparative medium in user behavior to web publishing. Commercial AM is primarily focused on news, information, gossip & opinion. It is programmed for shorter bursts of attention due to the nature of how people interact with the medium (weather on the 1’s, Traffic on the 8’s, etc.). The web is quick twitch just like AM. Our click behavior online closely mirrors our switching radio stations trying to get the information we desire.

AM is not an immersive medium like its high fidelity sister FM. Rather, AM tailors its content and it’s advertising to audience behavior. As any listener of AM radio knows, direct response (DR) dominates the medium. DR radio ads often play off the trust factor with the station and/or host – both great ways to leverage ad performance non-existent in display advertising (but interestingly present it social media and search).

Direct response radio is a huge business and one dominated with much the same offers that people on the web respond to. The optimization methodologies also closely mirror each other. Interestingly direct response ads are also the ones growing to dominate online. More interesting is this growth is based on performance. Publishers ignore this audience response at their own peril.

This begs the question will there be two webs -- The AM web and the FM web? The answer is yes and it already exists. The FM web is where we go to for rich media experiences - videos, gaming – where we go to have fun. Because these experiences immerse us, the type of marketing should be different. The AM consumption behavior to ‘get what we need and move on’ lends itself much better to DR where in more immersive digital experiences brand messages should wash over so we recall them as we walk through the supermarket.

This brings us back to the misalignment. Revenue starved publishers and budget hungry advertisers have been infatuated with demand gen dollars for display and have gone so far as to rip DR a new one (while gladly taking their ad network backed money). This desire for more media budget has also manifested a false and unaccountable sense that DR ads diminish the publishers own brand value. It’s all a bunch of crap both from a user sentiment perspective and performance perspective.

The lesson is that understanding the way people consume media is paramount to optimizing it for revenue generation both with your original content and your advertiser content. There is much we can learn from Amplitude Modulation.

The solution is a major paradigm shift. DR needs to be embraced, it needs to be “legitimized” and the revenue captured with the publisher’s audience, content and data needs to be distributed in a more equitable manner. The problem is not one of revenue generation. The dollars are there, they just need to be shifted. 

Recap: Search Becomes the Display Operating System

"So yeah I sampled your voice, you was using it wrong/ You made it a hot line, I made it a hot song" – Jay Z, Takeover

It was with the swagger that comes from presenting at my 5^th SES in San Jose that I created a new presentation below for the session I put together called “Search Becomes the Display Operating System.” Leading off the session my presentation focused on the high level issues hindering display and changes/impact of the more search like system taking hold.

Search Becomes Display

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Josh Jacobs, Vice President and GM, Advertising Technology, Yahoo! spoke next and his presentation primarily focused on attribution and using search and display together as the new way of doing business. While I get the need at the CMO level I’ve never been a big of attribution metrics. I think this misses the mark – the mark being that each channel needs performance metrics associated with them and said performance should be optimized and judged based on the in-channel results regardless of the overall picture. As a channel this conversation seems to me to be a red herring used to belittle the underlying value of search and the viability of performance branding in display in an effort to get more dumb money into display. That said, the rest of Josh's presentation was great especially when concentrating on Search retargeting with Yahoo and RMX. Josh had slide animations the likes of which only Yahoo’s marketing & PR team can deliver. Not to mention, Josh seems to be generating traction for my analogy of display as the Golden Shower. Thanks man!

Next was Rajas Moonka, Group Product Manger of Google Content Network. His take was about ease of use for the advertiser with both their enhanced display ad builder launching last week as well as their buying and planning tools. Google was also very upfront about their interest based advertising and the need for data collection transparency touting their already in place systems of targeting opt-out and ad preference manager. I like Google’s view of thinking about display ads as little landing pages (this was after all the reason I ventured into the wilds of display to begin with) and Rajas touched on two points that don’t get enough coverage. 1) Google is media format agnostic across all content including the SERP meaning as long as the creative is helpful or useful to the user performance rules whether it be graphical, video or text ads. 2) There are major data collection and profile creation problems inherent in people conducting so many different actions across channels and platforms – targeting based on these rules is only going to get harder in the coming years, not easier (and who says it works to begin with! :)

The venerable Scot Rafer batted clean-up for data collection & targeting expert Lookery. Scott’s quote about search becoming display’s operating principle served as my inspiration for starting this session at SES NY in the Spring. He is one of the few people in this business that does not bullshit you so it was refreshing to hear him echo Google’s issues around the pratfalls of the data collection business as well as the benefits that can be derived from it. I’ve always been a fan of Lookery approach and view them as the Occam’s Razor of data.

So some great content here and it looks like the Session will continue onthis December in Chicago and by the time we get back the NYC in 2010 the takeover will be in full force. Hopefully we will splinter into two sessions – one on technology and one on strategy.

Data is Easy. Optimization is Hard.

For the past 15 years web analytics has been namely about one thing, counting. Counting is very important and as an industry we have become infatuated with it. Never before could a medium really count what was happening with it. Attributable media was and continues to be truly revolutionary.

Attribution quickly formed the business models for the new medium -- traffic buying, affiliate marketing (have we forgotten how Amazon got to be Amazon), SEO and Email are all channels that emerged based on one principle. You could count what you got in return.

In measured media, performance becomes its driver and thus optimization became the obligatory next progression. However for much of digital media, namely site content/user experience & display advertising, it has been a long slog towards optimization. A medium capable of being optimized to deliver persistent relevance may only be (by my best estimate) about 5% there.

Of course if we want to look for optimization inspiration we look at Google. Paid Search serves as our shining example of what optimization is capable of. Many are trying to emulate their models for success but search is only a small piece of our digital experience.

Still, there is one important lesson we can take away from search. We can optimize the medium up to the point of diminishing returns. This is simply amazing. Yet, most “experts” and certainly C-level execs don’t even realize this is possible. Most clients will not believe it. But it is an economic law (and one that data and ad exchanges will put to the test).

Not to be lost in all the dashboards and spreadsheets is what we are counting - the experience of people. Performance is based on the actions that control the medium – content, experience and people’s response. There is of course the ability to optimize the buy-side however if we have learned anything as performance marketers it is that the sell side optimization factors most highly into optimization. In this regard we can simply define our goals as optimizing the presentation and delivery of content.

This feedback loop is one reason the web experience has the amazing ability to be optimized and should improve for years to come…if we can get there. Optimization is hard. It requires some measure of testing and analysis -- from bidding systems to creative performance. And data is a funny animal. There is no such thing as a perfect data set and often there are outliers. As we’ve seen this past year, even the world’s best systems are unable to prevent market forces from skewing predictive models to the point of rendering them useless.

There is also the “Predictive Paradox.” As we witness everyday in real-life people’s behavior is simply unpredictable over short periods of time. Yet incredibly and more often than not, over longer periods of time the differences in behavior normalize without significant variation. What this means to behavioral marketers is two things: 1) it is really hard to accurately assess wins that take place over short periods of time & 2) it is really hard to improve results by a large margin over a long period of time.

The other difficulty with optimization besides statistical significance is quality of data -- how much noise is in the data set. Optimization of ads or any content has so much to do with the surroundings. Content, layout, visitor source, visitor familiarity with site, and probably about another hundred or so factors. With so much noise the more complex the testing the more false positives in the numbers. Yet for some reason we’ve been led to believe complexity is sexy when in fact it is accuracy that is sexy.

There is one last thing we should never forget as we spend more time optimizing digital media and it may be the most important aspect. Counting tells only part of the story - it tells you what people did. It does not tell you why.  It does not provide answers or shed light on the actions people never realized they could take. To a large degree these answers can only be achieved through testing methodologies and observational research. Be wary of any predictive or targeting system not continually validating its assumptions with these methods…and good luck optimizing.

Previous Relevant Posts:

Expert Guide to Multivariate Testing Success

Capturing the Gorilla: New Ways to Quantify the Value of Search

On-Site Targeting: Crawl, Walk, Run Strategy

The Power of Brand to Influence Outcomes or Why Brands Will Always Rule Digital