Tag Archives: online advertising

Getting display advertising to perform on social networking sites has always been challenging. There are inherent hurdles of the media including:

1. User-to-User Communication Experience lends itself for users to zone out ads
The next time you see two people having a conversation, try passing them an advertising flyer. They are far from being in a mode that is receptive to marketing communications. Social networking traffic is made up of primarily this type of communication whether it is exchanging messages, reading your friends status or leaving comments for a friend.

2. Not Aggregated around a Purchase Intent
Sites like TheKnot.com or TripAdvisor.com aggregate users around a purchase intent. TheKnot.com‘s audience is in the process of putting together their wedding and are in the market for services like photographers, caterers and florists. And TripAdvisor aggregates travelers who are in the market for flights, hotel rooms and travel insurance. Well, the issue with most social networking sites is that they are not aggregating users around a purchase intent and are not on the site in purchase mode or even research mode. Therefore, social networking sites are not as effective in terms of bringing consumers to advertisers at the right time to effectively market to them.

So the fundamentals of advertising – reaching the right consumer at the right time and at the right place implies that social networking sites are inherently not ad friendly because they are delivering consumers to advertiser at the wrong time and place. However, what social networking sites may have that is unmatched by any other site is the information so marketers can identify the right consumers to target. Social networking sites collect more self identified data than any other type of sites. Think about the data that you provide…..age, gender, location, marital status, occupation, favorite books, music and movies. And then additional data that you provide as you spend time on the site. When you download the Texas Hold’Em app, they know you like poker, when you become a Fan of the Yankees page they know you are a Yankee fan. So with all this data, how do marketers leverage it?

Well, the best advertising play for display may be taking that data and applying it when a user is on another site. Therefore combining the ability to target the right customer at the right place and time. Sound like something that is far away….think again. Look at what is happening:

– LinkedIn.com recently created audience extension targeting by using Collective Media’s Amp platform. LinkedIn allows advertisers to target based on LinkedIn profile information such as Online Marketing professionals on other sites within the Collective Media network which includes most of the Comscore 250 sites.

– Facebook is currently working on an ad network play by using Facebook Connect.  Facebook Connect is already getting traction by allowing publishers to grow registrations by using Facebook Connect.  Now they are testing an ad network solution which they will be able to sell ads on Facebook Connect sites by leveraging their user data.

– BlueKai has created a data exchange that allow partners to buy and own intent data across any media.  Social Networking sites may be the largest data provider on intent data in this type of exchange.

At the end of the day, data may end up really being the fuel that online display advertising needs to grow more explosively.  The dirty secret about display advertising is that is for the most part a very poorly optimized and inefficient advertising vehicle.  The promise of the online advertising was the ability to deliver the right message via a 1-to-1 basis.  However, the lack of the portability of data has been a major roadblock.  Looks like those days may be over.  Now the next roadblock may be the proper technology to really optimize campaigns using that data.  We will save that for another conversation…..

In the JP Morgan Internet Report 2009, they cite that Internet display advertising will grow only 6% while search will grow at 11%. They attribute the slower growth in display to:

– Lower ad budgets given macroeconomic weakness and shift towards performance based advertising
– Continued pressure on non-premium inventory pricing as social networks and other non-traditional sites struggle to find a monetization model that works
– Difficult comps due to the 2008 Olympics and political campaigns
– Continued trouble finding an appropriate way to monetize video inventory without alienating users

The issue of social networking inventory is more complex then what is briefly defined in the report. Social media sites especially social networks have exploded in traffic over the last 5 years. That is no secret. With that being said, the display market has been flooded with billions of additional impressions per month from MySpace, Facebook and the countless social networking sites that emerged on the scene. My guess is that social media now accounts for at least half of the available ad impressions in display. Most of this inventory is sold through ad networks and yield single or teen cent eCPMs. The failure of growth of display is obviously not a supply issue. So why is demand not taking advantage of supply and capitalizing on the this incredibly opportunity of cheap available inventory. Here are some key reasons:

1. Social Media Companies are Not Properly Pricing Inventory
If you called MySpace and tried to buy display, they will quote your prices ranging from an eCPM of $2 to $5 depending on volume, targeting and the placement. However, you can go through other indirect channels (ad network, exchanges, etc.) and pay an eCPM of less than $.20. And what happens is that the high eCPM revenue probably only consumes no more than 20% of their ad inventory. The rest of that inventory gets unloaded through third parties at rock bottom prices. So why the discrepancy? Well, the mindset in these organizations is to price inventory competitively against other sites especially content sites and portals. And they are adamant about it because they feel that pricing their rate card too cheaply will create a negative perception of their site as an advertising platform. They also worried that once advertisers buy inventory at low prices that it will be difficult to get them to pay for high CPMs later.

I find that argument ridiculous and I regret at Community Connect that we didn’t price inventory more efficiently. Whether it is for branding or performance advertising campaigns, advertisers are measuring performance. If you have the available inventory, price that inventory cheaply in order to give advertisers the ROI for them to spend more. Advertisers are complaining about the efficacy of social networking advertising. Of course they are, content sites are naturally better performers on an impression to impression basis because of both the context and the time spent on the page. However, social networking sites have virtually no inventory constraints. So if they can’t beat them by the performance of the impression, beat them in price to get them the ROI that they need.

2. High Engagement is Bad for Advertising IF you Don’t Properly Frequency Cap
Social networking sites have an incredible amount of inventory because there are a core number of users that visit the site regularly and spending an immense amount of time during each visit. Showing that user the same ad too many times is the kiss of death. Most of the remnant ad inventory goes through ad networks which ask for frequency caps but only for their campaign. So let me give you and example:

Advertising.com offer $.40 CPMs and says frequency cap my campaign at 3 per day. Via that campaign they run an ad for Vonage and it is served with the frequency cap. The social networking site then runs ValueClick ads who offer $.35 CPMs with a frequency cap of 2 after they fill the order of Advertising.com (you fill Ad.com b/c of the higher CPM offered). ValueClick doesn’t know that Advertising.com already served the Vonage ad and then serves 2 impressions for the same Vonage campaign to that same user who got 3 impressions from Advertising.com. So imagine if you are the 40th ad network in line and that you are also serving the Vonage campaign. That user may have already gotten 100 impressions that day of Vonage! They are going to completely ignore that ad. Why does this happen – there is no common operating system for the publishers and ad network to know what campaigns are running. The social networking publishers just see a generic ad tag from the ad network and have no idea what ads they are going to run through there and the ad networks have no idea of what campaigns the other ad networks are running and what frequency campaigns. Does this sound efficient to you? This is a disaster that continues to happen in the industry.

3. Not Leveraging the Targeting Capabilities
Tell me of any type of site that collects more individual demographic and psychographic data than social networking sites. You can’t because the amount of data that is collected from users is unsurpassed. Everything from age, gender, location, school, occupation, religion, marital status, music interests, favorite books and movies, and on and on and on. What a treasure trove of data. Yet no one knows how to leverage it. The ideal advertising technology would be able to take a campaign and be able to determine what segments are performing better and weigh those impressions accordingly. It would be able to tell what attributes of that user actually correlate with performance (for example does gender or whether they do yoga effect performance) and then create segments on the fly to optimize against. Now imagine how you can then use this data across other sites to combine with context to further optimize a campaign. Can you imagine if you can run a pharmaceutical campaign on a health site with the additional targeting from the data that was acquired from a social networking site. If you can optimize based on context AND demographic AND psychographic then you would see much stronger ROI from display.

Internet display advertising is not exempt from the basic tenets of effective advertising:

“Delivering the right message to the right person at the right time” (while of course doing it at the right price). This was the promise of internet advertising. I can tell you right now for social media, it is not even close to living up to that promise. They figure this out, you are going to see real growth in social media advertising.

JP Morgan Nothing But Net Report 2009