Datatize

I recently had a brief email discussion with a successful entrepreneur, whose opinion I respect, greatly.  I was commending him for having a couple standard ad placements on his site, as I know the value of his audience is both unique and high. I assumed he was testing their efficacy and would rollout, if effective.

His response was that they didn’t have the volume or desire to be an ad business.  His Company is an online community that has taken money from high profile successful venture investors and most likely going for a large exit - if not 9 figures, then 10.

I completely agree.  

The most successful online properties that have achieved financial success through advertising have operated on such a large scale that they’ve been able to create their own advertising units.    

The obvious example here is Google (who then became the largest middle-man in online advertising), Facebook has taken a similar path (and that they aren’t challenging Google with 3rd party ad products, is surprising, but I’ll keep waiting), Twitter (http://bit.ly/I6fRHR) and Tumblr (http://bit.ly/I6fRHR) are both trying and have massive audiences (success to be determined). Not surprisingly, Native Monetization is one of the most common buzzwords I hear when meeting with new web and mobile companies.

If you’re building an online property that plans to rely on ad revenue and doesn’t generate hundreds of millions of users and tens of millions of very active users, then you might be able to build a great property with a lean team that’s a great lifestyle business with solid cash flow…

Or maybe you’ve got a bigger vision and you’re going to completely change the way we monetize online content through a new form of brands interacting with consumers (call it what you want, it’s still advertising) or through a new data product (where many are heading and where I think Twitter will have the most success).

Awesome. Do it. We need more and more entrepreneurs pushing the envelope here. But how are you going to fund it? There are many funding options available, but don’t overlook tapping into the AdTech ecosystem and very simply generating significant revenue to fund your future growth. It may not be sexy and maybe you / your designers will scoff at having to include an ad in their design - but do you know what is sexy…REVENUE!

So how do you do it? That will be covered in my next post…I know you can’t wait!

Digiday recently had a great interview with a Salesperson at a DSP.  You can find the post here: http://www.digiday.com/platforms/confessions-of-a-dsp-salesperson/

While I agree with almost all of what he said and found it incredibly helpful in the ongoing battle to figure out exactly what a DSP is…I strongly disagree with the following statement:

“If it were up to me, the rocket scientists would go back to actual rocket science. We need more moon missions and cool things from NASA, not more fragmentation in the advertising space.”

Online advertising, in a vacuum, can’t hold a candle to NASA, University Research or [insert almost anything] to solving important world problems.  The internet has changed how we consume content and while we’ve made incredible progress in the past 10 years, the ability to monetize online content is far behind the pre-interweb days.

Walt Disney famously said:  “We don’t make movies to make money; We make money to make movies.”

The next time you read an online article from a Newspaper, realize odds are the Newspaper or it’s owners has probably gone through a bankruptcy in the past 10 years, the next time you watch a movie online, realize Hollywood most likely lost money on the project, the next time you stream music…you get the idea.

The internet has completely changed how we consume content and in order for musicians, filmmakers, actresses, journalists, etc … we need really smart people to help us figure out how to monetize that content and that will enable the lives of many artists.

I’m no Rocket Scientist, but one of my life goals is to improve the ability for artists to monetize their work and if you are a Rocket Scientist, I hope I get the chance to work with you or compete against you!

We need to help artist make money, so they can continue to make art, music, movies, news and …

“I was sitting at home and had a profound experience. I experienced, in all of my Being, that someday I was going to die, and it wouldn’t be like it had been happening, almost dying but somehow staying alive, but I would just die! And two things would happen right before I died: I would regret my entire life; I would want to live it over again. This terrified me. The thought that I would live my entire life, look at it and realize I blew it forced me to do something with my life.”

- Huber Selby, Jr.

As February comes to an end and I’m two months late with this post, I ask, what have you done with your Q1 inventory?

As many experienced advertising insiders know and many new ad professional are learning…Q1 effing sucks.  You can reasonably expect to make somewhere between 20-40% on the same audience, engagement and performance as you saw in Q4, so is advertising the best use of your ad-inventory?

How do you get value from your users?

If you’re operating a free, advertising-based site, you receive value by having data on your users and being able to serve them relevant ads based on that data.  The more data you have to serve ads, the more value you can receive from the users.

Do you require your users to log-in prior to using your site?  If so, congrats, you won the battle with your product team (i mean you all agreed during a harmonious decision process :)  If you don’t, you need to understand how your users get value from being logged-in (so you have more data on them).  My favorite method, is to ask my users who log-in,  ”what’s you’re favorite part of (service)”?

Educate Your Users:

The more educated your users are on your product, the more likely they are to use and engage with it.  After asking your engaged users what they love about the product, it’s time to educate your low-engaged users why they will find value in logging-in / registering for your service.

How do you educate?

Let’s see, you’ve got all this inventory that no-one will give you fair value for, you’ve got users who have low-engagement in your product, which means they probably won’t read an email (if you even have their email) or spend time reading/watching a video on the product…HOUSE ADS!  (did you see how I just brought that full circle? i know super impressive…)

Freemium Services love to advertise their upgrades - seriously Spotify, I know that Spotify Premium has no ads, but what else?  Ask your users, build the ads focused on what the users love and fill your unsold inventory with those ads.

How do you serve the ads?

There are multiple benefits of serving house ads:

1)  Educating your users on your product:  (I don’t have to go into this again, do I?)

2)  Set a hard floor price in your exchanges:  If the exchange can’t get you higher than this floor price, you serve your house ad.  Also reduces your inventory, creating more competition and higher prices for the ads left.

3)  Set soft-floor prices:  Set a direct campaign to serve 5% of your indirect inventory at 70% average network price - this again will create more competition, but at the top of your inventory, again pushing networks higher.  (push from the bottom and pull from the top - yes that’s another blog post…)

4)  Performance:  House Ads are no different than brand ads, you need to track their performance, optimize the ones that perform well and re-evaluate the poor performing ads.

Barter:

You want more users?  Get yourself out there and trade your inventory with other smart publishers - you’ll find more value by bringing new users now, which you can monetize later (Q4).  hint: other publishers want this too!

Ideas are worthless, here’s how to get started:

Most of this post was based on things to do, but…

1)  Determine the value of each ad.  If you can’t get that value now, use it to trade for new users or educate to build engagement and data that you’ll monetize in Q3 & Q4.

2)  Determine the value you’re providing to users.  From THE USER perspective.

3)  Educate your users on the value they can receive, through house ads.  a) survey b) design c) serve ads d) optimize campaigns

4)  Trade that inventory for more users

Slightly more obvious to-do’s:

5)  Discount your direct inventory (if it isn’t already algorithmically priced based on sell-through rate - that’s another post)

6)  Give bonuses to your direct sales team for Q1 sales (yes, in addition to commission)

Did you know that the ideal Proof Rate for tasting whiskey is between 80-89?  I now think about this every-time I’m drinking whiskey?

What’s your product’s ideal Proof Rate for consumption?

In-between writing about 10 different posts (sounds like a metaphor for my life) I thought I’d post one of my favorite quotes from cycling (also known as my attempt to race road bikes), which is absurdly relevant to start-ups

“It doesn’t get easier…you just go faster”

During my time advising, working with and partnering with a slew of technology companies, one central problem that very few companies have effectively solved is the divide between the technology team and the business team. (note:  just referring to them in this manner perpetuates the problem, but for simplistic purposes I will continue to do so here…I know what a hypocrite!).

This divide widens when developers are treated like “code monkeys.”  Developers are extremely smart and hard-working, with the ability to strategically solve complex problems.  Don’t just provide your dev-team with solutions and expect them to quickly implement.

Instead, work to reverse the role and ultimately you’ll find a happy medium.  Present the developers with your problems and ask them for help.  When they have suggestions, stop and listen.  Look into their solutions, run a/b tests and analyze the data with the perspective that they are probably correct.  “BE A BUSINESS MONKEY.”

The next time you have a new solution, go find-supporting data, present it in a logical and rational manner and after having worked as a partner with the developer, they’re going to treat you like a partner and prioritize your project. 

IDEAS ARE WORTHLESS:  HERE’S HOW TO GET STARTED EXECUTING:

1) Learn your technology team’s names.  They’re aren’t developers, they have names.

2) Learn everybody’s stories; show them you care (hopefully you actually do).

3) Ask the appropriate developers to join your regular update, strategy and problem-solving meeting.  (Note:  Most developers hate meetings, so keep them short, to the point and send them summary notes if they cannot always attend.)

4) DATA:  Anytime you bring them something or they bring you something.  Find test and support or reject the thesis with data, don’t use intuition, it is not convincing.  And after they implement your latest idea, send them updates with how it is or isn’t working., based on data.

5) Don’t be an Ass (but don’t be a pushover either)

It’s January, so why not start my blog with one of the easiest gimmicks in the world, what do I see for 2012?  I believe that 2012 will become the year of quality (for digital advertising).

Many leading edge publishers already know and understand this, but mainstream publishers are on the verge of understanding the importance of minimizing (and hopefully eliminating) wasted and bad impressions.  Admeld, new changes in AdExchange and other various data services are improving publishers ability to understand what ads perform, what ads don’t, A/B tests on ad location, rotation & following users are easier than ever and thanks to the services mentioned above – it’s easier than ever for publishers to understand what performs the best.

THE MORE DATA YOU HAVE THE MORE DATA THE ADVERTISERS HAVE.

Advertisers have been ahead of publishers for years when discussing access to digital advertising data (thanks Google…).  As data drives smarter decisions on both sides of the industry, publishers need to move toward providing a quality ad product. 

PROVIDING A FANTASTIC USER EXPERIENCE AND PROVIDING A FANTASTIC ADVERTISING EXPERIENCE SHOULD BE THE SAME THING.

This topic deserves a slew of it’s own posts, but quickly: making the advertising a part of your product and a part of how your users engage with your product, will increase both brand dollars spent and conversion dollars spent.  This is pretty easy to say (typed it in about 2 minutes…) but very difficult to execute and I recommend a strong, cohesive relationship between the Yield and Creative team.

So worry about growing your inventory by growing your user base and your users interaction time, not bullshit gimmicks.  Create quality ad units that someone who has access to all the data in the world, still wants to pay a premium price for. 

IDEAS ARE WORTHLESS - HERE’S HOW TO GET STARTED EXECUTING:

1) Don’t let ads rotate when no-one can engage with them:

a) No Idle time rotation

b) No rotating when a users is below or above the ad

c) Explore moving to longer-click, page, or session based ad rotation.  

 2) Develop and work with Ad units that enable the user experience with limited overhead costs – doesn’t have to be standard.

 3) Constantly improve and add to your targeting ability.  Ask yourself, what is unique about my audience and build targeting to take advantage of your audience.