Local Retailers Win When They Optimize for Local Search

modifiedA related article entitled “Local Search Marketing, Accuracy Trumps Distribution” may be viewed on CMO.com

Retail success has long been largely dependent on physical location. Selecting commercial space requires consideration of many factors including demographics, socio-economics, competitive proximity, traffic patterns and more.  Multi-location retailers apply a great deal of strategy when opening a store.  Mall retailers will swap locations when premium space becomes available so that they are more visible to consumers passing by.

Today, however, location means more than capturing the passer-by.  Location also means being found by the digital searcher.  70% of consumers research local products and services on a desktop and then use their mobile device to get where they want to go.  A consumer that has decided to visit your store is in buy-mode.  Will they find you?  Did you take steps to ensure that a consumer would know that you changed locations in the mall?  Will your store be located where the “X” marked the spot?  Is the premium location really premium if a consumer shows up at the doorstep of another business instead of yours?  How much revenue will you miss out on?

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The Mobile Video Ad Serving Frontier

Mobile advertising technologies are swimming in an incredibly fragmented space right now in terms of streaming content and integrating paid advertising.  Mobile is the wild-wild west of online advertising right now.  It is the final frontier of video, which is arguably out there today already.

While we scramble to figure out which cell phone we want to carry – the iphone or something that comes close to it – people with content are racing to figure out how to get it to you while making a buck doing it.  We know it comes down to either a subscription model or an advertising model, and the latter is the most likely path. Continue reading

Direct Response is upon us. Live with it and ‘Fill a Need’

So how hard has the recession hit online advertising?  The growth of the industry has grinded to a crawl in comparison to almost every consecutive year going back to 1996.  Some say 3%, some say 6% and some even say 0%.  But not all sectors match this trend.  Search is projected to push a 15% growth in 2009.  In general, affiliate and lead-gen spending is also expected to continue to grow at a similar pace.  Yes, the recession is impacting spend levels this year, but it is how advertisers are spending their dollars that is really what has changed. Continue reading

Advertiser Control Over Ad Spend and The Swinging Pendulum

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.

The Ideal Online Advertising Campaign, Direct Response with Behavioral Customer Re-Targeting. How to Get a Greater Share of Your Advertiser’s Budget

Okay, so it’s a mouthful.  But all of my previous posts which have distinguished customer re-targeting from behavioral targeting, redefined BT as event-based targeting and attempted to diffuse the FTC complaint have led to this.  I am going to describe the workflow that puts first party ad serving, customer re-targeting and direct response online advertising into practice.  Re-targeting generates recurring revenue, decreases the CPA of online advertising campaigns and demonstrates significant reasons for increasing the online advertising spend by allocating direct marketing budgets to re-targeting initiatives.


The first step happens outside the realm of the online advertising campaign.  It takes place before the planning or strategy sessions or even before the budget is set.  The first step is first-party cookie writing.  As I described in my last post, How Does Re-Targeting Work? an advertiser has to segment its existing audience and set cookies to distinguish users for the re-targeting process.  


This sounds complicated but most often it is already done.  A retailer like an LL Bean will have already done this.  It knows who its customers are and has modeled them out by various types.  Amazon.com has you pegged by preferences.  Yahoo has you cookied if you maintain your stock portfolio on their web site so that they can recognize you when you return.  Forget about Microsoft!  Your bank does it too.  Pretty much anyone that you interact with online, with whom you have identified yourself, sets a cookie to further classify you.  Classification helps a site recognize you when you return so you don’t have to login, they pre-populate the user field, they dynamically serve content to you that is more suitable to your preferences, they optimize your experience so that your time is not wasted.  Are being tracked?  Yes but it is not invasive.


But there are other reasons to set first party cookies as well.  If you are going through a multi-step registration or application process, a first-party cookie can be set at each stage to indicate how far you have gone in the process.  That way if you leave, and later return, you can be ear-marked and taken back to where you left off.


So the first-party cookie writing process has to be in effect and, depending on the universe to be targeted, the cookie must be propagated out on to the Internet so that it may be effectively recognized through the re-targeting campaign.  This is usually about a 30-day lead time on the ad campaign. 


The traditional media planning process has to be conducted.  Sites have to be selected, negotiated and buys need to be made.  That’s all good.


Then there is the strategic media planning portion.  Unlike with traditional online advertising – and/or Direct Response online advertising – it is no longer just about prospecting, branding, messaging and generating leads and opportunities.  Re-targeting introduces an order of magnitude of complexity to the planning process because you have to think about messaging to existing customers in addition to the traditional planning you do involving prospecting.


Think for a minute about a three-month campaign that involves 10 core sites.  You renew on each site each month because those sites consistently perform well.  Popular sites get repeat visits.  Therefore if a site consistently generates strong leads for you, your previously acquired leads are also returning to those sites.  But while you are continuing to advertise there you are paying to re-prospect your previously acquired leads at the same time.  A portion of your message is falling on deaf ears.  Existing customers, previously acquired leads that bailed on you and people that have seen all of your ads and have never responded continue to see your ads over time.  You pay to continue to re-prospect them.  What is the composition of that audience?  The longer you advertise there, the higher it gets.  Maybe its starts off at 5% but it grows and could become 25% or higher over a few short months.


So with re-targeting you now have the opportunity to say something to your previously acquired leads, your customers and any audience that you can identify. 


For the sake of an example, and as we usually do with most of our DirectServe clients at TruEffect when they first start working with re-targeting, let’s just say that you create three segment types of a known audience for re-targeting.


  1. Frequent shopper (weekly)
  2. Moderate shopper (monthly)
  3. One-time shopper


So in addition to the campaign planning that will take place for acquiring new leads, which may have a number of messaging strategies and associated creative, we now must also do the same for each of these three audiences.  Multiple messages and creative must be planned and tested for optimization throughout the campaign to maximize response.


When the campaign is finally setup there will be four simultaneous campaigns going on across the same set of inventory.  The three segment types listed above, plus the prospecting type for unknown users who are not already carrying the advertiser’s first party cookie.  If you decide to use behavioral targeting to pinpoint events to drive more specific prospects you may have additional campaigns as well.


What will you see when you execute on a campaign with re-targeting?


(1) Audience composition


First of all, and for the first time, you will be able to measure the percent of your advertising audience composition.  You will now know who of the people that you are showing banners to are existing customers and who are prospects.  Not only that, but you will know what kinds of customers they are.  Ads will be displayed according to the cookies that exist.  So cookie type #1 (Frequency Shopper) will see creative group #1 (Targeting Frequent Shoppers) and so on.  And your impression reports will tell you not only how many times each banner was played but based on banner plays, what percent of your advertising audience is comprised of each type of person.  Overall, what percent of your advertising audience is comprised of existing customers vs. non-customers across every web site and network that you advertise on will become clear. 


This is very compelling information as the longer you advertise, audience composition may become a factor that impacts your media buying decisions.


(2) Re-target vs. Non-Re-Target Click-thru Rate


You will be able to distinguish the click-thru rate results of each customer segment type as well as prospect types.  What you will find is that like with your traditional online advertising campaign, you will be able to optimize click-thrus over time.  You will also be able to do the same with your re-targeting.  At TruEffect, we have consistently found re-targeting tends to have an incrementally higher click-thru rate than prospecting response rates.  If you think about this, it is pretty logical.  You are messaging offers to existing customers to drive repeat business.  It is a lot easier to get an existing customer to come back and do something than it is to get a new customer.  So the click-thru rate comparison will be a strong indication of re-targeting success.


(3) Post-Click Results of Re-targeting vs. Non-Re-Target


Here is where things really matter.  If the direct response campaign has a post-click success metric that is about generating a sale or action, then revenue is the success metric and the CPA is calculated based on that amount.  Generating recurring revenue or generating new revenue hits the cash flow statement the same way.  But when you can take your online advertising campaign and convert a portion of it into a customer penetration campaign you will please a lot of people in the marketing department at the advertiser. 


Dollars spent re-prospecting a deaf audience will now go towards driving recurring opportunities, cross-promoting and up-selling products and bringing customers back to the transaction cycle.  The CPA for the online advertising campaign will drop significantly because the revenue attainment of the campaign will go up incrementally. 


Is it a lot of work?  It takes brain power to figure out what you are going to say to three different customer segment types.  It takes strategic thinking to come up with multiple messaging strategies to motivate customers to re-transact.  But marketers do this everyday.  Direct Marketing is a huge initiative.  And the internet is already a massive DM medium.  Re-targeting introduces DM to online advertising and offers the opportunity to expand campaign budgets exponentially.  Think about that as an agency.  If you can prove to an advertiser that you can drive recurring revenue, you can demonstrate that you should have a greater share of the direct marketing budget!



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How Does Re-Targeting Work?

TruEffect has branded first party ad serving under the trademark name DirectServe™ Technology.  But for the purpose of this post, let me simply define that this technology is a type of ad serving that enables an advertiser or agency to re-target known audiences in addition to driving new opportunities as is done with traditional third party ad serving today.


Re-targeting takes advantage of an advertiser’s existing relationship with a known audience.  This may be a customer-base, registrant-base or applicant-base.  It may also be a partial applicant, i.e., someone who dropped out of an application process.  Whatever the case may be, re-targeting requires that an advertiser have some previous interaction and relationship with an individual so that they can have had the opportunity to classify that person on an anonymous basis.  For example, a retailer may classify existing customers by shopping habits, buying frequency, etc. 


Now don’t get your privacy feathers all up in a bunch, because this already a widely accepted practice.  Retailers use first-party cookies to track the behaviors of their customers online.  Other sites use first party cookies to recognize their customers as well, like banks, online stock portfolio providers and customized news providers.  Any site that recognizes you when you get there has used a first party cookie to do so.  And generally speaking, it is convenient to you as a user that they have done so.


With re-targeting it is the same thing.  And advertiser uses their first-party cookie capability to segment their customers, registrants or other known audience.


DirectServe, TruEffect’s patented technology, enables the ad server to read the first party cookie of the advertiser so that it can target that cookie with ads.  Big picture … when the ad server encounters a member of an advertiser’s known audience, they can be recognized by the ad server, distinguished from an unknown individual and messaged to accordingly.


What exactly does that mean?  It means that when an advertiser uses an ad server to manage its campaign online, it can re-target its existing audience anywhere on the web at anytime – across any web site and any network.  It is not a prospect-generating tool like BT, but then again BT is really event-based targeting.  Re-targeting is based on known customer behaviors.  The cookies set, the first-party cookies are named value pairs set based on customer segment models determined by the advertiser, based on customer behavior.


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The Best Online DM Strategy – Somebody Out There Get’s It!

Michael Mayer get’s it!  He posted an article in iMediaConnection recently where he initially sets up the concept of transactional advertising as the next step in direct response advertising online.  His article, The Best Online DM Strategy, opens the door, but requires you to walk through with your thinking cap on.


Transactional Advertising conceptionally infers the idea of leveraging known information about a recent transaction for future advertising.  So, basically if someone – a customer – makes a transaction you can leverage that knowledge for targeted advertising.  Hmm.  I think we may have come back to customer re-targeting.  Well, maybe Michael would like us to go and extend this capability further. 


While it may be ironic to be doing this on the heels of the FTC filing, at some point we need to get back to the more realistic future of our space.  And maybe we can even find some current technologies that do this today!


If an advertiser deploys customer re-targeting such as TruEffect’s DirectServe Technology, than they have the ability to recognize their existing customers, distinguish them from non-customers and message to them differently than they do to prospects while advertising online.  So that means there will be two strategic acquisition online initiatives going on at the same time: prospect acquisitions and customer re-acquisitions.  No longer re-prospecting existing customers, re-targeting promotes transactional advertising at the ad banner level.  Wherever you advertise, you can target customers who recently transacted and promote up-sell opportunities, cross-promote products or otherwise message to a customer based on recent transactional history while advertising anywhere on the internet in real-time.


Back to Michael’s Transactional Advertising concept.  If John Smith transacts on Acme.com, then we know something about him.  A record is created in the CRM system such as a customer profile and maybe even a customer segment (i.e., customer type = buyer frequency / value / product preference).  The information known about John can subsequently be leveraged for advertising.


What kind of advertising?


First there is email.  John’s email address will likely have been acquired during the transaction so now we can target John with relevant messages.  We can embed HTML images in the emails to jazz them up and make them more appealing while tracking receipts, open rates, click-thru’s and so on.  But this campaign can be integrated with banner and offline as well.


Online advertising, re-targeting such as DirectServe from TruEffect is the next step.  Re-targeting can drive recurring opportunities by as much as an additional 15-20%, potentially even surpassing the effectiveness of search.


Then of course there is dynamic content serving.  Recognizing someone when they land on Acme.com – using first party cookies (like DirectServe) – allows a site to better position messages and products in the most favorable light to maximize responses and trigger additional transactions.


What else might Transactional Advertising mean?


How about merging transactional advertising knowledge with offline knowledge to create a better picture of the customer.  Now there is an idea – not necessarily a new one but something to touch on. 


Cataloguers maintain vast databases on people, demographics, personal identifiable information, buying habits, customer segments, etc.  If we merge the offline information with online transactional information we know that much more about a person.  Then we can leverage offline buying behaviors to promote products and services that we might not otherwise know would appeal to someone in an online environment.  We can also do the same thing in an offline environment.  WOW! 


Enter the final stage.  With first party ad serving such as DirectServe, you can collect the click-stream data in anonymous format and create a new class of customer segment and merge that information with your customer records.  So now you can define how a transaction was acquired online as well.  Not just what banner generated a specific click but which banners were seen on which sites at which times.  All of the acquisition marketing history that not only were clicked on, but what was not clicked on as well can be streamed into an anonymous grouping and created a new customer segment model so that you can further characterize customers.


What does this mean?  It means that you can combine transactional information, offline information, acquisition knowledge from online and offline and create holistic profiles for targeting.  Then you can target both online and offline through a variety of media with relevant messages.  Transactional advertising?  Relevant advertising. 


So would the CCD and US PIRG consider all of this a violation of personal privacy?  Probably.  Would they understand it?  Probably not.  So what do we do from here?  We have a responsibility to start educating the industry and the rest of the world who wants to monitor our industry as we develop and execute these capabilities so that people see the benefits.  Relevance beats SPAM and inundation any day of the week.

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Make Your Media Buy More Effective – But How?

Brad Bender published an article to in iMedia Connection entitled: “Make your Media Buy more Effective” that unfortunately gets a C+.  Brad starts off real strong as he is talking to advertisers about expecting more out of publishers for the dollars you spend, but he fails to give us the practical tools or insight to empower us to do that.

Brad talks about the fact that publishers have optimization capabilities – capabilities that should make our campaigns more effective.  Brad is the VP of Optimization Solutions at DoubleClick and yet he does not bother to share what those solutions are.  Presumably his role is associated with DART for Publishers (DFP) which is the ad serving platform that publishers use to manage the ad serving on their web sites. SO if anyone knows what a web site is capable of doing for advertisers, Brad should know it.

Brad talks to us about sharing the objectives of a campaign with publishers with the hope that the publishers will know how to better maximize the spend we make with them.  But unless our spend is significant how can we really expect that the publisher will put forth the effort.  Publishers work for themselves.  Their motivation is the bigger picture.  Sure they will optimize your campaign performance insomuch to assert that they can get your spend on the next campaign, but is that optimal?

I think that someone like Brad is in the unique position to share his insight with us about what a publisher is actually capable of doing.  Empower you as a buyer so that you can know what to ask for rather than telling you to share your needs with a publisher and see what they offer. 

The only take away that you can get from this article is that it is a sellers market and therefore if you can overcome that, you get power, and power will get you results.  So if smaller buyers band together to represent significant spend, they will get power in the buy – like a significant spender has.  Aggregators of spend.  Folks like
CPA Empire and Memolink work for direct response advertisers and buy in bulk to generate leads and acquisitions.  There are a lot of these bulk buyers out there.  Having stronger spend power is one way to force a publisher to pay attention to your campaign.  When Yahoo buys advertising; when AOL buys advertising; when American Express Buys advertising, publishers are responsive provided that the agencies that represent them know what they are asking for.

Buyer knowledge is key to a transaction.  A publisher is looking to secure your business, keep your business and then preserve high value inventory for the next client and repeat the process.  Optimization burns high value inventory and reduces revenue potential.  So don’t expect it to be volunteered.  You will have to know what you are asking for.

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It’s Just a Bunch of ROI, with Direct Response – Clue in Your Agency

Who has the greatest interest in ROI?  Who has the most at stake when it comes to advertising online and direct response advertising?  With regard to actual investment of dollars and common sense, is it the agency or the advertiser?  Who has the most to gain and who has the most to lose?

At the advertiser level, the importance of ROI is more obvious.  Sales are responsible for generating revenue and are supported by marketing who generates product or service demand.  Those people bear the burden of modeling programs that generate leads and attain a cost-per-lead (CPL) at an ever-decreasing rate.  Whether they do it in-house or they employ an agency, they are striving to drive the CPL down in order to support a growing revenue demand within the company.  So there is the motivation.

ROI is a product of the CPL or the cost-per-acquisition (CPA) over total investment made.  Different buying models come into play for different media with respect to online as we all know – CPM (impressions), CPC (clicks), CPL (leads) and CPA (acquisitions) – but for the advertiser it’s all about turning the dials to generate the demand so that sales can drive up the revenue.  Total investment made is the BIG picture (creative, expenses, R&D, technology, personnel, etc.)  The advertiser evaluates its marketing team based on its ability to generate an increasing return on the investment made.

Okay so B-school lingo aside, what is the marketing person’s motivation?  Is their compensation somehow tied to their ability to drive the ROI in a positive direction?  Well, probably not.  Maybe it should be.  But there are probably other incentives in place that motivate this individual to focus on this number pretty strongly.  Quarterly goals, etc.  Its in there.  Because to most people who own the marketing budget at an advertiser, ROI is a very personal figure.

So, why would an advertiser use an agency?  They are increasing the investment right?

If an agency is employed, the advertiser’s investment in the process becomes that much higher.  The decision to bring an agency into the mix is a calculated one.  The return has to be strong as a result of the agency’s involvement because performance must now also overcome the increased cost of the agency’s involvement.  A solid agency will bring competency and expertise to the table that the advertiser simply does not have.  But this needs to extend beyond the senior ranks and the business development team of the agency. 

At the agency level, ROI is also about the client’s ability to attain a desirable CPL or CPA.  But this figure is not necessarily internalized, it’s not personal.  This is a figure that is set by the client and it is the agency’s job to achieve it.  But when you dig into the agency, beyond the senior ranks and into the file you don’t find the same level of passion.  Not always anyway.  The agency does strive to meet the defined CPA, as they want to keep the client’s business, but they don’t necessarily shoot above and through the ceiling.  They don’t shoot for the ROI objective that the client holds dear.  See the difference? 

The agency is not compensated based on its ability to meet the advertiser’s ROI objectives.  It is compensated by it’s retainers and service fees and commissions.  There is no vested interest by the agency to drive the CPA or CPL lower and lower.  There is no incentive to improve the ROI, only to meet the defined CPA/CPL.  The only incentive that exists is to do what is necessary to keep the business and perhaps garner more budget dollars from the client. 

So do we change how an agency gets compensated when working with a direct response advertiser?  Maybe.  Maybe what needs to happen is direct response advertisers need to examine how they align the way they compensate agencies with their long-term goals.  Of course an agency will still want its commissions, retainers and fees, but a solid advertiser will negotiate a position for itself that rewards the performance it desires most.  Do they want their agencies focused on CPA and CPL or do they want them focused on the larger picture, on ROI?  Maybe its time to bring the agency into the fold and reward them for attaining your goals as an advertiser.  Clue them in.

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Paid Search Advertising: The Tipping Point and Rising CPA

Well it is official.  I am now hearing a consistent theme from advertisers and agencies.  There is such a thing as too much of a good thing.  Paid search has evolved into the fastest growing online advertising medium with spend in excess of $8B this year and the ceiling is expected to bump up to $10B next year.  Advertisers have found – especially direct responders – that search advertising generates a great steady stream of leads.  Common knowledge.  Agencies, however have found that the costs associated with managing paid search is increasing – causing a drain on the bottom line for the agency.  But the real problem is that there appears to be a Tipping Point in paid search.  Search is rearing an ugly side, a side that is proving to be less cost-effective and perhaps even down-right expensive.

What am I talking about?  Paid search is all about the cost-per-acquisition right (CPA)?  What does it cost me to buy a lead?  What does it cost me to buy a lead by buying a search term?  How about 2 terms?  Okay, how about 5,000 terms?  Let’s say I spend $5,000 in the first month and things go very well so I up my budget to $10,000 and things do better.  The CPA for a lead went from $20 down to $18.  It’s like Vegas, so I up my anti.  This is how it has been for a lot of advertisers.  So the budget get’s increased this time $50,000.  And off we go….

Along comes SEM (search engine marketing) and bid optimization tools and people go hog wild.  Now the bidding process is automated so that search terms get purchased more quickly and at optimized pricing.  Now a buyer can bypass the search engine’s interface (like Adwords for Google) and set up bulk buys.  Furthermore, the SEM optimization tools can be leveraged to auto-bid for placements and the buy process is effectively streamlined.  The result is that for $75,000 the CPA drops down to $15 – wahooo!  So now the budget gets increased to $100,000. 

Next he advertiser starts shifting dollars away from other media and starts pumping money into paid search because it is working so well.  Meanwhile, the agency is smoking like an overworked engine.  The keyword list is up to over 20,000 terms and the buys are simultaneous across Google, MSN and Yahoo!  Terms are changed daily – sometimes intraday – and reports are run every morning.  Click fraud appears – when the clicks reported by the search engine are higher than those received by the client – but it’s within 10% so we consider it acceptable (what?!?).  The agency has to put at least one FTE on the job just to manage the search campaign for this one client.  No longer is this a profitable situation for the agency.  Unless of course it is an agency that specifically specializes in search (like a 360i for example) in which case they have dedicated search campaign managers.  That is not the case for most traditional agencies, which at this stage are burning margins like candle wicks.

Anyway, then something mysterious starts to happen.  The client bumps the budget again and the CPA – which was hovering at $15 – comes up to $16.  At first nobody thinks much of it.  The next month, however, it’s at $16.50.  Slowly, over the course of the next couple of months the CPA starts to rise by fractions of a dollar until and, after about 6 months, it is back to nearly $20.  What’s going on here!?!?!

Paid search has a Tipping Point.  It is the point upon which the search engines – specifically Google – appear to target something, an advertiser maybe or perhaps just certain terms, and they inch up the rates.  So now the terms that have always worked well for an advertiser start to become more expensive.  I don’t presume to know exactly what it is that is causing the creep but it is consistent and obvious.  Big block retailers, direct response advertisers and hard-core CPA-advertisers alike are all beginning to report that paid search is becoming more expensive.  Maybe more and more people are buying paid search and that is driving up the bidding on the most common terms, but it doesn’t quite add up.  Even if that is it the explanation it is still a problem.  The CPAs for paid search are rising steadily for those who have been at it for a while.  Exactly that.  It all goes well at first and then it changes.

So what happens now?  Do you keep the budget at $100,000 when the CPA is back up to $20?  What if it keeps rising?  That’s what you were getting when your budget was $5,000.  Most advertisers are finding themselves stuck somewhere at or near this quandary.  The CPA is rising and the budget requests for search are still out there, only now they can’t be substantiated like before.  What do you do?!?

The conversations that I am having with agencies and advertisers include this search Tipping Point and this phenomenon is real and relevant.  People want to know if this is happening just to them or if it is a trend.  It is a trend!! 

So now what?  Now is the time to look at other ways of driving effective online advertising that are also response-driven.  Now is the time to re-consider effective targeting solutions that were once written off or overused (dare I say abused) and see if they can be put to good use again.  Tried and true online advertising techniques that deliver effective results need to be put into back into practice.  Remember the ad banner?  It’s still there.  Have you abandoned it for search?  Bet you did and you don’t even feel bad about it.  I am not saying go buy a bunch of display ads.  I am also not saying go buy a bunch of network CPA buys.  Besides, if you are an effective media planner you probably already have both included in your plan – diversification right?

What I am recommending is that you go back to the basic technologies and see how you can reapply them.  Ad serving technology is malleable.  It can be utilized to do other things.  For example it can be leveraged to serve dynamic, rich content.  It can be leveraged to identify and recognize individuals.  It can do a lot more than simply serve an ad on a page.  Try exploring technologies that have been repurposed and see what they can do for you and your client. 

Can you recognize and re-target customers?  I know I talk about that all of the time.  But what about leveraging your client’s CRM database for recapture marketing?  You can be just as good at generating recurring revenue opportunities as you are at generating new opportunities for your client.  Obviously you are not about to abandon the new-prospect-generating role that you fulfill, but diversification right?  Leverage the technologies out there to drive your net CPA back down. 

You can still do search.  Balance it out with re-targeting solutions that will drive recurring revenue opportunities as well.  Convince your client that you can take responsibility for generating both sets of results and the net CPA will be lower as a result.  You have the ability to deliver new and existing customers simultaneously and that is one way to overcome the search Tipping Point.  Because it is a creaper.

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Behavioral Marketing: In Focus – Targeting Success Stories and The Upcoming Holiday Season

Robert Moskowitz published an article today in iMediaConnection entitled: “Behavioral Marketing: In Focus – 5 Targeting Success Stories.”  Two of the stories have some relevance to a topic that I cover on this blog – equating behavioral targeting to event-based targeting and the opening the door to what behavioral targeting can mean when we consider customer re-targeting.

The first story I would like to talk about is Ecommerce – Sequencing Ads.  In this piece he describes your basic storyboarding of banner rotations with a twist.  The first time someone sees a banner, they see a full price ad.  If they click on that banner and visit the site they get cookied and are considered having experienced an ‘event’ (my definition not Robert’s).  Subsequently if that individual is encountered on the Web again through an ad campaign, s/he is shown a discounted ad upon being recognized as being someone that has been through the event.

So it is a spin on storyboarding insomuch that storyboarding deals with prospect-targeting and rotating ads in sequence without the event of having visited the advertiser’s web page(s).  But this pretty basic event-based targeting example is hardly what I would characterize as behavioral targeting.  We know next to nothing about this user other then the fact that they once clicked on an ad and visited the advertiser’s web page.  They could be a customer already, they could be a prospect.  Who knows.

Like other examples of what people consider “behavioral targeting,” all we have here is someone that has seen a web page before.  Had this person registered, logged on or somehow identified themselves through some incentive, and then left, and we later recognized them through an ad campaign, then we could consider it behavioral targeting.  We would know something about them and could target them based on some behavior or customer segment model.

The statistical results cited in this article were impressive, re-messaged leads represented 25% of the traffic and 50% of the revenue.  But only 7% of the banner impressions served were re-targets.  That means that only 7% of the audience composition was the same audience.  So all of the effort made in capturing people from the event, cookieing them and then getting setup for the re-target reached that audience 7% of the time.  This means that the media buy was not effective in getting to where the audience repeat-visits.  A lot of wasted effort.

When we work with people on customer re-targeting, we help them recognize that when there are sites – more so than networks – that consistently perform well month over month, there is a high likelihood that those sites are visited repeatedly by existing customers as well.  DirectServe campaigns can potentially find audience compositions of pre-existing customers to be as high as 25% or more when implemented.  So when you execute a campaign designed to capture people who have been through an event before, you should be media buying where they will repeat-visit.  Networks are a hard place to do that due to shear size and broadness of the networks composition.  Whereas sites that consistently perform well will likely be sites that are also visited repeatedly by your customers in addition to prospects to it is a win-win for customer acquisition and re-acquisition.

Customer re-targeting is a lot closer to behavioral targeting than event-based targeting is.  But I dare not confuse you by changing the definition for fear of getting lopped in with what is a failure-to-meet-expectation offering.  Customer re-targeting can be customer, registrant or applicant re-targeting.  It is the re-targeting of any known individual.  So if someone clicks on an ad, visits a site and identifies themselves, you can re-target them later based on information you now know about them.  How?  You build user segment groups for your targeting.

The second Story of Roberts that I think is relevant is Seasonal Retailers – Extra Incentives.  This example comes very close to what I am talking about, only it is confined to the 24/7 network.  Again it is event-based as it tags users who have been to a flower shop web site, makes the assumptions that they have shopped and then later targets them with ads following the assumption that they were previous customers.

Had this been true customer re-targeting rather than event-based targeting, the flower shop would have already tagged its customers with cookies at the time of the initial transaction.  Then when it came time to serve ads, they could recognize its existing customers – segmented based on a model of customer profiles – and message to its audience accordingly.  Instead of assuming someone is a customer, you could know they are a customer.  Furthermore, if the individual does not carry the cookie tag, meaning they are not a customer (or they deleted the cookie), then you can easily distinguish them and message to them as a prospect!

How does all of this become relevant to the holiday season?

Now is the time that people will be getting ready to shop online in droves.  A storm is coming to the e-tailers and they are scrambling to get ready.  If e-tailers can create a customer segmentation scheme now – such as a 5 or 10-point schema that describes customer preferences – and cookie customers as they shop between November 1st and December 1st, they could use those cookies for re-targeting online through their online ad campaigns from December 1st through December 24th.  Furthermore, all of the cookies that get written during the holiday season that segment customers for each e-tailer could be leveraged by the online ad campaigns for these advertisers throughout the rest of the year. 

Sounds simple doesn’t it?  It really is.  An ad server targets cookies.  If the cookies are written to reflect a customer segment target then they can be recognized and targeted.  If the advertiser writes the cookies and the ad server can read the cookies, then BOOM you have the integration of online ad serving and online marketing.  That is DirectServe.

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Ad-tech is Coming, Ad-tech is Coming! Should You Care? How Should You Handle it if You Go.

Okay its the major industry event of the year, Ad-tech NY.  Its the place to be, to be seen and to see what’s happening.  Or is it?  Is it worth the $1500 to sit in on the sessions or should you just go to the exhibit for free. 

It depends on what you are looking to find out, and on who is paying!

I’ve been doing the Ad-tech thing for a number of years.  I remember when it was the Jupiter Ad-tech Conference – hell I was even a speaker back then – and I’ve done the circuit in SF, Chicago and NY.  NY is the one.  You will find two entirely different experiences at this show – the sessions and the expo.  And depending on who you are will dictate which experience you should have.

The expo is the three-ringed circus of vendors and technology presentations.  Come-one come-all, see what I have to show you!  I know this because I’ve done it myself many times.  If you want to know what is out there, what technologies and who the players are then walk the expo.  Pick up all the crap they give out and weigh down your arms with bags of worthless goodies to later clutter up your desk.  But wear comfortable shoes because the hotel is disorganized maze, crowded and it will take you more than a day to walk it all.

Anyway, what you will get from the expo is a snapshot of technology.  Big booths don’t necessarily mean the biggest players, just big spenders.  Big players usually send insignificant people while the small players send their best people.  Sometimes their only people.  If you are interested in knowing more about a specific technology or space, and care less about which vendor you speak to, go to a smaller player as you will get better insight and information.  Don’t talk to DoubleClick about ad serving when they put kids in their booth who are there to have fun.  Don’t talk to Yahoo about search when the people there have been with the company for less than a year and don’t have industry expertise.  You will find they put “booth candy” in place and not knowledgeable, insightful people on the floor.  The smaller companies or the local companies will send their better people.  Anyone who thinks they might be able to do business at the show will send better people.  Better people means better information for you to gather.  If you are looking to learn about new technologies, go to the expo.  But be prepared for the pitch.  And you may want to have one yourself as they too are looking for something from you!

What you won’t get from the expo is insight into the industry.  You will notice which players are prevalent – more SEO, less email marketing, more mobile, less direct mail, more site optimization, less web site development, more gaming etc.  The expo will tell you which technologies are on the rise just by how many companies in each space chose to promote themselves at the show.  But it won’t tell you where the money will be going next year.  It will only tell you who you will be competing with for the money if you represent a technology or who will be calling you if you control the media spend.

The sessions lend insight into what will actually be big next year.  In the past I have found that, no matter how hard they try to diversify the content, Ad-tech always boils down to a few dominant topics.  Its hard to forecast it going in, but it becomes real obvious after the first day.  The session topics don’t discriminate the speakers, the speakers who control and who will guide the marketing spend for major organizations next year will provide insight into the 2007 plans that are already in place.  Where dollars will be allocated is already known.  If you want to find out where the major money will be headed, what rising technologies will be test next year, listen to these people as they have already decided.

In many of sessions there is a Proctor & Gamble, AOL, NBC, Circuit City, ConAgra, McDonalds, Sony, Hewlett-Packard, Coke, MTV speaker.  These are the drivers of what will become bigger.  Their agencies are speaking too.  They also know the plans for 2007.  Never mind what the technology vendors have to say in the sessions as they only know what technologies are becoming available and how it could change the industry in the future.  What you need know is how will things be changing now, and what you need to do to be ready and a part of that change.  Truth is, the technology vendors are reactionaries who try to drive market trends.  When they speak at trade shows they are trying to persuade marketers and agencies.  When marketers and agencies speak, they will share what they have already been persuaded about.

What if you don’t go to the sessions?  Everyday there are session briefs that talk about what is going inside those secretive little rooms.  Pick one up.  There are also several blogs online that will talk about what has been said.  I will do my best to find references for you on what has been happening in the sessions that I find relevant, however for me it will be about finding those big messages.  The trends that matter most. 

For me its about knowing what are the pain points that are really hitting the wallet?  What technologies are working the way we know – not think – they are working?  Where will spend increase?  Where will it decrease?  Where will the test dollars going in 2007?  What test dollars in 2006 will get more money and what test dollars in 2006 will not? 

Here are some forecasts that I think you will see …

  • Search is hitting a wall.  People have achieved what it is meant to do and they are looking for more out of it but, as I have said in previous posts, you just can’t get beyond a certain point of result without CPA creep.
  • Email Advertising is at a plateau, valuable and a mainstay, but not growing much.
  • Rich media has made its splash and will grow at a moderate rate
  • Video advertising will be a small piece of the pie with a very large voice.  Not even coming close to cracking the $1 Billion mark in 2007, video will be a test market for advertisers that can afford it and the lack of metrics will restrict it from being something that can justify it in any kind of direct response-driven test.
  • Mobile advertising will continue to be a small piece of the pie
  • Display advertising will grow modestly, with only a select number of large advertisers beginning to engage with the advanced technical applications that I have been blogging about
  • The convergence of ad serving and site optimization will open the door to a new series of analytics that will just begin to impact the industry towards the end of the year
  • Gaming will make its introduction into the market as a test medium, grabbing a small piece of the pie for the first year

I will probably have more for you as we get closer to and go through the crazy event but that’s enough for this early morning.  Hopefully you can make it as its worth the time.  If you can’t, blog it each day and find someone you know who can download with you about what they learn.  The themes are what you want if you are trying to stay ahead of this industry.  Like I said there will only be a few take aways from the sessions.  If you are someone that is looking for the next and newest technology to bring to your client, you need to know the expo – but you can also find that stuff out but reviewing the expo list on your own as well.

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