Cross Pixel

Reposted from AdAge, July 27th, 2011

With Admeld Deal, Google Has Assembled a Formidable Platform for Ads. Is Anyone Going to Respond?

http://adage.com/article/digitalnext/hey-yahoo-microsoft-google-eat-lunch-display/228947/

Give it up already!

Guy Kawasaki was the first person I heard make the comment “its not about the idea, it’s about execution”.  Groupon is about as good of an example of this as you can find.  Their big idea? – Offer discounts to email subscribers.  Earth shattering huh?  Nothing defensible, no proprietary technology, just a very basic idea that turned into the fastest growing startup in history because of execution.  Of course other factors helped in their success – good timing being a key one, but when we look back on how Groupon became a powerhouse, we will be focusing on execution.

The Winklevii could learn a lot from Groupon.  Connect U’s lack of success had nothing to do with Zuckerberg “stealing” their idea (which wasn’t even their idea  – friendster anyone?).  They didn’t succeed because they didn’t execute.  Mark Zuckerberg is executing on his vision, Andrew Mason is executing on his vision, the Wiklevii?.  Did they even try and make Connect U work after Facebook was started or did they just give up because they felt wronged?

Entrepreneurship is about executing not coming up with good ideas – they are a dime dozen.   As an entrepreneur I find the Winklevii’s pursuit of Facebook really distasteful.  I don’t doubt that Zuckerberg pulled a fast one on them.  So what.  It is clear to me that Connect U would have never succeeded because its twin leadership would have never executed.  Entrepreneurship is about making it happen, not blaming the rest of the world for the obstacles that will always arise  If the Winklevii had what it takes to build the right social network, we would all be using Connect U right now, not Facebook. They could have learned a lot from Mr. Kawasaki.

As posted on Adexchanger.com

I believe that retargeting has flaws and any active participant should be aware of them before engaging in the tactic.  The key flaw that concerns me is conversion attribution; retargeters are consistently taking credit for sales that should be credited to other marketing tactics and advertisers are not getting an accurate understanding of what advertising is working for them and what is not. In my opinion, aggressive retargeting is undermining our ability to track the effectiveness of online ads.

The problem all stems from the idea that the last ad shown to a user(or clicked on by a user) deserves full credit for a sale or conversion.  This concept implies that all ads deserve an equal weighting when measuring effectiveness but I think we all know that this is a ridiculous concept.  And in the case of retargeting, a significant portion of the ads that are being credited for a sale deserve no credit at all (or limited credit) because the consumers were going to come back to the site even if a retargeting ad was never shown to them.

I don’t think you have to be an online media pro to easily grasp this concept – most people don’t buy on the first visit to a site.   Shoppers will research a product before buying it and visit a site multiple times before making the purchase.  Since retargeters start dropping their cookies (view or click-based) the moment after a person visits a site, it is inevitable that a portion of the cookies will be placed on users that were going to come back anyway. When this occurs, the retargeting effort ends up getting credit for a sale that was initiated by another marketing activity, completely screwing up conversion attribution. Does that mean we should not use retargeting?  Absolutely not – there are some people that might not have come back to purchase unless they were exposed to a retargeting ad that lured them back.  But the question is how many?

Under the current model retargeters take credit for every single person with their cookie that that comes back to the site and makes a purchase. And while the problem is exacerbated by view conversion spamming/cookie stuffing, it is still relevant to click-based cookies – just because I click on the ad it doesn’t mean I wasn’t coming back to the site anyway to make my purchase.

Another concern is that a significant portion of the sales that are generated by retargeting come from repeat customers vs. new customers. Obviously repeat business is critical for a company, but many ad campaigns are focused on new customer acquisition.  Is retargeting an acquisition tool or a retention tool, or both?  I would highly recommend that advertisers track these conversions separately to understand the types of sales that are generated by retargeting efforts.

One tactic that marketers are using to understand this issue is running PSA ads (public service announcements) alongside their retargeting campaigns to use as a baseline to determine how many people returned and purchased without being retargeted.

Advertisers are measuring the conversion rates that occur from people who saw PSA’s vs. the conversion rates of people who saw a retargeting ad and the results show that the difference between the conversion rates is nowhere near as high as retargeters would lead us to believe – a lot of the shoppers were coming back to the site regardless of whether or not they saw are targeting ad.  And when smart marketers identify the number of retargeting conversion that are new customers vs. old customers, retargeting campaigns ROI is further diminished.

It is my opinion that retargeting should be a part of almost every online advertising campaign because it is highly effective.   But we need to be realistic about its effectiveness and think we would all benefit if retargeters adjusted their pitch to focus on the incremental customers they deliver and not offer distorted numbers that don’t reflect its true value.

Wow.   All this hubbub because a bunch of angel investors got together to try and fix the terms under which they do business.  Honestly – I don’t give a shit and neither should you – even if you are trying to raise money from angels for your business.  Let them collude – they will collude themselves out of deals.  Collusion only works when you get all of the players  to participate.  How much of the available angel capital that exists in the marketplace do you really think these guys control?  It’s a lot less than you think.  I have raised angel investments several times in my life and have yet to work with any of the gang that decided to get together to try and call the shots.  There is a significant source of angel money available and the vast majority of it was not sitting in that room.

As for Ron Conway’s reaction -

a) why do you care – it just made your life easier because now you will have better terms to offer than the “colluders” that are competing with you for the deals and;

b) “I have stated consistently for year that I invest because I love helping entrepreneurs and watching them learn and succeed”.  Give me a break.  I am sure you do like teaching and helping entrepreneurs but let’s be real – who invests in businesses and doesn’t do it to make money?  Seems a bit disingenuous to me.  You shouldn’t get mad at your colleagues because they are trying to figure out how to make the most money possible.

If you have a good idea and you need to raise seed money there are lots of places to turn.  A few players (albeit important, well connected ones) are not going to set the terms of the seed capital  marketplace.   While Angelgate is great fodder for Techcrunch and Twitter – it won’t impact anything in the real world.

The following was originally posted on adexchanger.com:

I have been overwhelmed by Zappos retargeting ads from Criteo recently.  Apparently, I am not the only one.  Michael Learmonth wrote a piece in Ad Age yesterday about the subject and I think it about it a lot (see post).  Data driven marketers are walking a very fine line, balancing what we can do and what we should do, and I believe that Criteo and others that focus on automated, dynamically personalized  retargeting creative  have crossed it.  What’s worse is that there is no need to cross this line because I don’t believe that this approach to retargeting improves performance and I know it pisses a lot of people off and can hurt a brand.

I am a big proponent of retargeting and we do a lot of it at Cross Pixel.  It is an effective strategy.  My concern is with retargeters that use tactics that scare the consumer by exposing too much information in the ads.  One popular tactic is to utilize the last products searched as the basis for the ad creative.  The theory is that the ad will perform better because it is being personalized (dynamically) to the specific products that were of interest.  It makes sense, in theory, but it can be annoying to consumers in practice.  Since buying a new pair of very cool Puma sneaks from Zappos about 2 weeks ago (the author is going retro), I believe I have seen 300+ ads from Criteo for Zappos that continually show me the same 5 pairs of sneakers that I was researching.  Here are some suggestions that retargeters should consider:

1. I already bought the sneakers they keep pushing, so I would recommend that remarketers remove buyer’s cookies from these types of retargeting efforts.  A consumer that isn’t in the business would think that Zappos is a clueless company (“Why does Zappos keep bombarding me with ads for a product that I already bought?”)
2. Frequency caps are even more important when you are dealing in personalized ads.  I have seen the Zappos ads 10 times or more on certain days.  Most marketers utilize a frequency cap of 1 or 2 imps per day per unique.  Dynamic retargeters MUST utilize frequency caps.  My sneaker purchase was one small part of my life about two weeks ago.  Based on the frequency I see the ads from Zappos, it feels like that one shoe buying event is defining my online existence.
3. Dynamic, personalized creative can produce as many false positives as positives.  If I was on an auto site and I looked up lots of Ferraris and Lamborghini’s does that mean I am “in market” for those cars?  I wish that were true, but it isn’t the case.  Dynamic creative can make many mistakes – the last products you looked at aren’t necessarily the ones you will react to and buy.  What if the last products you looked at were a total turn off and made you leave the site? This is a risk not worth taking.
4. Overkill – this is my biggest concern.  Based on experience, automated, personalized creative in retargeting efforts does not improve performance.  The reason this is the case is because you are targeting a consumer that is already predisposed to the web site that they visited.  It doesn’t take much to get them back to buy goods at the site.  Simple ads that remind them to return are all you need to get people to return and buy.  I equate it to Search Engine Marketing and bidding on your brand name.  When someone goes to Google and searches for “Zappos, they are likely going to click on the Zappos search result regardless of what the text ad says – they were already predisposed to Zappos.  There is really no need for an SEM firm to focus on the text ads for a “Zappos” keyword search.  They don’t need to personalize them, or test varieties of copy.  There is only so much fine tuning that is necessary – optimizing the ads for the keyword Zappos is a total waste of time and the same is true for retargeting. It is highly likely that the consumer will return to the site they already visited if they are interested.  Personalized creative is overkill and unnecessary.

I am sure the retargeters using these tactics will disagree with me and I look forward to hearing why I might be wrong.  Our data says automated, personalized creative doesn’t improve performance in retargeting and I know I am not the only one who is annoyed by this type of advertising.  The data driven marketing community needs to show a little restraint if we are going to win over acceptance by the consumer.

Can a single DSP give an advertiser access to all of the desired impressions available on the ad exchanges?  I used to think the answer was yes.  I thought each DSP had access to the same inventory and that each DSP had the capability to process ALL of the available opportunities from the exchanges.  Ahhh, the naïve days of the early DSP era (my thinking was so 2009).  I posed this question to most of the DSP owners that I work with and I am pleased to report that all of them were honest about the fact that their DSP couldn’t make every impression available to a single advertiser.  The reality is that a single DSP can’t connect/ interact with the exchanges in a way that gives an advertiser full access to the inventory they are seeking.

So what is an advertiser to do?  Use multiple DSP’s? (Yes). And what does this mean for potential DSP owners?  If you are large holding company thinking about buying a DSP, doesn’t it reduce its value to you if you can’t build your entire “trading desk” around one DSP?  I think the answer is yes.  It seems to me that agencies need to focus on building a demand platform that has ability to integrate with the entire pool of available inventory.  This will require working with multiple DSP’s, multiple ad networks and directly with publishers.  For a demand side platform to be really valuable, and a single solution that can meet an advertiser’s needs, it needs to have access to all of the inventory in the marketplace (or as much as possible).

Imagine if a Search Marketing platform didn’t allow you to bid on all of the keywords that you wanted to purchase.  You would end up using multiple platforms.  Unfortunately, this is where we are with DSP’s.  Will the answer be that DSP’s develop the capability to access all the exchange inventory, or will they end up differentiating themselves in another way? My guess is the latter.  It is probably time to say goodbye to the concept of totally neutral platforms.

My birthday was last week and I got the usual assortment of phone calls, texts and Facebook shout outs from family and friends.  I must admit that I don’t put the same value on a Facebook “Happy Birthday” wish as I do from someone that calls me or texts me.  It’s not that I don’t appreciate a FB note but if all you have to do is logon to FB, notice its my birthday and type a note in 2 seconds, it is a wish that is devoid of some of the qualities that make a personal birthday wish special – that someone goes out of their way to remember your day and makes an effort to let you know.  FB has commoditized “Happy Birthday” and changed its meaning to me.  Not bad, just different.

I think the same can be said about the FB “Like” button.  “Like” has made it so easy and effortless to tell everyone what you “Like”, that it diminishes the value of the intent.  Effort is a key component in determining the level of a person’s interest.  A lead form that asks for detailed information for a life insurance quote will yield much higher quality leads than a life insurance form that asks for three basic pieces of information.  Effort weeds out lower quality and lower interest.  As “Like” becomes ubiquitous, it’s value as an intent indicator is lower.

This is what I think this means for FB in terms of monetizing “Like” – it won’t be the new adwords (the home run they are hoping for) but it will be a leading source of data for audience targeting (still a decent opportunity).  If FB really wants to turn their data into a powerful solution, they need to harvest real search intent, either on site, or off site – which I think is still very possible and likely to happen.

Do you remember the first few years in online media buying when the major print publishers offered banner ads to their advertisers as a value ad?  It wasn’t that long ago and it didn’t do anything to help save the newspaper industry.  While most of the talk is about the decline in subscribers and readership, I believe that this problem is secondary to the newspapers key problem – their inventory was overvalued by a magnitude and they could get away with it because they controlled distribution and had “exclusive” access into our homes.  We all know those days are gone, but there is still a fairly robust group of people that like a physical newspaper and haven’t shifted to reading the local news online.

Now the newspaper publishers that are successful online are facing a different issue – they have way more inventory than they can sell directly to advertisers at full price.  So what is an offline/online publisher to do to compete with hundreds of other news sites and brands that capture our online attention?  I suggest they start throwing in print as a value ad.  Print advertising is still very valuable, and I believe that the newspaper industry could use this as a key differentiator to garner a larger share of full price, online display advertising.  I know that my clients would value newsprint ads if they were included in a package and I am sure it would lead them to more buys from newspaper sites.

I think this is inevitable, but it probably won’t happen on a major scale for a while.  When print becomes a value ad it will be the final confirmation of the end of newspapers as a print advertising medium and few newspaper owners are willing to accept this fate, even if they know it is coming.   I suggest they learn from the past and jump ahead of the issue and use it to their benefit.  I would be interested in learning if any large advertisers have received this type of an offer from the newspaper companies.

I believe that right pricing model for an advertiser to execute retargeting campaigns and other targeted display campaigns is usually CPM.  While it is intuitive to select CPA as a pricing model because it ensures a specific performance, the reality is that buying on a CPA often limits the scale of your campaign. CPA buying shifts the risk and the responsibility for the arbitrage from the advertiser to the media seller.  The typical reaction of a media seller in this scenario is to limit it’s risk and only pursue media buys that are performing well below the CPA earn out.  For example,  an advertiser is willing to pay $50 for every sale generated during a retargeting campaign.  The retargeting company starts buying media to determine what the right price is for the inventory.  Because the retargeter is taking all of the risk, they will typically set their allowable ad spend, i.e. what they are willing to spend on advertising per order, at a low level to make sure that they do not lose money.  For this example, the retargeting company might set the allowable at $25 so they can try and earn a healthy markup on each order.   The problem with this model is that the retargeting company has very little incentive to push the envelope anywhere near the real allowable.  The basically go after the low hanging fruit, make a very high margin, and avoid the risky arbitrage.  In this example, the company may have figured out that a $1.50 CPM backs into the $25 allowable for the retargeting company.  The company will not bid on any inventory above $1.50 and the advertiser suffers because there are many orders that can be acquired by bidding above $1.50 that will fall within their $50 allowable.

CPM buying is much more scalable because it eliminates the arbitrage.  The retargeting company in a CPM scenario is working on a smaller fee and their portion of the revenue is tied to the media spend.  In a CPM scenario, the company is motivated to help the advertiser  maximize the number of sales they can generate within the allowable.  In the example above, a CPM retargeter will bid well above $1.50 to make sure the client gets all of the orders possible.  In a CPA scenario, the retargeting company is motivated to maximize its own profit margins.  This fundamental difference results in many lost sales for the advertiser.

Many advertisers are still concerned that the CPM based programs motivate media companies to spend, simply because that’s how they make money, while they don’t have to worry about this in a CPA buy.  White it is true that the CPA buy has a built in regulator, CPM buying can be easily controlled through daily reporting and the reality that every smart performance oriented company knows they have to meet the CPA goal to satisfy the client and keep the business.  As long as you know the company and trust them, an advertiser is almost always better off buying on a CPM because it can lead to many more sales , particularly on high performing programs like retargeting.