The customer as god

By | VRM | 4 Comments

Most businesses figured out a long time ago that delivering good customer service is a pre-requisite for long term financial success. If you’re like me you will have noticed that more and more often issues can be sorted out with a single email or phone call (although some providers remain frustratingly awful at looking after their customers – particularly banks and telecoms companies). A quick history of the phrase ‘the customer is always right’ is illustrative here. Use of the phrase dates back to the early 20th century when the concept was championed by a few visionary firms (including Selfridges here in the UK), then by the beginning of this century management were pushing the idea so hard that comedians derided it as a cliche, and now it has become so widely accepted that people don’t really joke about it.

However, all of this progress hasn’t really made its way into the world of advertising yet.

Back in 2008-09 I wrote a few posts about Vendor Relationship Management (VRM), a conceptual framework for improving the customer experience of being advertised to which turns the traditional advertising model on its head by putting the customer in control of the adverts they see. In theory this should be better for everyone – the customer only sees ads that are relevant to things they want to buy or do, and the advertiser can avoids the waste of advertising to people who aren’t interested in their product.

Doc Searls and the other proponents of VRM have sketched out a technical architecture for the services that are required to make this vision a reality, the most important element of which is a personal datastore for each consumer which tells advertisers which products and services they are allowed to advertise. The datastore contains rich profile information which is valuable for advertisers, but the contents and access to the datastore are controlled by the consumer, who may choose to see no ads at all.

I stopped writing about VRM in 2009 when it became clear that the practical challenges to implementing VRM were such that we were unlikely to see any successful startups in this area in the short term. I think the biggest challenge is getting consumers to engage with the concept, both by contributing to a personal datastore and then by updating their preferences so advertisers know what they might want to buy. For a service to work the data needs to be captured and the preferences inferred without any effort from the consumer, and to my knowledge nobody has found a way to do that.

I still believe in this vision of the future though. It is much more efficient than today’s advertising which, despite much improved targeting, is still mostly irrelevant to the consumer and increasingly simply not seen.

I’m writing about this now because I just read an interview with Doc Searls about his new book, The Intention Economy. The interview is a good reminder of the problems with the existing advertising system and how things will look different in the future. As I say, I still believe in the vision of VRM, but equally the path that gets us there still isn’t clear. I think developments in smartphones and intelligent agents are bringing us closer to the point when that clarity will arrive though, and I’d be happy to hear from any startups working in this area.

Time for something new in online advertising

By | Advertising, Consumer Internet, VRM, Widgets | 17 Comments

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.

The advertising industry should become the consumers friend

By | Google, Privacy, VRM | 7 Comments

Online advertising continues to grow fast fueled by increasing consumption of entertainment online and growth in ecommerce (up 38% YoY according to NMA).

That is the good news.

The bad news is that outside of search the existing models are coming under strain due to banner blindness and lack of tolerance for interrupt advertising. The industry response so far has been to focus on targeting the ads better, which makes sense, but I’m not sure it will take us far enough.

As I have been saying regularly on this blog and elsewhere, the best potential answer to this problem that I have heard is a shift to permission based advertising based on a user controlled profile. Something I have been calling VRM.

By profile information I mean things like surfing history, search query
history and user entered data about their likes, dislikes, wish lists
and so on.

Reading NMA this morning the following excerpt made it clear to me that at this stage there is far too little trust between the advertising industry and consumers for this stuff to work. This is from the Privacy Special in the NMA of 17/7/08 (no link due to their paywall):

Privacy storm brewing

May 2006
121Media closes its ContextPlus ad-serving service, amid the threat of legal action, and becomes known as Phorm

June 2007
Privacy International labels Google data retention policies ‘hostile to privacy’

March 2008
After BT is joined by TalkTalk and Virgin Media as potential Phorm users, public outcry sees Phorm‘s share price drop by a third in a day; Tim Berners-Lee, inventor of the web, warns privacy is being eroded online. He claims that he would change his ISP if it worked with Phorm.

April 2008
The Information Commissioner’s Office says Phorm is legal so long as it is strictly opt-in; Google rejects calls from the EU’s Article 29 Working Party for it and other search engines to not keep cookie data beyond six months, following its volunteering in 2007 to ‘anonymise’ data held longer than 18 months.

July 2008
Privacy protesters threaten to picket BT‘s AGM and give police evidence of earlier Phorm trials on its network; Phorm and BT maintain, despite past slipped deadlines, the ISP will start rolling out Phorm shortly.

This shows the absence of trust very clearly, and the cost of that absence for BT and Phorm.

My strong instinct is that the only way consumers are going to get over this lack of trust is for a) the advertising industry to start sounding like it cares, and b) if we find a way for people to experiment with letting people target ads against them in a low risk fashion.

The best way I can see for this to work is to build consumer internet apps which generate profile information as something of a by-product and then to give users the option to edit their information and also to opt in for ads to be targeted against it.

Esther Dyson on the future of advertising

By | Advertising, VRM | 2 Comments

Esther Dyson penned an article for the Wall Street Journal in February. It is a great article, and you should read the whole thing if you are interested in this area, but there are two pieces in particular I wanted to pull out.

1) The current model of advertising is heading into a dangerous place:

This market will get more competitive, and users will be barraged by ads to which they will pay less and less attention. Call that public space, a world of billboards and cacophony. Even though the ads will be more “relevant” than ever, users will increasingly tune them out.

This plays to a couple of themes I have been discussing off and on for a while. Firstly users increasingly don’t see the ads on the page. Their eyes tune them out. Secondly we need something more radical than behavioural targeting – I suspect that the improvements of increased relevance will struggle to keep pace with the losses from people tuning ads out.

2) The answer to this problem lies in recasting our notion of privacy:

The discussion about privacy is changing as users take control over their own online data. While they spread their Web presence, these users are not looking for privacy, but for recognition as individuals — whether by friends or vendors. This will eventually change the whole world of advertising.

All of which brings us back to VRM.

VRM – requirements of a good service

By | VRM | 8 Comments

For a reminder of why marketing is broken and a detailed set of requirements for a good VRM service to fix it check out this post from leading European VRM thinker and practitioner Iain Henderson – Hard Re-set Required for Direct Marketing to Re-invent Itself.

In summary Iain argues for total control of customer data by the customer, 100% opt-in, and control of when, where, and how advertising messages are received.