They used to be the kings and queens of media arbitrage. The ad tech watering holes of Goodge street and Dusseldorf would only mention their names in hushed tones. Nobody could beat them on margins. Nobody. Not even Google. But times have changed. The business model of the typical horizontal DR ad network is in real trouble – and it is going to have to battle hard for survival in a landscape that’s been radically altered by the emergence of automated ad trading and the arrival of buy-side/sell-side technology.

About twelve months ago, ExchangeWire published a piece on the future of the ad net model, entitled “The Life And Death Of The Ad Network”. It still remains to this day one of the more controversial posts on ExchangeWire. The post detailed why existing ad net models were doomed, and why they would have to pivot in order to survive. It would seem much of what was predicated has already come to pass. But how did we get here, and what now for the DR ad net market?

Those Pesky DSPs/ATDs Stole My Business

It was inevitable that some bright spark in New York would come up with a way of disintermediating the ad networks. For years the ad nets acted as the go-to aggregation and optimisation layer for all of the top agencies. They delivered on that CPA target but made sure it was optimised at the lowest CPM possible. The ad network became very big. Large amounts of VC money was thrown at the new ad “middle man”. Some were acquired. Some IPO’d. And most built very healthy businesses. ExchangeWire estimated that around £260 million of display spend in the UK was going through the ad net channel. There was a slight flaw in their lucrative model though: it was almost totally reliant on the agencies. Getting on the agency media plan was the nexus of their business. So when the agencies starting using DSPs to aggregate and optimise, it was always going to be difficult for ad nets to hold on to that kind of margin in the market.

No… The Automated Channel Is Killing My Business

For DSPs to work they needed dynamic supply. The Yield Optimizers (later to pivot to SSPs) – who were essentially managing the yield of unsold inventory on behalf of publishers – were about to offer the agencies the supply they needed to compete with the ad networks. It was at the time that the concept of RTB appeared. Buying at the impression-level, offered the agencies the type of transparency their clients craved – kicking traditional media-buying on its proverbial arse. While RTB has had its teething problems, its growth in the market has been phenomenal.

Despite the obvious protestations form current incumbents, it’s hard to deny we are now in the automated age. Automated trading – whether at the impression level or at a pre-agreed price with agency trading desk/ marketers – is the way publishers are going to trade their unsold – and possibly premium – inventory. That is a fact. Where this leaves the traditional DR ad net is open to debate. But anybody can see that its traditional brokering role in the market is no longer required by publisher or agency. Ad nets have been forced to buy inventory from same dynamic sources. All well and good. But where’s the differentiator from the agency trading desks.

The Inevitable Ad Tech Pivot

Ad nets are not clueless. They saw this coming and the pivots have been coming thick and fast. The most notable has been Specific Media. Cursed by countless agency execs over the years for the eye-watering margins they were making in the European display market, Specific was clearly going to be the biggest casualty of the move to automated buying – especially when you consider they have no prop inventory and data as well as an ageing ad server stack.

While Specific has been ridiculed for its celebrity hookup with Justin Timberlake on the MySpace acquisition, I think it could end up being quite an astute move. MySpace has 30-40 million uniques globally. If Specific succeeds in turning this into a a proper distribution channel, and can execute on its plan to produce ad-funded video content, it could move the company away from DR and into the lucrative brand budget. I have to admit I like it. It doesn’t seem as flimsy as its under-threat DR model. With brands looking to produce their own content and requiring go-to distribution platforms, Specific could easily leapfrog agencies to service advertisers direct.

The same logic could be applied to the thinking behind AOL’s recent GoViral acquisition, and why its abandoning Ad.com. Is abandoning a tad extreme in the case of AOL? Arguably. But then if you let all your talented people move to competitors then I think you are entitled to be accused of neglect.

Pivot Number Two… Moving Closer To Publisher And Agency

It’s interesting to see how many middle men DR networks have moved either closer to the agency or publisher. On the publisher side you now have some ad nets claiming to have SSP capabilities. While white-labelling the AppNexus platform for the purpose of managing publisher inventory in the real-time channel would seem like a smart move, it is a tough market. Lots of well-funded players play in the space and given the small margins you have to have serious scale to make this work. And on the demand-side you have ad nets working closer with just the advertiser. Smart. Until you realise you are competing directly with the agency trading desk. Incidentally, whatever happened to going direct to the client? The agency relationship could work of course if all re-targeting was in-housed and the ad nets on the plan were left to prospect…

Enter The Direct Response Prospectors (DRP)

While it’s probably the last bloody thing we need in this industry, this TLA will be popping up with some regularity over the coming twelve months. It is fact that re-targeting will be internalised by the agency. Anybody moaning about the situation needs to go and get their own clients. If you don’t like it, then you need to go client direct. If you don’t want play the agency’s game, go client direct. It’s that simple. As long as the agency controls the relationship you must play by their rules. And most DR networks will be forced into a new prospecting rule. Now it will be interesting to see how these ad nets survive without the re-targeting pixel. Is prospecting really for them? I can only count two or three pure prospecting networks doing this at the minute, MediaIQ and CPX spring to mind. But then bigger players, like Tribal and Unanimis, could also pivot. There might even be a big opportunity for some pure play CPA affiliates to capture DR budget too.

Whatever happens next, the DR landscape in Europe has utterly changed. Things will never be the same. So lets bid a last hurrah to the traditional DR network. Long live the arb!

Can you give an overview of the Adap.tv offering – and where it currently sits in the video ad eco-system?

Adap.tv operates two distinct product divisions, the Platform and the Marketplace. The Adap.tv Platform provides customers with programmatic ad trading solutions that power some of the leading advertising companies including Cadreon, Collective Video UK and Havas Media. The Adap.tv Marketplace is the industry’s largest video advertising marketplace, and a central meeting point for thousands of advertisers and publishers worldwide. Both offerings deliver an automated and holistic way of planning, buying, selling and measuring TV and video advertising across multiple sources, screens and methods of transacting.

Is Adapt a pure tech offering or do you run a video ad net solution as well?

Our core competency is technology, however we have a significant video sales team selling campaigns directly to agencies in the US.

How is Adap.tv connecting supply and demand – especially in a fragmented market like Europe?

With 27 countries to cover, 23 languages and a diverse approach to doing business, Europe poses a daunting challenge for any global company looking to do business.

Until now, the approach tended to focus on selecting the big countries, establishing a team in each and competing to win publishers. However, this is a very costly exercise and only a few companies have managed to succeed.

The rise of RTB has helped to consolidate the European market by removing the need for buyers and sellers to negotiate directly with each other. Sellers set floor prices, buyers enter maximum bids, and this has created a mini revolution in display, which we are starting to see that happening in video.

For example, publishers in large countries such as Poland have significant traffic in the UK, but it was difficult for them to get the attention of UK media buyers. However, by linking with an exchange, the inventory is instantly visible to the relevant buyer at a price they set.

What kind of efficiencies is Adap.tv bringing to the market?

The efficiencies we bring result from a combination of process, visibility and pricing, both within our public Marketplace and outside of it.

We simplify the process of buying by aggregating publishers’ inventory into one central point from which buyers can choose. Any sites that they don’t want to form part of a campaign can simply be removed.

We provide full visibility to all domains in the public marketplace – mobile, web and IPTV. Each site is named and we have integrated all the major data providers to allow extra levels of targeting.

We have built predictive technology that allows buyers to see the total cost and CPM required to meet a campaign’s goals before it goes live, thereby making it straightforward to manage and optimise.

Can you speak about the evolution of RTB in the online video ad market? How much traction has it had over the past 12 months – and how significant is it in the current online video ad market?

We are still quite early in the cycle, but we have seen streaming and download speed increase to allow seamless viewing of video content, particularly on mobile, which is an important step in the industry’s development.

The broadcasters still dominate the majority of the revenue, but due to the regulations to which they have to adhere, it is currently difficult for them to engage in this space. The IAB is working hard to help address these issues with all the players in the market.

The past 12 months has seen the rise of video networks and exchanges. Broadcasters dominate the spend, but the online video publishers, including Youtube and DailyMotion, dominate the amount of video inventory available.

Another recent development is the rise of simulation games such as Farmville on sites like Facebook. Research is showing that the time people are investing in managing their virtual animals’ welfare, or the growth of their vegetable patch, is offsetting the time they used to spend watching soap operas on television.

Is there still a huge gap between display and video? There still seems to be a lot of complexities in the video market with multiple ad server solutions. How is Adapt making this myriad of technology solutions work together?

We follow the approach ‘make it simple’. As a Silicon Valley start up, we like nothing more than chatting about how we have solved many of these issues, our co-founder and CTO Teg Grenger has just been given an award by the IAB in the US for his work on setting the standards for VAST compliance. However most people buying online media just want to know, ‘Does it work?’

In a nutshell, Adap.tv has tried to act as a central hub for any technology involved in the process of buying video. This might be data partners, video platforms, ad servers, mobile distribution or connected TV.

We can provide technology to address each of these needs, but we also understand the importance of working together with companies that already have this technology.

We try to stay focused on the client and how they want to work rather than setting a strict list of guidelines they have to follow.

Demand seems to be outstripping Supply at the minute with publishers able to secure significantly higher CPMs than display inventory. Can this trend continue? And is there a threat that automated trading will put downward pressure on pricing?

Publishers are seeing the value of their display inventory come under intense downward pressure while the CPMs for video continue to rise. (Video ads can command more than ten times the price of display). Many therefore are already shifting focus and resources to meet this new revenue source.

In RTB display we see an almost infinite number of impressions available to buyers, some of these are visible, but much of it is blind. This is often acceptable for response lead campaigns, but online video is more of a brand lead medium so things are quite different.

The lack of supply for quality VOD means that rather than depress prices, RTB in this case is driving them up. This was particularly true in the run up to Christmas where demand for inventory was so intense that the average CPM rose by 35%. Although fluctuations like this are not common and simply reflected the competition for inventory at the time, as more buyers come online we are seeing CPMs steadily increase.

Adap.tv recently signed a deal with Collective in the UK. Can you give some details around the partnership?

There is a lot of discussion around RTB and publishers are quite rightly being cautious before exposing their inventory to this new technology. As RTB has not been around for long, there is still a lot of education needed and research to be done. Publishers therefore want to work with partners they know and trust.

Networks continue to provide a valuable service to publishers and have done so for many years, helping them manage many of the changes the market has experienced.

This deal allows us to work together to combine the experience of the Collective team with the technology of Adap.tv. This provides their publishers with a private marketplace fully managed and operated by the Collective team who they know and trust will have their best interests at heart.

Can you give some overview of the Adapt.tv strategy in Europe, and how it intends to work with local players here?

Adap.tv is a global player and we are building a global business. Europe is central to achieving this goal, so we have developed a strategy that will allow us to reach viewers of video in any country.

This will be made up of a combination of global publishers looking to monetise their inventory in the public marketplace and local country publishers creating private networks in conjunction with their network partners.

Buyers of RTB don’t want to log into multiple platforms to access different inventory sources – rather, they want to have one system that gives them access to all the players.

Our aim is to make Adap.tv the ‘must have’ technology for buyers and sellers of RTB video in Europe.

In 2011, real-time bidding (RTB) was the trend that – at the coalface of online display advertising – I have most come across. As what the market understands as an ad network, Tribal Fusion is in the thick of it when it comes to addressing this trend, particularly with our publisher partners, and now is the time for me to offer a view.

There’s no question that RTB as a mechanism for setting the price for display inventory has its place. Like all auction models it seems on the surface to offer the best way to guarantee the seller the highest possible price for a product or service and, mysteriously, the lowest possible price for the buyer. But, like all auction models – not least because both those things cannot possibly be true at the same time – it doesn’t work that way.

For some inventory – mainly the highly sought-after impressions from users suitable for retargeting – RTB secures a very high price. But, for all else, far from raising prices to their highest possible level, it commoditises inventory such that impressions that could be packaged up and sold for a justifiable premium, go for an absolute song. This is bad in the short, medium and long-term for publishers and advertisers. Here’s why that’s my view:

The shortcomings of an auction model

There are very few markets where an auction model favours the buyer and the seller at the same time. It favours the seller only when scarcity and competitive demand combine. And it favours the buyer whenever either of those things does not exist. Consider the antiques and arts world. Those lots that reach astronomical prices do so not just because of the scarcity of the object, but because there are one or more buyers competing for that very object at the very same time. On these occasions the selling price is usually far in excess of the justifiable value of the object sold. Great for seller, bad for buyer.

Then, wherever a lot is either quite common or there’s only one able and willing buyer, the lot price rarely reaches the same level as its justifiable value. It is by buying these very lots that antiques dealers – of which there are thousands – survive.

Now, let’s think what an antique owner might achieve were he or she instead to market the product via traditional techniques, that is, package the product up, advertise it to seek willing buyers and agree a price that works for both buyer and seller. Assuming they are matched for negotiation skills, both leave happy.

The price of RTB

We see the same occurring in the auction market for online display advertising. Inventory that one or more buyers want at the same time secures CPMs far in excess of their actual value. These impressions are almost exclusively where a user is suitable for retargeting by more than one retailer or more than one agency buying on behalf of a single retailer or even one agency bidding through more than one buying point. Great for seller, bad for buyer.
Meanwhile, for all other impressions, prices fall below what might be achieved were they packaged up and sold to advertisers as part of a campaign, whether directly through the publisher team or part of a content or audience-targeted network buy. Great for buyer, bad for seller.

The critical question

Given we know that, for some inventory, RTB will secure prices far in excess of their justifiable value and for others, far below, the only real question for publishers is whether the former will outweigh the latter.

The answer to this question depends almost entirely on the nature of the publisher and its inventory. What we see evolving is an ecosystem where in-house sales teams account for top, premium inventory, RTB platforms for the commoditised impressions – previously the domain of the ad networks – at the bottom of the funnel, and networks for the middle ground; inventory that the publisher finds hard to sell but that work well as part of a content or audience package.
We operate in an environment where publishers face an increasing number of choices in how to monetise their hard-earned inventory. I fully appreciate that there is a place for exchanges and RTB but do I think all ad inventory should or will be traded this way? Unequivocally no.

Once we look beyond the latest gadgetry hype, however, there are a number consistent themes for the online ad industry…

Greater Accessibility

Consumers are going to have a lot more affordable ways of accessing the internet via multi devices in 2012. It will not necessarily be the products on show at CES but this latest innovation cycle will speed up the diffusion of innovation. Consumers will genuinely have greater access to multi platform connectivity which opens up some interesting opportunities for those on the buy and sell side and everything in between.

Measurement Systems

Greater consumer adoption of connected devices really starts to create the pressure on the main measurement behemoths to come up with new ways to measure across screen. Google could start owning this for themselves and the Google-Kantar tie up is surely a sign of things to come. If we as an industry want advertisers to invest in the new opportunities that
multi devices create, then we better be prepped with the ability to help them measure it all.

Big Data Just Keeps On Getting Bigger

If you think that big data is big now, wait until machines start computing data across all devices in real time. This might be a bit of a pipe dream right now but the need to store, structure and fuse all of this unconnected data is going to be a major battleground in the next five years. It’s going to become the foundation for any company operating in this space and it’s going to be the most transformative part of this industry.

Buy Side Tech

There are going to be a few key players that bring all of this together. The obvious candidates spring to mind but the race to own the stack is already happening. But aside from this, piecing together every channel across every device is also going to create more fragmentation at the same time. You can imagine there will be a new wave of FNAC’s (feature not a company, thanks Omar). Which will then spark another wave of M&A and so the cycle continues.

Sell Side Commercial Models

Perhaps an interesting opportunity in this multi-connected world lies with publishers who have access to consumers across these multi-devices. Publishers being able to package audience across their assets will be incredibly powerful. A holy grail (there increasingly seems to be quite a few) for marketers is communicating a story with their consumers, in true sequential messaging, from one screen to the next. It seems miles away, but this certainly creates a stronger position for publishers who can execute on this.

Creative Agencies Get A Seat At The Ad Tech Table

A central creative proposition will become more important than ever. This means that creative agencies start evolving and get a lot closer to ad tech. Whether this manifests itself by these agencies working more collaboratively with their sister agencies within the large groups, or by employing savvy ad tech integration experts, creative agencies will become pros in ad serving, targeting and measurement across screen. They simply have to.

The Consumer

Lets not forget that yes, a new multi-connected, multi-device world creates many interesting opportunities for those operating in the delivery side of things, but it also becomes really exciting for the consumer. Apple is already piecing it together with iCloud. Consumers really do become in complete control of content: where they consume it, when and how. This then fuels a new wave of consumer-focused apps, designed around content and agnostic to the delivery mechanic. Exciting times, even more exciting than the latest HD-3D-LTE-SMART- TV!

The sales houses are very strong in the German market, and most remain unconvinced of automated buying. However they realise change is on the horizon, and it is with this in mind that we are looking to bring together some of the biggest sales house players in the market – as well as senior figures from the demand side and the ad tech space – to discuss and analyse the potential of data-driven online advertising in Germany.

2011 was dominated by lots of industry chatter around the potential of automated buying and real-time trading. 2012 is about application and making this new eco-system work.

The Ad Trader Conference is the biggest independent conference on the data-driven display marketplace in Germany. ATC Hamburg will have over three hundred online senior advertising execs in attendance – and will attract some of the biggest buy side and demand side players in the market.

ExchangeWire will be chairing two panels at the event. The first will focus on the technology enbling and powering the current move to automated buying; and the other will explore the potential models that will work for German sales houses in the dynamic marketplace. Our editor, Ciaran O’Kane, is looking forward to hosting two of the biggest international names on the day – AppNexus’ Brian O’Kelley and Brian Lesser, Xaxis CEO.

Brian O’Kelley is one of the most influential figures in ad tech – and is currently CEO of AppNexus, a key tech provider in the new real-time ecosystem. He was the former CTO at RightMedia, helping to launch the first ad exchange for online display. As CEO of Xaxis, Brian Lesser is arguably the most powerful man in the burgeoning data-driven ad marketplace. Xaxis is a global digital advertising company servicing over 700 marketers in 13 markets – effectively acting as the optimisation layer for the entire global GroupM operation.

Tickets are selling fast for Germany’s premium event on the data-driven marketplace. Book your early bird tickets today. Details of speakers are available on the Ad Trader Conference site.

Brian O’Kelley, CEO, AppNexus

Widely considered a visionary in the field of online media, Brian created the first successful ad exchange as CTO of Right Media (acquired by Yahoo for $850MM in July 2007). Prior to Right Media, Brian was CEO of Netamorphosis, an early social networking and e-commerce site for events and venues. Brian was also an early innovator in real-time personalization and real-time ad optimisation at LogicSpan, a consulting and technology integration firm, and later co-founded Cetova, a web-based reporting and analytics platform for enterprise financial systems. While earning a computer science degree at Princeton University, O’Kelley started a web design firm, building an open-source e-commerce engine used by more than 100 companies. Brian is an active partner at Grape Arbor, an angel investor group. Since its founding in 2006, Grape Arbor LLC has made investments into more than a dozen technology companies.

Brian Lesser, Chief Executive Officer, Xaxis

Brian Lesser is Chief Executive Officer of Xaxis, a global digital advertising company servicing over 700 marketers in 13 markets. Brian is responsible for delivering targeted digital media products that allow advertisers to reach and better understand their audiences at massive scale. Xaxis delivers these products through the expert use of consumer data, advertising technology and media relationships.

Prior to his current role, Brian was Senior Vice President and General Manager of the Media Innovation Group (MIG), a company he founded in 2007. As the leader of the MIG, WPP’s first technology development organization dedicated to media buying and optimization, Brian created the first integrated data management, targeting and ad delivery platform for media agencies. He was instrumental in creating the first and largest demand-side digital trading business, the rapid success of which led to the creation of Xaxis.

Before leading the MIG, Brian was Vice President of Product Management and Director of Product Marketing at 24/7 Real Media, a global media and technology firm acquired by WPP in 2007. Brian has over 15 years of experience in advertising and technology.

Brian has a BA from the University of Pennsylvania and an MBA from Columbia Business School. He is regularly quoted in digital marketing publications and has been a featured speaker at various industry conferences. Brian sits on the WPP Digital Advisory Board and the GroupM Global Digital Executive Committee.

Facebook and Amazon could soon bring massive disruption to the multi-billion dollar/euro traditional display marketplace – with display solutions that could even emerge as a serious threat to current kingpin, Google.

We Need Some Context

The two major themes of audience-led buying presently centre around both intent and social. They are so in vogue right now with the entire industry. We see BlueKai selling shopping intent, and the likes of RadiumOne serving up social targeting. Facebook and Amazon could easily become a major competitor to everyone working in these emerging areas of display.

The truth is, buying third-party data is hard to efficiently scale. It’s why these data companies are trying to create relationships with hundreds of publishers. They need consistent volumes of data with as many touch points as possible to build robust, rounded profiles. Facebook and Amazon are the biggest publishers and owners of data in their respective spaces – and sit on the largest, most diverse sets of user data. Up until now it has not been accessible to marketers and advertisers, but that could soon change.

The Intent-Driven DSP

Amazon has for some time been discussing bringing to market a display-led product. My hunch is they won’t just look at building a behavioural ad network. Like most forward-thinking real-time traders, Amazon is looking at building its own bidder. And why not? As far as infrastructure goes, Amazon is going to be more competitive than any independent DSP is, so why not own their own stack and retain that juicy margin.

So how could this play out? It is likely Amazon will launch an intent-powered DSP. For larger trading desks and independent specialists, Amazon could simply let companies license their bidder. As a standalone bidder, it would be competitive (and pricing/costs could be offset by Amazon already owning its own cloud infrastructure). Throw in access to all of that user intent data and you suddenly have a serious contender in the DSP space. Not every advertiser would see the value of this, but you’d have to expect that the larger retailers would want access. It would be up to Amazon to manage the competitive element of giving away user data to potential competitor retailers.

This could impact the retargeters too. Up to now, the likes of Criteo have been winning the race because of its engineering and technical capabilities. Amazon could easily match this. And then some. Amazon has a scaled predictive/personalisation algorithm. You can just imagine the sales pitch to retailers now: “Yes we can do personalised re-targeting, that’s easy… but the platform also gives the ability to do sophisticated prospecting, modelled from user intent on millions of consumers”. This could well be a huge competitive disadvantage to existing retargeters.

The Graph-Enabled Ad Net

Many of us are sure of two things: 1) Facebook will IPO in 2012 (and it could be in the next eight weeks given that trading has been suspended on secondary marketplaces) and 2) it will take distribution of ads outside of its domain.

It remains to be seen whether this becomes an ad network, a walled marketplace or a social-enabled DSP. To be honest it doesn’t matter right now, what matters is the open graph. Facebook has already assembled a socially connected web. It has a massive distribution of little “like” buttons across millions of publisher sites (thank you very much, publishers!). Up to now it hasn’t really leveraged any of this data. It’s been confined to ASUs. However, marketers have invested billions (four billion to be precise) into these ad units because ultimately they know their audience is there. So what happens when Facebook can tell you where they are outside the FB domain, what they’re doing, and who else they’re connected to? There is likely to be huge shift of budget into this new entity – whatever it’s likely to be.

Will this leave Facebook vulnerable on the privacy front if it rolls out this new solution? Potentially. Up to now consumers have tolerated the ever-changing privacy policy because most of their virtual life is tied up into the site. Facebook has also evaded the clutches of any e-privacy discussion. By signing your life away to Facebook, you’re giving the requisite ‘explicit consent’ that satisfies the new EU privacy laws.

What’s most intriguing about all this is how Facebook goes about executing this long-awaited strategy. It’s currently a walled garden, and I can’t imagine that will change any time soon. The new solution will probably look like Adsense of old. Facebook will not let users anywhere near the data so it could be leveraged elsewhere for free. I just cannot see how Facebook would ever let advertisers third-party ad serve. Advertisers need to be able to track holistically including the infamous post-impression. The compromise? Advertisers and their agencies will likely send their tracking tags to Facebook to embed themselves.

Building The Facebook Display Stack

But why stop just at an Adsense clone? Once it has enough impressions, what’s holding Facebook back from building its own exchange for dynamic demand partners? There has been some speculation of late within the industry of a link-up between Facebook and AppNexus – with the view of building the FB display stack. AppNexus might even be one of Facebook’s big acquisitions post-IPO when it is flush with public money. Not a completely crazy theory. But how would this impact its current deal with Microsoft? Would Facebook’s relationship with Microsoft pacify potential conflict here? Regardless of how this plays out, I will make a bold prediction: Facebook’s revenue in traditional display will soon outgrow those of Google.

A final thought here. Amazon and Facebook could – and most probably will – bring major disruption to the display marketplace, but imagine if they worked together. An integrated partnership that leveraged the best of both the intent and social worlds. You bring this entire stack to the table and it’s enough to own the market. Things are going to get interesting. Again…

Imagine enabling your brand to interact with consumers in a visually gripping, cinematically inspiring and fully interactive experience, on devices that are already in the hands of the majority of Europeans and North Americans. That’s the promise of rich media on mobile, where an ecosystem is rapidly emerging around the tools, technology and services to create, traffic and measure highly effective interactive campaigns in the mass-market smartphone display advertising channel via ad networks and exchanges.

Mobile rich media encompasses a variety of campaign features, and while the definition (like that of “smartphone”) is not set in stone, the term describes display advertising that moves beyond the traditional static banners and looping animations that have been prevalent in mobile advertising for several years, exploiting the rich features of HTML5 and deep integration in mobile app environments to allow for advertising that is more visually arresting (custom animations or in-banner video), more interactive (banners that expand on-screen when a user taps), and more story-driven. Advertisers and agencies are creating mobile rich media campaigns that not only tie into above-the-line TV and billboard campaigns, but go beyond those by providing brand-building in-ad mini-games, extensive discoverable video and audio content, or direct calls to action including on-device purchase options. Because of this, and because of the mobile medium’s unique targeting capability and consumer dynamics, rich media enables premium performance for advertisers and can provide premium monetization for savvy publishers and app developers.

In fact, rich media is not particularly new, even on mobile, but was early on the exclusive domain of premium publishers and boutique technology providers. Recent developments have turned that model on its head. Apple introduced its iAd platform in 2010 following its acquisition of mobile ad network Quattro Wireless, and put its money where its mouth was, drafting in big budgets from major American luxury and entertainment brands (at least those who were willing to stump up the reputed one million dollar minimum insertion order and let Apple design and build their campaigns). Apple then made it easy for developers to integrate iAd content into their iOS applications, giving millions of consumers their first experiences with rich media campaigns. In 2011, the Internet Advertising Bureau (IAB) introduced a new standard for mobile rich media, dubbed MRAID, Mobile Rich Media Ad Interface Definitions. MRAID enshrines and solidifies the vendor-driven ORMMA (Open Rich Media Mobile Advertising) API, and attempts to bring together what has been a fragmented space of proprietary software development kits and approaches. With mobile publishers and rich media creative service providers agreeing on a standard, the door has swung open for access to billions of impressions on both mainstream and niche mobile sites and applications.

The delivery chain for mobile rich media starts with creative vision. In theory, MRAID (which is, at its core, a JavaScript API on top of an HTML5 rendering environment) creative could be built by any technically adept developer; in practice, powerful campaign building tools providing by the rich media serving platform are typically used. These include off-the-shelf reusable widgets like interactive photo carousels and embeddable video, allowing interactive experiences to be built quickly and easily, with tracking of multiple conversion points and actions. For example, one automotive campaign featured a carousel of images of the car model in question, the ability to interactively customize features and pricing, and then the option to book a test drive or receive a printed brochure. That surely should be compelling for brand advertisers looking for new channels to reach their audiences. Rich media vendors such as Celtra, Crisp Wireless, Phluant Mobile and Medialets all provide self-service tools, and they as well as mobile ad networks like Adfonic often have creative services teams that can do the heavy lifting at this stage of the process, and will quote on briefs from advertisers and agencies.

Most rich media creatives start life as a banner displayed in an existing ad space within a mobile web site or (increasingly) an application acquired from the Apple App Store or Android Market. On iOS and Android phones, these fit into the Mobile Marketing Assocation (MMA) standard banner sizes of 300×50 pixels (XL size) or 320×50 (XXL size), with double-density graphics becoming more and more common (that is, the ad space and device actually support 640×100, like on the iPhone 4 and 4S). Tablet formats vary, but often use IAB standard formats such as skyscrapers and leaderboards; the iPad is the most widespread and arguably the most coveted tablet device when it comes to rich media, due to its larger viewing size and high-end consumer base. Other smartphone platforms such as RIM (BlackBerry) and Windows Phone 7 are on the radar of rich media service providers, but it’s fair to say that iOS devices (and to a lesser extent, their Android competitors) are driving the bulk of campaign spend; together, these two platforms account for more than 500 million active devices worldwide. From the banner placement, user interaction (a tap on a touchscreen device is still somewhat anachronistically termed a “click”) causes the ad unit to expand, usually to full screen size, whereupon the user can typically tap to close the ad (and return directly to the site or application they were using) or choose to further engage with the takeover ad content. The creative can also link the user to their device’s app store to promote further content, bring up a click-to-call dialog, or open a separate browser, for example to enable bookmarking of a made-for-mobile destination site.

Delivering and trafficking a rich media campaign, once built, typically involves both a serving cost – in this respect, the rich media vendors act as serving platforms on par with DoubleClick for Advertisers and similar platforms in the non-mobile display advertising sector – and a media cost. Advertisers will be provided with ad tags (provided in versions compatible with MRAID or one or more legacy or proprietary formats) for the campaign, which must be trafficked on inventory sources that support the rich media format. In the past, this has been limited to a handful of premium publishers who typically sold their own mobile inventory via a dedicated ad sales force or premium ad network representation. Now, though, with the advent of standardization and adoption by a wide variety of publishers, aggregators and ad networks, access to audiences powering billions of monthly rich media enabled impressions is becoming a powerful and efficient buying option.

That’s not to say that rich media on mobile is easy. Unlike the PC-based web, where baseline browser support for most interactive features can be assumed, it’s important to ensure that mobile rich media campaign tags are served only on sites and applications that support all the features required to view and interact with the creative. Ad networks are on the hook to certify each of their publishers (often across several different platforms and placements in each case) as compatible with tags of the various types; there is no one-size-fits-all approach to trafficking a rich media campaign, and mobile ad networks play a necessary role as intermediary. At Adfonic, for example, we’ve developed technology that helps bridge the gap by automatically adapting tags from vendors like Celtra to publishers that use MRAID, ORMMA, and proprietary standards, removing the complexity from the trafficker’s role.

Mass-market mobile rich media is sold on an audience basis and with CPM pricing. Pricing will vary with targeting, especially on the basis of specific devices targeted (for example, the iPad commands a premium), territory or region selected, and desired demographics. Cost-wise, while rich media demands a premium over legacy mobile formats, it still compares incredibly favorably for traditional reach and frequency metrics versus buying, say, a full page magazine ad or prime time television slot.

Furthermore, the real richness of rich media comes in the metrics that can be gleaned from a campaign. These include hard metrics like impressions, clicks, and conversions, which sophisticated ad networks allow advertisers to break down and compare by device, territory, channel and so on. Consumer engagement on mobile rich media campaigns is impressive, with clickthrough rates often above one percent, which is roughly double the average seen on non-rich mobile banners, and an order of magnitude better than that seen in PC-based web advertising.

Additionally, rich media enables soft metrics around engagement and awareness. Because the end user experience is tightly integrated from initial banner presentation to expansion through to exit actions, rich media provides the context for a conversation with the consumer. By integrating tracking into each aspect of the campaign, a picture emerges from clear analytics about the flavor of each conversation held, enabling deeper ROI analysis and consumer engagement studies.

All of the above adds up to an exciting beginning to 2012 for the mobile advertising industry. Rich media is now mainstream on mobile, a tidal wave that will have ripple effects down the entire value chain. As big brands and agencies look for effective channels to rich audiences in ever more engaging ways, the industry is well positioned to deliver at each step of the process.

Retargeting is the core foundation of any performance display campaign. It’s something we all know now, but it’s not something we all knew when we outsourced our display buying to ad networks all those years ago. That’s ultimately because ad networks never disclosed the importance of retargeting whilst they were able to ride the gravy train. However those days are over, and there are several compelling reasons as to why we should all bring retargeting in house today.

Transparency

Arguably, the greatest output of RTB is that it has created a new marketplace that allows it to be centred on transparency (not 100% complete transparency on every bid request but considerably better than it was previously).

Being in control and accountable of every penny a client spends means we know exactly how much contribution there is from every element of their retargeting programme, and what’s more, so now do our clients. There is no more allowing ad networks to hide behind blended CPA metrics, offsetting the poorer performance of their run of network activity with quick win retargeting conversions. Clients now understand the exact worth of retargeting and precisely how/what needs to be done to a) increase that retargeting volume but also b) drive incremental growth from other prospecting strategies.

Lets not forget, in most cases, we also now have insight and transparency into where our ads are being served. Not only is this paramount from a brand safety perspective but also incredibly valuable when we can provide insight to clients that demonstrates which environments convert their target audience more efficiently, how that informs their other cross media planning strategies, and how it disrupts their traditional media planning with fresh ideas.

Price Inflation

The impact of price inflation from multiple retargeters running on a single media plan is real, it is not just a theory. We know the effect of having to bid for a single user against other bidders. We’ve seen the data, it becomes less efficient. The message we convey to clients is that the situation is akin to brand bidding in the affiliate space a few years ago. Why would you let affiliates obtain standard levels of commission for piggybacking on your marketing investment, by bidding on your brand, whilst also inflating your own CPC costs to access that brand term inventory? It didn’t make sense then and it doesn’t make sense now.

Strategy versus tactic

By centralising retargeting in house, you immediately remove any element of having to play ‘the ad network game’ which is designed to obtain last click or view attribution. You are actually able to start developing more bespoke, controlled strategies around first party data, integrating it into the wider marketing/comms mix and introducing separate eCRM or cross channel strategies. It becomes an extension to an integrated marketing plan, rather than simply a cheap display acquisition tactic.

User experience

If there’s one thing that gives retargeting a bad name, it’s when advertisers do it poorly. Retargeting should be used as a reminder of the brand/product/service that a potential customer is considering, rather than giving advertisers the ability to stalk users across the Internet with the same message, no cap on frequency, and potentially showing them the same product that they bought 3 weeks ago. It sounds basic, but we’ve all seen it in action. By taking the retargeting program in house, agencies can help clients ensure that their customer’s user experience remains engaging, consistent and above all else, controlled, increasing brand advocacy rather than damaging it.

Data security

Lastly, and perhaps most importantly, being in control of client’s first party data is not a simple game of efficiency improvements. There is also the much more serious consideration of client data protection. With publishers being able to place tracking pixels within tracking pixels within tracking pixels, can you honestly say that you know every 3rd party server call being made from your client’s site?

It is not unfair to say that practices from *some* ad networks in the past have included leveraging one client’s dataset to improve performance for another client competing in the same vertical. Why should client A help fuel the performance of client B? It reduces their competitive advantage for the benefit of their competitor’s. It’s clearly efficient for ad networks to do this, and certain agency groups are also now taking this data sharing approach, but who really gains when everyone has the same cookie pool available to them?

Data leakage became a serious issue for the industry last year, and with the e-privacy cloud looming, agencies have a responsibility as much as their clients to ensure consumers are well informed of how cookie data is being used. How confident can you be in your client’s privacy policy if numerous disparate suppliers are still managing elements of your retargeting?

At VivaKi we take this very seriously and ensure that no client data is EVER co-mingled. We also work with clients to give them transparency over which pixels are placed on each of their sites and what they are used for. When you outsource retargeting, you loose your ability to have a holistic view on how your client’s data is being used and ultimately, you outsource control. In today’s ever-stringent e-privacy environment, that is a dangerous place to be.

2011 was the year RTB hit the mainstream marketing press as agency groups bought in to the concept wholesale. Spend is pouring into the real-time space with predictions for 2012 ranging from 10% to 20% of all online display (which is an incredible adoption rate for a technology just three years old). But, when you ask what the real benefits of RTB are there tends to be a scratching of heads. Impression level bidding, terabytes of data…what does it actually mean for advertisers?

Current benefits of RTB to an advertiser are pretty scant. Centralisation and control of retargeting, along with black box optimisation algorithms are as far as anyone can get, and are all trading and workflow related benefits. If we look at the market against Gartner’s Hype Curve, it feels as though we’re on the way down into the trough of disillusionment as RTB rather than ushering in a new era of display advertising, has merely shuffled budgets from one supplier to another. I’ve sat in quite a few meetings with advertisers recently where they tell me they’ve ‘tried RTB’ but it didn’t really work out and they couldn’t see any discernable difference from all their previous display activity. So is RTB really a game changer?

Taking a step back from where we are today, it’s clear that big changes are happening in display advertising. Behind the acronyms a new vision is emerging of a fully dynamic display advertising experience where audiences are targeted in real-time and creatives are tailored to the individual. But we’re not there yet. RTB is fundamental to that shift but it’s only part of the story and the clue to where the problem lies is in the name. All advertising campaigns have four core components: planning, buying, creative and optimisation. RTB has meant that the buying element of the campaign is now dynamic, but without the other elements going real-time the benefit is marginal and this is where we find ourselves as an industry now. In the starkest terms, what’s the point in targeting the right audience if you then don’t show them the right message? And, can an algorithm that’s right for a credit card advertiser also right for car manufacturer?

2012 is the year that we are going to wake up to the real challenge of changing the entire online display paradigm to become a fully dynamic customer experience. RTB will continue to be fundamental to that shift, but there is a growing realisation that it’s not enough on its own. To get out of the trough of disillusionment and onto the slope of enlightenment needs all the real-time pieces to come together to create campaigns that live up to the heady billing of a ‘New Era of Display’.

I’m on record with you in agreeing that fewer, well placed, larger ads with better rich media executions should be the way forward. It will take time but I think enough people are pushing the larger and better formats to drive that change. However, publishers, while agreeing in theory, are yet to be convinced that fewer ads with placements likely to have view-time is a better monetisation strategy in practice (and no one wants to be first to jump!). The quantitative case has not been made yet but I’m optimistic that that will come.

I’m also on record as saying that last-impression-post-view is the least-worst attribution method available today given current infrastructure and education but it’s certainly not the way forward. Here I think you do the industry a disservice: we’ve now spoken with enough smart, passionate people with integrity who understand the post view issue that we’re convinced this too will change. Eventually, enough people will move to more sophisticated/ fair/ scientific (pick as appropriate) non-manual models that those agencies and third parties with vested interest in the status quo will be found out and commercial reality will kick in.

Reading your piece I think that the post view window argument is a red herring. The question is how much did each advertising touchpoint contribute to a measurable advertiser event? If you want to get rid of last view cookie bombing then a good first step, possible today, would be to move to weighted or linear attribution. That would incentivise people to manage to frequency (and there are enough studies to show that frequency is valuable) and efficient audiences (via look-alike models) as well as last view retargeting segments.

Longer-term though this is a “big data” problem of collection and processing (and maybe standards?). The weightings applied in exposure to conversion paths (or any other event you value) should be calculated not made up by rule of thumb. Our view is that optimising to those weightings is the next generation algorithm (after optimising to audiences which was the advance on optimising on sites and placements). But we’re then into an issue of statistics: will you ever see enough of a given exposure event to know with any confidence that it is a relevant factor?

I like your vision of the future… but I wonder if anyone out there is crazy enough to build a business model with long-term direct publisher relationships on quality content to drive more effective creative formats while developing exclusive segments to deliver audience discovery and look-alike models? They could price to market and then revenue share back to publishers so that they share the upside (and downside?). Would that be the next generation model… the BEAN? (Balanced Ecosystem Ad Network)