Time for something new in online advertising

My buddy Paul Fisher of Advent published some research last week showing that venture capital investments into ad technology are over $580m so far this year.  Moreover Europe counted for 45% of the total in this sector, which is a lot when you consider that we only account for around 20% of venture investment across all sectors (by any sensible long term measure we should be nearer half, but that is another story).

There are some interesting looking businesses on Paul’s list, many with the general idea of pushing the web models to new areas – widgets, video and so on.  I’m sure lots of them will go on to be very successful (including DFJ’s contextWeb) but I can’t shake the thought $580m is a lot of money to invest in companies that are largely chasing extensions to a market that is already largely consolidated – albeit a very large and fast growing market.

Which is why my thoughts have been turning to ideas and models that are more revolutionary, and I have become interested in permission based marketing/VRM and more recently publisher based tools for ad optimisation.  What the online ad industry needs more than anything is a way to drive much higher eCPMs, and both VRM and publisher based tools offer the possibility of much, much, tighter targeting, based on the availability of a higher volume and quality of data than has been available to most current approaches.

  • Continuing down the path of existing advertising models is simply throwing more and more money at less and less attention. “VRM” is a criminally under-invested opportunity. The industry needs different, not new…

  • Continuing down the path of existing advertising models is simply throwing more and more money at less and less attention. “VRM” is a criminally under-invested opportunity. The industry needs different, not new…

  • Thanks for pointing me to the term VRM as it might explain even more what we are doing with Adcloud than Performance Marketing Exchange does. Having previously built one of the biggest financial performance marketing networks and then having adapted this to the local advertising space, we have learned a lot on how advertisers and publishers really tick, and this is what Adcloud is becoming. A way for these two to really work with each other.

    The goals of both parties are clear:

    * publishers want to earn higher cpms, have better yield-management, transparency and control
    * advertisers want an efficient way to buy well converting traffic in high volume

    For this to happen, publishers and advertisers need to bound together under one platform that is driven by performance metrics so that everyone can talk to everyone but doesn’t have to. Agency X want 10.000 clicks that are good, not caring about targeting, and Publisher Y want part of the pie knowing that he alone is not the entire pie.

    Taking a cue from the VRM list on Wikipedia:

    1. Give them a personal tool
    2. It all starts with an advertiser that wants to know the publishers she works with but not be bound to one or having to talk to each one seperately (more or less connecting once and then forgetting about it)
    3. Publishers need to be able to leverage their advertiser relationships
    4. You need to subplant it with relationships that guide easier negotiations going forward
    5. Advertisers have full visibility and can integrate campaigns from outside of the network
    6. Some customers will want to buy clicks, other go for leads sharing more data but getting more measurable performance
    7. ok
    8. Through having one platform, performance is optimized platform wide in the best interest of all parties based on the shared information. This also allows for better optimization going forward by finding the real data points that matter
    9. Set them free to do what they want
    10. The ad server is amazon aws based on standard formats for products allowing for integration into additional systems and growth from outside of the network

    I am amazed how much it fits. The only thing I am not fully buying into is the idea of giving the user control of their data. We fully have that at Ormigo, the local part, and yes it is a very nice thing, but you will not get a mass of people to do it. What you can do through integration of performance data across a wide network, to track anonymous data to be able to better target your performance based ads. So no email spamming but ads on sites. And there you take the approach of unimposing text links, not hurting publishers branding business and not hurting the user too much. From there you go by just analyzing the underlying data that you collect for those data points that have a meaning. One thing that still amazes me is that most networks out there are running image ads.

    Anyway, thanks for the post. 🙂

  • Thanks for pointing me to the term VRM as it might explain even more what we are doing with Adcloud than Performance Marketing Exchange does. Having previously built one of the biggest financial performance marketing networks and then having adapted this to the local advertising space, we have learned a lot on how advertisers and publishers really tick, and this is what Adcloud is becoming. A way for these two to really work with each other.

    The goals of both parties are clear:

    * publishers want to earn higher cpms, have better yield-management, transparency and control
    * advertisers want an efficient way to buy well converting traffic in high volume

    For this to happen, publishers and advertisers need to bound together under one platform that is driven by performance metrics so that everyone can talk to everyone but doesn’t have to. Agency X want 10.000 clicks that are good, not caring about targeting, and Publisher Y want part of the pie knowing that he alone is not the entire pie.

    Taking a cue from the VRM list on Wikipedia:

    1. Give them a personal tool
    2. It all starts with an advertiser that wants to know the publishers she works with but not be bound to one or having to talk to each one seperately (more or less connecting once and then forgetting about it)
    3. Publishers need to be able to leverage their advertiser relationships
    4. You need to subplant it with relationships that guide easier negotiations going forward
    5. Advertisers have full visibility and can integrate campaigns from outside of the network
    6. Some customers will want to buy clicks, other go for leads sharing more data but getting more measurable performance
    7. ok
    8. Through having one platform, performance is optimized platform wide in the best interest of all parties based on the shared information. This also allows for better optimization going forward by finding the real data points that matter
    9. Set them free to do what they want
    10. The ad server is amazon aws based on standard formats for products allowing for integration into additional systems and growth from outside of the network

    I am amazed how much it fits. The only thing I am not fully buying into is the idea of giving the user control of their data. We fully have that at Ormigo, the local part, and yes it is a very nice thing, but you will not get a mass of people to do it. What you can do through integration of performance data across a wide network, to track anonymous data to be able to better target your performance based ads. So no email spamming but ads on sites. And there you take the approach of unimposing text links, not hurting publishers branding business and not hurting the user too much. From there you go by just analyzing the underlying data that you collect for those data points that have a meaning. One thing that still amazes me is that most networks out there are running image ads.

    Anyway, thanks for the post. 🙂

  • nic

    Thanks Oliver. The thought is that if a user controls her data she will allow targeting on a named basis – with all the benefits that entails. Conversely if she doesn’t feel in control she may resist even anonymous targeting – certainly that is what we are seeing at the moment.

    The need to feel in control runs pretty deep in our DNA.

  • nic

    Thanks Oliver. The thought is that if a user controls her data she will allow targeting on a named basis – with all the benefits that entails. Conversely if she doesn’t feel in control she may resist even anonymous targeting – certainly that is what we are seeing at the moment.

    The need to feel in control runs pretty deep in our DNA.

  • @nic … fully understood, but at this time this just does not work. People don’t run in your door in the thousands and millions to allow you to target them for ads. Just look at Beacon, or a simple change in the TOS here at StudiVZ which needed to remove much of the targeting bit. Often the problem is that people do not understand that their data is not sold but simply used in a controlled environment. And that use can happen with a less clear consent.

    I mean Attentiontrust tried it with a very open system. Root Markets actually wanted to use that data and are a normal lead exchange now. The idea of giving people something for their data is something that you do not need pre-consent for “Order Fortune and get an MP3 Player” is still there. Performance wise you see huge amounts of ads here in Germany for private health insurance way cheap, because people register and you have bad conversions afterwards, but it is still better than running highly targeted correct ads with correct prices in the ads. We’re not doing it because it’s not what we believe in, but it is still something that is out there. And if publishers want highest CPM, then they will go down that road. Otherwise we would presume they are thinking long-term strategy…

    Oliver

  • @nic … fully understood, but at this time this just does not work. People don’t run in your door in the thousands and millions to allow you to target them for ads. Just look at Beacon, or a simple change in the TOS here at StudiVZ which needed to remove much of the targeting bit. Often the problem is that people do not understand that their data is not sold but simply used in a controlled environment. And that use can happen with a less clear consent.

    I mean Attentiontrust tried it with a very open system. Root Markets actually wanted to use that data and are a normal lead exchange now. The idea of giving people something for their data is something that you do not need pre-consent for “Order Fortune and get an MP3 Player” is still there. Performance wise you see huge amounts of ads here in Germany for private health insurance way cheap, because people register and you have bad conversions afterwards, but it is still better than running highly targeted correct ads with correct prices in the ads. We’re not doing it because it’s not what we believe in, but it is still something that is out there. And if publishers want highest CPM, then they will go down that road. Otherwise we would presume they are thinking long-term strategy…

    Oliver

  • nic

    @Oliver – for this to work the model will need to be a bit different – probably a web service that delivers value to you and collects data as a by product, but then offers the option to deliver more value if you allow the use of your data for targeting – all in a transparent, reversible and controllable manner.

  • nic

    @Oliver – for this to work the model will need to be a bit different – probably a web service that delivers value to you and collects data as a by product, but then offers the option to deliver more value if you allow the use of your data for targeting – all in a transparent, reversible and controllable manner.

  • @nic but that is quasi what Attention Trust was, excluding the value bit 😉

    But ok, you think more along the lines of any web service (e.g. mybloglog) that delivers value and collects data next to it (mybloglog) and then tells you that it can now deliver you more value if you agree to the data being shared with e.g. all of yahoo!. Not sure though if that is not already the case with mybloglog 😉

    But it probably needs to be something totally disconnected to the idea of collecting data. A learning system that then asks for permission to use that learning for targeting.

    This makes it majorly expensive though because you need oodles of users before your monetize, and to not have a backlash, you need to be clear from the getgo that you are doing this to collect data. … still need to think about this I think.

  • @nic but that is quasi what Attention Trust was, excluding the value bit 😉

    But ok, you think more along the lines of any web service (e.g. mybloglog) that delivers value and collects data next to it (mybloglog) and then tells you that it can now deliver you more value if you agree to the data being shared with e.g. all of yahoo!. Not sure though if that is not already the case with mybloglog 😉

    But it probably needs to be something totally disconnected to the idea of collecting data. A learning system that then asks for permission to use that learning for targeting.

    This makes it majorly expensive though because you need oodles of users before your monetize, and to not have a backlash, you need to be clear from the getgo that you are doing this to collect data. … still need to think about this I think.

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  • I have been studying the online advertising market for some time. Research indicates that adspend in the UK will pass £1bn in 2008. However, looking at all these investors, venture capitalist and financial institutions wishing to capture that small percent of the market all seem to be missing a very vital point.

    There are over 23million broadband users in the UK and rising. However, although most of these people use the internet on 40% buy online. This is due to the fact that they find searching a minefield. So many search engines, shopping portals and website make it very confusing and infuriating. Most people like to use the internet but they are not tech savvy.

    I think people need a simple way to find what they are looking for and navigate to with in a few clicks. Virtual worlds were created for this reason, but how many of us have a few hours each day to walk around a virtual world like second life. It seems meaningless and with no purpsoe. Sorry 2ndlife fans but i am expressing my honest opinion here.

    Lets face it Google reported record profits in the UK last year. Most adspend online goes on search engines.

    No one seems to be targeting those 60% of DSL users in the UK who do not buy online.

    http://www.mymall.at formerly known as http://www.themall.tv is the first concept that allows advertisers to cost effectively brand themselves and allows users a fast,easy and fun experience via their 3d interface. They do this via a 3d virtual shopping mall that has the best quality of graphics and speed i have ever seen. They recently launched their site with over 500 major brands, 1500 stores in 36 categories hosting over 25 million products…WOW.

    Their model is simple…

    Having studied them they have a great business model too. They claim each mall holds 5000 stores. They charge at £100 per month rent per store. Peanuts compared to the 4 figure weekly adcampaign by Google Adwords.

    Anyway thats £6million per year per mall. They are planning at least 20 malls in different countries and in 12 languages. They have also considered regional malls if the demand is there.

    That makes it £6m x 20 = £120m a year.

    They are targeting 1 million users in the UK and 4 million in 4 years. Their CPA income should work out to at least £1 per registered user per month. I know my figures and guys… im a size 8. They are expecting 50million users globally in 5 years. That makes my calculation at £50m x 12 months = £600m a year in year 5

    so far that is £720m a year.

    With ad revenues at £1 per person per month you can add another £600m making a total revenue of £1,320,000,000.00 a year.

    Try IPOing that…

    That is without their virtual social network income, and their free mobile phone platform said to be better than skype for quality.

    They have set this up with no investors, using their own funds, see today’s lancashire evening post article. i interviewed Ishmael Bahadur the Founder and CEO of MyMall, he said he has been to government grant innitiatives, banks they all thought it wasnt possible. So he invested everything he has to get to this point. he quoted ” great minds have always encountered opposition form mediocre minds” a quote originally from Albert EWhy arnt any venture capitlaists or investors looking at this instead of throwing millions at virtua lworlds that all do the same.

    sofia panagi now a mymall fan.

  • I have been studying the online advertising market for some time. Research indicates that adspend in the UK will pass £1bn in 2008. However, looking at all these investors, venture capitalist and financial institutions wishing to capture that small percent of the market all seem to be missing a very vital point.

    There are over 23million broadband users in the UK and rising. However, although most of these people use the internet on 40% buy online. This is due to the fact that they find searching a minefield. So many search engines, shopping portals and website make it very confusing and infuriating. Most people like to use the internet but they are not tech savvy.

    I think people need a simple way to find what they are looking for and navigate to with in a few clicks. Virtual worlds were created for this reason, but how many of us have a few hours each day to walk around a virtual world like second life. It seems meaningless and with no purpsoe. Sorry 2ndlife fans but i am expressing my honest opinion here.

    Lets face it Google reported record profits in the UK last year. Most adspend online goes on search engines.

    No one seems to be targeting those 60% of DSL users in the UK who do not buy online.

    http://www.mymall.at formerly known as http://www.themall.tv is the first concept that allows advertisers to cost effectively brand themselves and allows users a fast,easy and fun experience via their 3d interface. They do this via a 3d virtual shopping mall that has the best quality of graphics and speed i have ever seen. They recently launched their site with over 500 major brands, 1500 stores in 36 categories hosting over 25 million products…WOW.

    Their model is simple…

    Having studied them they have a great business model too. They claim each mall holds 5000 stores. They charge at £100 per month rent per store. Peanuts compared to the 4 figure weekly adcampaign by Google Adwords.

    Anyway thats £6million per year per mall. They are planning at least 20 malls in different countries and in 12 languages. They have also considered regional malls if the demand is there.

    That makes it £6m x 20 = £120m a year.

    They are targeting 1 million users in the UK and 4 million in 4 years. Their CPA income should work out to at least £1 per registered user per month. I know my figures and guys… im a size 8. They are expecting 50million users globally in 5 years. That makes my calculation at £50m x 12 months = £600m a year in year 5

    so far that is £720m a year.

    With ad revenues at £1 per person per month you can add another £600m making a total revenue of £1,320,000,000.00 a year.

    Try IPOing that…

    That is without their virtual social network income, and their free mobile phone platform said to be better than skype for quality.

    They have set this up with no investors, using their own funds, see today’s lancashire evening post article. i interviewed Ishmael Bahadur the Founder and CEO of MyMall, he said he has been to government grant innitiatives, banks they all thought it wasnt possible. So he invested everything he has to get to this point. he quoted ” great minds have always encountered opposition form mediocre minds” a quote originally from Albert EWhy arnt any venture capitlaists or investors looking at this instead of throwing millions at virtua lworlds that all do the same.

    sofia panagi now a mymall fan.

  • nic

    Thanks for a great comment Sofia

  • nic

    Thanks for a great comment Sofia