Advertising Online, Reactionary with Insight

Google Dumps Yahoo – Finally

ari@arikaufman.com (Ari Kaufman) — Wed, 05 Nov 2008 15:08:18 GMT

Google has finally recognized that this deal was never going to come true. And the opportunity-line for Yahoo has been severed. A Microsoft offer is not going to be at a premium, it’s going to be a lifeline. Ultimately, two companies that have a proven history of being horrible at integrating acquisitions should not merge. Yahoo and AOL coming together would represent the largest distraction in the industry, giving Google more time and opportunity to grow even faster and more furiously than before. Over the next 6 months, Yahoo and AOL will lose more market share to Google while they figure things out. What alternatives exist? Would IAC and ASK.com consider selling its ASL network to Microsoft? What if Microsoft and Yahoo don’t do a deal ever? What if Microsoft simply approaches Yahoo with the same deal that Google approached them with. Just run Microsoft ads on Yahoo. Now there’s an alliance only purgatory could create!

Google has finally recognized that this deal was never going to come true. And the opportunity-line for Yahoo has been severed. Now what? Enter Balmer. 3-2-1, how many days will pass before we read of an offer for $15, maybe $20 a share at most. Trading at $13 a share today, the day after Obama was elected President of the United States. You would think that the election results would have driven the market up, but job-loss numbers are pushing a 400pt drop instead. A Microsoft offer is not going to be at a premium, it’s going to be a lifeline. If Yahoo tries to hold out and go for the AOL deal, they will delay Balmer and probably allow their stock to drop further over the next 6 months and yield an even lower offer as a result if AOL fails to come through.

Ultimately, two companies that have a proven history of being horrible at integrating acquisitions should not merge. Yahoo and AOL coming together would represent the largest distraction in the industry, giving Google more time and opportunity to grow even faster and more furiously than before. Over the next 6 months, Yahoo and AOL will lose more market share to Google while they figure things out. Yahoo will get so buried in the post-deal work that Google will have the opportunity to rapidly steal customers and demonstrate to publishers that their superior ad base warrants additional exclusive access to their inventory.

Microsoft will have to strive for acquisition wherever they can find it if they are going to compete, really compete, in the game. They can go after the combined Yahoo and AOL – which will be at a premium over the original Yahoo offer – or they can look to roll-up the remaining 10% of the industry covered by the tier-2 networks. If Yahoo and AOL merge, and Microsoft subsequently buys just the search business that would leave Yahoo and AOL out of that game and fledgling. Microsoft would have picked up 20+pts of the market and would have to figure out how to integrate together and manage two degrading networks that are losing to Google at the same time.

What alternatives exist? Would IAC and ASK.com consider selling its ASL network? Doubtful. But it does have several thousand advertisers and several thousand distribution partners. What about LookSmart, MIVA, Industry Brains and Seevast? That’s a lot of work for Microsoft to do, but it’s a consolidation that needs to happen at some point. Google gobbles market share, and they are taking it from Microsoft. Not from the tier-2 networks. Not yet. I’ve written about this before. Microsoft either buys Yahoo now, or buys just the Search business from Yahoo-AOL. Or they turn their heads and gobble up a few of the tier-2s while Yahoo-AOL get organized and degrade in value and beg for Balmer to buy them later.

Here is another totally interesting question. What if Microsoft and Yahoo don’t do a deal ever? What if Microsoft simply approaches Yahoo with the same deal that Google approached them with. That deal is indicative of the fact that Yahoo wants out of search. DOJ would probably approve the two smaller players coming together against Google. If Microsoft wants to stay in the game, let them just do the deal with Yahoo to acquire the inventory and run their ads on it. Screw the M&A. Run Microsoft ads on Yahoo. There’s an alliance only purgatory could create!

Yahoo-Microsoft Deal Inevitable?

ari@arikaufman.com (Ari Kaufman) — Mon, 27 Oct 2008 15:33:51 GMT

Is the Yahoo-Microsoft Deal Inevitable? Ballmer said a deal between Microsoft and Yahoo! Inc. may still make economic sense for shareholders of both companies. No need to review the already well-known history of this story. Why is Microsoft waiting? First, there is the Yahoo-AOL deal. Second, is the DOJ investigation into the Google-Yahoo advertising deal. Is this the end of an era? “Do you Yahoo?” has been replaced with “Google-it.” The DOJ has conducted literally tons of interviews these conversations have undoubtedly gone deeper than just the deal. Finally, the DOJ has a solid understanding about why Google has a monopolistic path.

For Microsoft to compete in search they have to do something disruptive. Buying Yahoo! only buys time. The question is not will Microsoft buy Yahoo!. The real question is what will Microsoft do after they buy Yahoo!. Buying time is not much of a plan. Microsoft will still be playing a losing gain.

Steve Ballmer said a deal between Microsoft and Yahoo! Inc. may still make economic sense for shareholders of both companies. This not-so slip of the tongue at the Gartner conference in Orlando on October 16th of course sent Yahoo shares up during another one of the daily rapid cycling behaviors of the daily market performance.

Since the beginning of the year, Microsoft has been looking at Yahoo! No need to review the already well-known history of this story - the first bid of $47.5 Billion and the second bid of $33 Billion. Today, Yahoo! Has a Market Cap value of $16.5 Billion and if Microsoft were to re-engage in talks with Yahoo! they would most likely no longer bother looking at the totality of the company but rather a subset of just the search business.

Why is Microsoft waiting - if they are waiting at all?

First, there is the Yahoo-AOL deal. AOL reports earnings on November 5th. So if there is any information to be revealed it may come out during that call. Second, is the DOJ investigation into the Google-Yahoo advertising deal. Microsoft has no choice but to wait and see how these two situations play-out based on how Yahoo! has responded to previous buy-out attempts.

Carl Icahn’s appointment to the Yahoo! board was originally thought to be a stimulus to making a sale happen, but that has not been the case thus far. Instead, the leadership remains in place and the core strategies remain largely unchanged. Quarter-end results were received negatively last week and the company continues to erode in front of our eyes while a 10% RIF further indicates the downward spiral of this former tech-darling giant.

Is this the end of an era? “Do you Yahoo?” has been replaced with “Google-it.” Yahoo has historically demonstrated a poor acquisition strategy, falling short on implementation. They have grown and stalemated their text advertising business, returning to a display advertising strategy rife with technology glitches in a market where advertisers are placing heavy bets on direct response rather than CPM.

What does all of this mean? The writing is on the wall – in big, bold, block letters. Yahoo! has no clue what they’re doing any more. Balmer will strike when the timing is right, if at all. When will that be? After DOJ finishes demonstrating that they have a mighty strong case.

The DOJ has conducted tons of interviews on this deal and these conversations have undoubtedly gone deeper than just the deal. While the DOJ may be focused on the potential of Google gaining an 80% stake in the search market, they are also having significant light shed on the ever-changing algorithm that forces everyone to change their technologies on an ongoing basis. They are learning about the occurrence of price inflation on popular keywords which has been taking place even as advertisers decrease spend – indicative of unnatural pricing pressure within the auction. They are learning about the industry-wide pressure being placed on distribution partners in terms of their sources of traffic – such as the arbitrage business - and the squeeze that is occurring with regard to Google no long paying for what they arbitrarily deem to be “suspect” traffic. The DOJ is learning about exclusivity requirements placed on publishers that require only Google ads on pages, blocking other sources of ads from competing on the page.

These are just examples of the domination business practices, which are commonly known within the industry and that are being brought to light for the DOJ. I don’t think that any of these issues will come up now, with regard to the Google-Yahoo! deal, but the DOJ is getting heavily educated. Which is about time! What it does all mean is that the next time someone raises a red flag, which may be sooner than later, the DOJ will have a solid understanding about why there are issues and what the complaints reference. And most important this exercise will position the DOJ well going forward with the right mindset for HOPEFULLY preventing the monopolistic avenue that Google is traveling.

So will Microsoft buy Yahoo? Maybe. Is it worth that much to Microsoft? At the end of the day, Microsoft’s core business is the Office platform. Not the operating system. A huge portion of their revenues have been from Office for a long time. Other LOBs add to that stream including advertising, search, XBOX and Vista, but Office carries the ball. But Microsoft continues to declare that they want to compete in the Search realm but as the #3 player they have to do something disruptive to stay in the game long term.

Buying Yahoo! only buys time. It buys a degrading market share – both Yahoo! and Microsoft are losing share every month to Google. They can look beyond Yahoo! and consider buying additional share from the remaining 10% that is not controlled by the big three engines, but all of that only buys more time from the inevitable trend. ASK has some recognizable share – but 95% of their search ad revenues come from Google as well.

So I don’t think the question is so much will Microsoft buy Yahoo!. I think the real question is what will Microsoft do after they buy Yahoo!. Here are the most current share positions as provided by Comscore:

Google  62.9%
Yahoo  20.2%
AOL  4.1%
Microsoft 8.5%
Ask  4.3%

If Microsoft buys Yahoo! they will have 30% market share. But again, that number will erode over time. If Yahoo buys AOL, that only lifts Yahoo by 4% - not much of a gain. Microsoft could still look to buy the combined Yahoo!-AOL search business – however unlikely – bringing them to 34%. ASK combined into the equation would bring it to 38%. But of course that will never happen. ASK is tied up with Google and I can guarantee you that there is a clause that says IAC can’t sell ASK to anyone without Google’s approval. You can bank on that one.

So again, what does Microsoft plan to do after they buy Yahoo! to stop the erosion. Buying time is not much of a plan. Unless there is some plan to go after the jugular that pinpoints the rapid growth of Google’s climb to dominance Microsoft will still be playing a losing gain.

Let’s get some conversations going on this one.

Tech-Crunch Layoffs – Is it a Financial Crisis or a Clean-Up Opportunity, or Both?

ari@arikaufman.com (Ari Kaufman) — Wed, 22 Oct 2008 15:47:53 GMT

So the economy took a nose-dive this past month. Yahoo’s stock is down more than 35% in the last 30 days, Google is down 16% and ebay is down 34%. The Online Media sector is taking a beating for sure. Yahoo! is laying-off 1,500 people and eBay already laid-off 1,500. But how many of the companies doing lay-offs are financially strapped or in trouble? At this point, any company can announce a 'me-too' lay-off without having to provide much explanation.  A lay-off now would actually be perceived as an indication of good fiscal management! So for many companies this is a great opportunity to ‘cut the fat’ and get away with it. But look closely and you will see that while some companies are eliminating positions, they will be creating new ones elsewhere in the company. Out with the old and in with the new. RIFS are fundamental.

The economy took a nose-dive this past month. Yahoo’s stock is down more than 35% in the last 30 days, Google is down 16% and ebay is down 34%. The Online Media sector is taking a beating for sure. Advertisers are cutting budgets and channeling the remainder of their spend where they can specifically measure results.   There is no question that the ride has gotten bumpy and will likely get worse before it gets better.

So Yahoo! is laying-off 1,500 people. EBay already laid-off 1,500. Now Wikia is laying off 30% of their team after Pandora laid-off 14% of theirs.   The image I am providing is the Tech Layoff Scorecard from CNET. You can find it at http://news.cnet.com/8301-1001_3-10069195-92.html. This chart illustrates some of the recent lay-offs that have been reported across the industry and it is updated daily:

Company	Date	How Many
SanDisk	10/22/2008	TBA
ManiaTV	10/22/2008	20 of 70
iMeem	10/22/2008	25% of 80
Mahalo	10/22/2008	10%
HP	10/22/2008	24600 over three years
Yahoo	10/21/2008	10% of ~14,300
Ticketmaster	10/21/2008	35%
Comcast	10/21/2008	300
Softchoice	10/20/2008	6.5% of 958
Veoh	10/20/2008	0
Wikia	10/20/2008	3
Autotrader	10/20/2008	69
Texas Instruments	10/20/2008	possibly 300
Sprint	10/17/2008	ongoing
Jaxtr	10/17/2008	13
Zivity	10/17/2008	33%
Zillow	10/17/2008	25%
SearchMe	10/17/2008	20%
Heavy	10/17/2008	14%
Lenovo	10/17/2008	50 in Morrisville, N.C.
MPC Computers	10/17/2008	200
Hi5	10/16/2008	10-15%
Sirius XM	10/16/2008	50
Pandora	10/16/2008	20
Adbrite	10/16/2008	40%
Tesla Motors	10/15/2008	Detroit office
SkyRider	10/15/2008	All
Appcelerator	10/15/2008	6
Jive Software	10/14/2008	33%
Redfin	10/14/2008	20%
Seesmic	10/10/2008	7
Lulu	10/9/2008	24
Micron	10/9/2008	15%
eBay	10/6/2008	1000
Gawker Media	10/3/2008	14%

VCs and PE firms are handing down the word to their portfolios: ‘tighten your belts boys, and stretch your funding for the next three years.’ The wells aren’t dry, but the likelihood of exits in this sector with this market just got pushed out. It’s definitely time to shine the spotlight on venture-backed tech companies, that promised high-value returns, who still haven’t figured out how to make money. VCs and PEs take this time to reassess their portfolios. They’re already invested pretty heavily in the space so now it’s a matter of suring up those investments. How strong are the existing management teams in place? Are we going to rescind the next traunch? Should we make some structural changes at the leadership levels? One thing is for sure … VCs are getting active with their companies.

Is this the next bubble-burst? Not necessarily. We all know that the economy is in a recession. How many of the companies doing lay-offs are financially strapped or in trouble? Some of them are as we can see or estimate. Some of them, like Yahoo and eBay need to scale-back just to maintain shareholder value or keep profitability at expected levels. Other smaller venture-backed companies need to scale back costs until they can get their revenues up to support the business.

But when big companies RIF (reduction in force) it also opens the door across the industry. At this point, any company can announce a me-too lay-off without having to provide much explanation. In fact, at this point in time, a RIF will likely be perceived as an indication of good fiscal management in response to economic uncertainty, inflation in our sector and the forecasts of decreased spend from advertisers. So for many companies this is a great opportunity to ‘cut the fat’ and get away with it.

RIF opportunities come in cycles. When big companies do a layoff – like Yahoo did a year ago – other companies follow suit so they can move under the radar of the headliner. Do all of these companies need to RIF? Nope. In fact, look closely and you will see that while some of these companies are eliminating positions under the guise of good fiscal management, they will be creating new ones elsewhere in the company. The East Coast Sales Director will be replaced by the National Business Development Manager. The Global Market Strategy Director will be replaced by the Corporate Product Marketing Director. These changes don’t necessarily happen at the same time. Smart companies let 90 days pass between the two moves. This allows the RIF to happen in one quarter, and the opportunity to report the impact, before going into the next quarter when the re-expansion occurs. Out with the old and in with the new.

So with the current lay-offs in the industry, what does that mean for companies that want to grow – great hiring opportunities? Yes and no. RIFS don’t usually flush the good people, they flush they expendable people while the good people get retention bonuses or extra stock options. The market will get flooded with mediocrity and one man’s fool will look like another man’s gold. I am not saying that there won’t be any good candidates put out to pasture, but hiring managers will have to do a lot of interviewing to find them. Tactically, the opportunity to hire is to go at the companies that just did layoffs and try to hire the retained people while they feel unglued. Good recruiters know this already.

But in the end RIFS are fundamental operating procedures – and opportunistic initiatives that are taken when the elephants are under the microscope. Don’t let 400 point daily swings in the Dow and RIFs make you think that the bubble is coming. Think a quarter or two out. There are some very good technologies out there, game changers. There are a lot of dollars invested in some real businesses and accomplished teams. Advertisers need to make money and need now more than ever to invest in marketing and sales to do it. It’s bumpy now, and will stay this way for a while. But look carefully through the dust being kicked-up and see the movers and shakers that are in motion beyond the RIFS. It’s probably not a ‘pop’ you’re hearing but plans for more growth.

Advertiser Control Over Ad Spend and The Swinging Pendulum

ari@arikaufman.com (Ari Kaufman) — Tue, 21 Oct 2008 14:52:51 GMT

There is big pendulum swinging over who controls spend in Online Media. The economy has taken a swinging nose-dive and everyone is looking for signs of fall-out. One thing that is for certain, Advertisers are aggressively taking back control over their spend. There will be budget cuts of 15% of more across the board in Q4. The place where those cuts are starting is anyplace where an ROI can’t directly be derived. If a publisher can’t prove a return they will lose the spend. Response-based advertising is probably the most insulated area of the industry. This means a push from CPM towards CPC and CPA, even for display. Advertisers will be driving the pricing models and publishers will have to buckle in order to sell inventory. With less money to spend, more pressure to perform, hundreds of publishers and networks competing for the reduced dollars at hand…advantage advertisers.

Here is the story...

My good friend, Jonathan Ewert says that every four years there is a great big pendulum that swings in our industry. On the end of that ball is the influence factor over who controls the dollars in Online Media.

In the late 90s it was clearly the advertisers who had the control. As they began to test the new medium and brought dollars to the internet in increasing amounts, advertisers tested all kinds of mechanisms that the publisher could come up with. But it was the advertiser that dictated what measured performance, what the price they would pay and what services they expected in terms of campaign management and reporting.

Then the pendulum swung in the other direct – towards the publisher – as online media shifted from "new media" to internet advertising. “Standards and policies" were written. Publishers started driving pricing; and ad server utilization, campaign management provisions and acceptable reporting became organized and structured according to what Publishers were willing to provide. Advertisers had to start working with what was available, throwing more resources and time at managing the diversity that clients were demanding which made the process of managing internet advertising increasingly more expensive.

Competition for inventory rose steadily once again following the recoil of the bust and price inflation followed. The explosion of ad networks broadened advertisers' options and the result was a drastic overload on resource requirements to manage just a single campaign.

While all of this was going on, Search outpaced display as advertisers began to recognize the value of response-based advertising and Google's climb to the top of Everest was off to the races.

Fast-forward to the beginning of 2008 and you had topped-off CPMs, somewhere between 200 and 400 ad networks (depending on who is counting) and Google controlling 60+ % of the addressable Query stream on the Internet – 90% collectively controlled by Google, Yahoo and MSN.

Throughout the first-half of 2008, prices hit all time highs in search as traffic growth online slowed and competition for popular keywords rose. CPMs for targeted quality display inventory trumped the last four years and publishers began to push to reclaim inventory from the networks that had been previously aggregating and watering down their value.

Then the big ball started to swing. With the advertiser no longer able to increase spend in search without compromising ROI and publishers reclaiming display inventory in order to elevate CPMs, something had to change. Additional factors at play, aggravating the situation, was the continued consolidation of search (think Google’s increasing share of the Market – the Yahoo deal, Google running on ASK, etc.), the intense-resource demand on advertisers associated with managing disparate data sources, and publishers trying to push CPMs while a massive number of networks commoditize eyeballs. All of this equates to the advertisers almost hitting a breaking point.

Then the economy took a swinging nose-dive and everyone started to run around asking themselves what is the fall-out result for online advertising. Is this the next bust? Here come the layoffs. How many VC-backed companies are going to go under which have promised huge returns with no revenues to prove it? One thing that is for certain, Advertisers are aggressively taking back control over their spend.

You can figure there will be 15% cuts in budgets across the board in Q4. At least that is what some of the larger advertisers are talking about and that is what some of the networks are already hearing. The place where those cuts are starting is anyplace where an ROI can’t directly be derived. Lookout publishers – if you can’t prove a return you’re going to lose spend.

Response-based advertising is probably the most insulated area of the industry over the next 2 to 4 quarters given our economic environment. Advertisers have to advertise to keep generating business, but branding online is going to suffer. This means a push from CPM towards CPC and CPA, even for display. Advertisers will be driving the pricing models and publishers will have to buckle in order to sell inventory.

Furthermore, diversification of spend across less expensive, higher-returning publishers and networks will also draw attention. This means that advertisers who have hit the asymptote of their returns on Google or the major display ad networks – when spending a dollar no longer returns $1.50 but now returns $1.25 – will start to look elsewhere to maintain their margins. With smaller budgets to spend, ROI pressure will become intense. We may even begin to see performance-based commissions between advertisers and agencies as competition for control over the spend increases between agencies. Certainly this will be a likely case in the SEM arena.

So the pendulum, which started to swing in the beginning of Q2, went full tilt when the market dove. Advertisers now hold the cards and publishers and networks that recognize the truth will step up and work with them to maximize the value of their relationships given the pressures present in the economy.

With less money to spend, more pressure to perform, hundreds of publishers and networks competing for the reduced dollars at hand…advantage advertisers.

DoubleClick Launches Online Marketplace

ari@arikaufman.com (Ari Kaufman) — Wed, 11 Apr 2007 09:52:37 GMT

As reported in iMedia Connection on April 4^th, “Buyers and sellers of online display advertising will have a new forum for making deals; at least that is the premise behind DoubleClick’s latest proprietary product, DoubleClick Advertising Exchange.”

A mediated exchanged between buyers and sellers for the exchange of advertising inventory is not a new concept. Right Media is the best example of a well-executed version of this concept. I commented on Right Media several weeks back in Disintermediating Ad Exchanges, Publisher Ad Auctions. The argument back then was that in an ad exchange environment like a Right Media, where buyer and seller are brought together anonymously under an auction based environment, there is no relationship developed or fostered in the buy process. My proposal hypothetical question in that article was, what if you could eliminate the middle-man of the exchange and put buyer and seller together.

That article generated a response from Right Media. Bennett Zucker contacted me for a little education conversation. Subsequently, I wrote a follow-up comment acknowledging the value proposition of Right Media.

Some of the things that I learned my research into RM and other exchange models is that publishers are migrating away from the traditional networks because they are getting better rates through the exchanges. Inside sources have shared with me that Advertising.com, Tribal, Burst and other popular networks have all seen a measured decrease in publisher inventory while that same inventory has reportedly shown up on RM.

So now DoubleClick is going to enter the exchange game. Think back a while and recall that DC was one of the original networks. Of course I don’t believe there is a single person remaining at DC who was involved in that operation, but the heritage is there – and maybe some of the legacy technology. Regardless, they’ve built the exchange technology. They have the publishers with DFP and they have the advertisers with DFA. Put them together and link the two systems and you have a broad network of exchange. Get out of the way and you potentially have a model that will rival Google’s cake-and-eat-it-too mode of AdSense and Adwords.

DC has some challenges ahead of them. I don’t know the nuances of how well they are going to tie together DFP and DFA, but as hosted solutions they can upgrade and link the two and the users will see the collaborative efforts. If publishers start pushing inventory into the system and advertisers start looking into the system to buy, you have a strong value proposition for both sides of the transaction. Under this model, neither buyer nor seller needs to go to a different system like a Right Media to transact.

Under the DoubleClick exchange, it is largely publisher inventory that is at stake, whereas with Right Media is mostly network inventory. So will advertisers who use DART start to look at the exchange for publisher inventory – or will publishers first begin to test the DC exchange in addition to “offshoring” inventory to networks and auctions? Time will tell and the testing model of DC will be a good approach so the top-success-oriented players demonstrate the desired results. But this is one to watch closely as it could be game-changing.

Reactionary with Insight

Moving Beyond Event-Based Targeting

ari@arikaufman.com (Ari Kaufman) — Wed, 11 Apr 2007 10:14:29 GMT

Today I published an article iMediaConnection, Moving Beyond Event-Based Targeting. The assignment was to 'go deep' with behavioral targeting, something that is uncommon on iMediaConnection.

It is not that IMC doesn't cover BT well, because it does publish at a fairly decent frequency (maybe once or twice every 2 weeks). It's just that it speaks to the lower-common denominator with respect to the topic. Behavioral targeting is a hot topic and yet most of the articles that you read in IMC, MediaPost and ClickZ – among other industry trades – are about network targeting. My blog borders on enraged reactions to the misnomer that network targeting is not really targeting deep behaviors at all.

So I convinced the folks at IMC to let me put out an article that redefined BT into classifications – event-based behavioral targeting and explained network, ad server, site-side and search in these terms. I ‘went deep’ by introducing the concept that these capabilities are all very relevant but that they need to be tied together.
I have another article that I am trying to get IMC to publish for me that goes into much greater detail. I don’t know if they’ll run it – and if they don’t I will post it here. But I will let you know if it is coming out. My position is that once we can all begin to recognize that there are levels to BT, there are techniques to each level and there are available technologies that tie them together; then we won’t be so focused on just one kind of BT or one set of results. Stay tuned.

LookSmart Hires Ari Kaufman as Vice President of Publisher Services

ari@arikaufman.com (Ari Kaufman) — Sat, 07 Apr 2007 16:37:33 GMT

LookSmart Hires Ari Kaufman as Vice President of Publisher Services, and Jonathan Ewert as East Coast Vice President of Advertising and Publisher Services

Critical Hires Complete the Company's Executive Sales Team

SAN FRANCISCO--(BUSINESS WIRE)--LookSmart (NASDAQ: LOOK, ASX: LOK), an online advertising and technology company, is bringing two new Vice Presidents into its fold who are expected to help LookSmart grow and service its advertiser and publisher base. LookSmart has hired Ari Kaufman as Vice President of Publisher Services and Jonathan Ewert as the East Coast Vice President of Advertising and Publisher Services. They join Yolanda Loh, Vice President of Ad Sales, to complete the company's executive sales management structure. All three will report into David B. Hills, LookSmart's President and CEO.

"The addition of Jonathan and Ari complete the sales management layer at LookSmart, allowing us to further penetrate advertisers and publishers," said David B. Hills, President and CEO of LookSmart. "We are thrilled to have such high caliber and experienced individuals in all of our critical sales executive positions. Now we'll be able to provide our advertiser and publisher customers with even more opportunities and improved service."

Ari Kaufman joins LookSmart after serving as Vice President of Sales for online ad serving company TruEffect, Inc. where he was responsible for the growth of the national sales organization. Prior to TruEffect, Kaufman was Vice President of Business Development at Integro eBusiness Consulting, where he was instrumental in the development of the company's Microsoft partnership, collaborating business opportunities, sharing client leads and expanding service skills across the Microsoft platform. Kaufman's career spans 10 years in the online advertising industry. Having launched one of the largest advertisement-supported financial web sites in 1996, Kaufman oversaw online advertising sales as Executive Vice President for Zacks.com.

Jonathan Ewert, LookSmart's new East Coast Vice President of Advertising and Publisher Services, also has an extensive background in the Internet marketing and advertising industry. Prior to joining LookSmart, he served as the Chief Executive Officer for ePals.

Prior to ePals, Ewert was Vice President, Business Development for E-Commerce Solutions LLC, a consumer e-commerce enterprise software and marketing services company. His extensive experience in the sales and marketing industry dates back to 1989. Since that time he has held key sales positions with such companies as Infoseek Corporation, Modem Media, an Internet Professional Services firm, and Landon Associates, Inc.

About LookSmart

LookSmart is an online advertising and technology company that provides relevant solutions for advertisers, publishers and consumers. LookSmart offers advertisers targeted, pay-per-click (PPC) search advertising and banners via its consumer Web properties and a monitored ad distribution network; a customizable set of private-label solutions for publishers, and vertical search sites and web tools for consumers. LookSmart is based in San Francisco, California. For more information, visit www.looksmart.com or call 415-348-7000.

Create and Satisfy Demand: Two Tools to Complete the Marketing Loop Plus the Advertising Equation

ari@arikaufman.com (Ari Kaufman) — Fri, 30 Mar 2007 08:55:17 GMT

Today Steve Mulder gave us “Create and Satisfy Demand: Two Tools to Complete the Marketing Loop,", an academic piece in iMediaConnection that well-defines the fundamentals between demographic segmentation and behavioral targeting or what he referred to as “goal targeting.”

Steve talks about customer segmentation based on demographic and psychographic profiling. Of course you can push this farther and consider buying habits, product preferences and other known store-interaction behaviors which can be categorized. Anything you know about your customers can be grouped and segmented. So while Steve talks about the anonymous segments, when we’re talking about customers we can dive deeper and look at the information that our eCRM systems can capture and that our site-side analytics can measure. If I have a customer who purchases monthly, like electronics (i.e., Target.com) and spends on average over $100 per transaction, I can drop that user in a bucket with other like-demographic customers. The segmentation possibilities go much deeper.

This is not to suggest paralysis of analysis by creating too many segments, however if you are a Target.com, a BestBuy or other big box retailer, you have many, many customers and you have the ability to create 10-20-30 customer segment groups. If you are an e-tailor like LLBean, or Amazon or Overstock.com, you can create these segments.

Steve talks about Personas, as a defined “who or what,” meaning “…Why does this product or service make sense to your target audience? Why do the people represented in this audience need it, and why will they use it? How should we structure and design it to satisfy how people will be using it? How do we make sure the site gives people the experience they need and the business results we need?”

In Steve’s discussion, Personas are the other side of the equation, the behaviors that you target or goals. This article focuses on web site content placement which is vital to the emarketing equation. How you react to your customers when they are identified on your site will directly correlate to your recurring revenue potential. I have discussed the integration of CMS and dynamic content many times before.

When someone logs-on an identifies themselves, you tap into eCRM and you can tap into the segment relationship and/or bucket that user belongs to. They you can target them with content and messages to promote recurring revenue opportunities.

External marketing, such as email marketing can tap into these buckets as well with customer segment targeting as well.

But a topic we have talked about many times before is how you can recognize and target someone BEFORE they come to your site and identify themselves. Well, what about when they come to your site and don’t login. Using cookies enables you to recognize someone and still tap into your customer segment models right? So you don’t have to wait until they login to identify them.

That takes care of returning customers. What about someone who blows out their cookie? Well, as soon as they login you can re-recognize them and re-cookie them right? Cool.

What about someone new? They click on an ad and come to your site, you grab the click-thru URL and interpret the source and put that into the cookie as a prospect and let CMS take over until they create an account. Cool. Once they become a customer, segment membership begins and more data can be written to the cookie for future recognition and content targeting – more CMS. CMS is Content Management System btw.

Then there is the external recognition of your customers – what about the topic of choice with regard to advertising. If you are spending time creating customer segments and you are spending time creating goals for CMS targeting. Why wouldn’t you leverage that knowledge to benefit from being able to recognize your customers when you advertise online as well? If you can recognize your customers while you advertise online, you can extend your goal-oriented messages, drive recurring revenue opportunities and motivate your customers to return. When they do, your site-side BT efforts can take over as Steve discusses and your drive home those sales opportunities.

With both of these efforts in place. Taking the time to create and analyze your customers to create segments and creating targeting goals that affect both internal, site-side and external, advertising-side efforts you will gain huge insight into what works. The knowledge gained will improve your ability to make better decisions about your future marketing efforts, both site-side and external.

Reactionary with Insight

Behavioral Targeting, What Ethics?

ari@arikaufman.com (Ari Kaufman) — Fri, 23 Mar 2007 08:15:47 GMT

Earlier this month, Doug Wintz gave us an inspiring article in iMediaConnection. The Ethics of Behavioral Targeting offers a glimpse into what behavioral targeting could be like in the offline future. Transfixing our imaginations into the likeness of the futuristic worlds painted by author Philip Dick, Wintz helps us to question interactive advertising beyond the banner. But there is a big leap between the 728x90 banner and the beams of light that could be reading our retina in the shopping malls.

Several years ago people screamed about the use of cookies: “VIOLATION OF PERSONAL PRIVACY!” The industry cried that we must educate the population so that they realize that cookies are not bad, spyware is bad. Antispyware came out, and adware came out. People now feel protected from persistent spyware and third-party cookies now get deleted 45% of the time. The dust cleared from the cookie fight and yet cookies are still in common practice. The funny part is that people still don’t understand cookies. But the industry has moved on; it has stopped trying to educate and now the next crisis has moved to the forefront – behavioral targeting.

BT still involves the use of cookies but the technology is less of the issue. It is the overall concept of tracking and oversight that people care about. Once again there are those in the industry that are trying to educate, but then there are many of us that know that you can’t educate people coming from a position of fear. Moreover, once politicians get involved it’s about swaying popular opinion and not about providing rational explanations. Remember that some people get charged by the fight while others stay in the background, continuing to develop and position their cards so that they are ready when the dust clears. A new crisis always moves to the forefront to replace the existing one, right? Where will you be when that happens? Battle scared or primed?

Is it ethical to behaviorally target? Is the internet really free? Is it ethical to target consumer behaviors like catalogers do? Doug has a fair argument when he says we probably won’t even care by the time the technology is mainstream. Right now there is kickback on behavioral targeting, but that doesn’t stop publishers and networks from offering it or from advertisers from buying it.

So where are the ethical lines in all of this? Publishers use site-side analytics to track your patterned behavior while you are on their site. It is their site. You use much of it for free. So is it ethical? Is it okay for Safeway or Kroger to track your shopping habits in the supermarket? You get discounts for using that shopper’s card that also tracks your behavior. What about Amazon keeping track of your book-buying preferences? You get recommendations right? You get benefits in return for providing information about yourself, even online. So where is the difference between what we have come to accept offline and what we protest online?

Why do people get so crazy about the web? The point of the whole thing is to put advertisements that are more relevant in front of you. Contextual advertising has done a great job at this and nobody seems to complain about that. In fact a lot of people don’t even know that the links along the side of the Google and Yahoo pages are paid listings, nor would they necessarily care since they are usually relevant links that often lead to qualified destinations. Relevance. If Behavioral targeting has the ability to present a user with advertisements that are relevant, is there still an ethical violation?

P-ersonal I-dentifiable I-nformation (PII) is the red line that can’t be crossed and yet it is crossed all the time in the offline realm. I think that in the end it’s not a question of ethics. It’s a question of fear. The futuristic movies like the Minority Report scare people. They don’t get it and other people take advantage of it to promote their own agendas (like politicians looking for platforms).

Customer re-targeting introduces the ability to recognize customers – not anonymous individuals – anywhere on the web in real-time using first party ad serving. Advertisers can recognize their existing customers, not based on events but based on customer profiles. This is identical to what already goes on in the offline world. A different message can be positioned to a customer than to a non-customer based on customer profiles – not based on event-based behaviors. Is this a violation of privacy? We can go around and around on this one, like we did with the cookie. And it is the cookie battle that leads me to believe that the smoke will clear before we settle it. When the next technical invasion comes to the forefront it too will shadow this one. Maybe it’ll be iTV, which will be more invasive and wider-spread when it hits people while they are relaxing in their living rooms!

You can go down the ethical rabbit hole if you want with behavioral targeting, just like you can jump into the political debate or stand up on the soap box and try to educate. But frankly, people will continue to develop and drive forward with anonymous event-based targeting, customer re-targeting, site-side analytics and first party applications that empower advertisers to message to users with the most relevant information, advertisements and content. Operating as if the dust will clear as oppose to getting caught up in the fight makes more sense. Helping the web to become an increasingly more efficient use of people’s time with behavioral targeting techniques is not a violation of privacy, it is a provision of relevance.

Reactionary with Insight

Google Tests Pay-Per-Action Ads

ari@arikaufman.com (Ari Kaufman) — Thu, 22 Mar 2007 08:57:42 GMT

On Tuesday, Google announced the wider rollout of their beta Pay-Per-Action advertising program, originally launched on a limited based in June 2006. Available only in the United States, CPA on Google will enable AdSense publishers to choose from a selection of ads and will have more flexibility in promoting the ads, according to Google.

When C|Net reported on the original program last June, they stated: “Because they'll be tied to a purchase, the new ads are expected to be auctioned at higher prices than cost-per-click ads, which costs advertisers every time an ad is clicked on, despite whether it leads to a sale.”

Pay-per-action advertising is a new pricing model for Google that will allow advertisers to pay only for completed actions that such as a lead, a sale or a page view after a user has clicked on an ad. The advertiser will define the action, set up conversion tracking and create ads that AdSense publishers can select to run on their sites. Smartly, Google is including view-thru conversions with a timestamp of up to 30-days for the post-click events so any action that results following the impression within 30-days will be credited back to the advertisement.

Over the last couple of weeks, Google has been taking incremental, but significant steps towards engaging advertisers with programs that recognize their need to be more flexible and receptive to the demands of the market. There have been mounting complaints about Google’s inflexibilities. Pricing has been increasing, technology integration has been restrictive, click-fraud was a huge issue, Analytics counts are well below other metric measurements and so on.

In January 2007, President of Interactive Marketing at AKQA Andrew O’Dell was quoted by ClickZ as saying: "We can't use [Google’s] networks if they don't allow third party serving … It's not worth trying to maintain a separate universe. We're not going to do a buy that's got 95 percent of our inventory running on an ad server and the other 5 percent sitting there as an outlier."

Agencies with significant buying power like AKQA have been vocal about how difficult it is to work with Google. David Smith of MediaSmith was quoted in the same ClickZ article as saying: "We'd love to have them [as partners for branding campaigns], but they're going to have to listen to what the agency wants, not what they're trying to sell."

Google has finally started to listen it, or so it seems. After all, Andrew O’Dell is not alone when he said: “I think I could increase my Google spend in total [by a factor of two] if their network was competitive."

In addition, Google must be feeling the pressure of MSN and Yahoo! – especially MSN. It has been a while since MSN has done anything of significance, but for the first time their share of market has increased. Granted it was one percentage point, but they went from 10% to 11% last month and Vista and Office 2007 Desktop Search has a lot to do with it. Finally Microsoft has found its way to the desktop for search and it has done so with what appears to be a useful and attractive tool. I have the search tool on my desktop and – aside from the hours it took to index my computer – it really flies now. I found that not only does it find things within my computer really well, but it does a pretty good job at commanding my search needs online. I still have my Google search bar on my browser which I am well trained to use, but if my browser is not open, I will give the Windows Search bar a shot – and that is a new behavior, which MSN is counting on.

So Google is on the move, again. They are taking steps to increase their stride. First it was banner ads, now we’re talking about video. And now we have CPA. Google is creating destination sites, and beginning the process of creating its own content and will soon have the command of its own communities (think Gmail, YouTube). They offer analytics with Urchin and it is not limited to Google campaigns but rather to any advertising initiatives. Granted it’s not the best measurement tool, but it works for the small-to-mid size advertiser and there is the long-tail.

So what’s next. Are they going to step up and answer Andrew O’Dell’s call? Do they recognize the onslaught of media dollars waiting to flow in with banner advertising when an ad server can be used to manage campaigns on Google? They have brought the CPM model to the table with banner ads. They have search integration with their API for Adwords which has been taken advantage of by most of the major ad servers already. All they need to do is step forward and allow ad servers to pump the banner campaigns through. Now that CPA is here, it would not be much of a bigger step to allow those campaigns to report through as well.

To me it is clear that slowly, as their foothold continues to stretch and they reach further out into more areas of the online advertising arena, they are beginning to recognize that they have to open some doors of the vault just a crack in order to make it a little easier for companies to work with them. Maybe they will let a little more light into the room, slowly. Hopefully so. But the signs of some listening are there.

Reactionary with Insight