About a year ago, I wrote a blog post pontificating about the likely 2013 ad tech IPOs, and Digiday turned it into a fun poll. Pretty much for the first time in my 10 years of blogging, this post proved both prescient and accurate!
Out of nine companies listed, four IPOed (Rocketfuel, Marin, Tremor, Criteo), one was sold (Adapt.tv) and one is filing soon (Rubicon). I missed YuMe; so depending on how you score, I went something like 6-3-1. Not bad.
Here’s my take on the 2014 line-up. I think there are far more companies contemplating going out, but most of them are on the smaller side and may have a harder time making a successful offering. As a result, I’m a lot less confident in my predictive power since a marginal candidate like LiveRail might surprise us, while a “lock” like AppNexus may choose not to file. By my count there are at least 10 private ad tech companies with gross revenue in the $75-$125 million range, which is on the light side for an IPO, but close enough to be hard to predict.
In descending order of likelihood here are the ad tech companies to look at for 2014 IPOs:
Rubicon: I’m cheating by predicting them as a “yes” in both 2013 and ’14. Bloomberg reported it is already in the process of picking bankers and filing, so Rubicon is probably a lock for early 2014.
Turn: Turn is the largest of the independent DSPs and reportedly raised a recent round at a $700 million valuation. Questions have been raised about its gross margins given its mix of SaaS and media revenue, so it might take some time for it to clean up its story.
AppNexus: Last year’s list excluded AppNexus because I had just left my job there and wasn’t comfortable talking about its business prospects. But without any confidential information or insight, I think I can take a pretty good guess that it will file this year, probably toward the second half. Quote of the year from Brian O’Kelley discussing IPO prospects: “It’s just another financing round. Why would I want my investors to be irrational hedge funds?”
BrightRoll: BrightRoll is as big or bigger by revenue than the current crop of public video companies. It certainly could file if it wanted to but might be avoiding the markets because of the poor performance of Tremor and YuMe.
Collective: Among the biggest of the independent ad networks, Collective has been a rumored IPO candidate for years. Its investments in second-screen TV targeting and strategic relationships with Cox and other media giants makes it much more attractive as a differentiated play. It is also running TV commercials (!) on CNN in the New York area, so that’s got to mean something.
Kenshoo: With Marin out this year, Kenshoo will likely be looking to raise capital to continue differentiating beyond search into social and marketing tech.
MediaMath: I’m personally bullish on MediaMath since its acquisition of Akamai’s ad business in early 2013. Its financials may not justify a filing this year, but I’ll give it the benefit of the doubt given the overall heat in the market.
Who isn’t on the list:
There are a lot of companies that won’t make it out this year, either because they’re too small, need more time to get traction, or are seeing headwinds in the market.
Here’s the “out” list — let the hate mail begin!
TubeMogul/LiveRail: Both floated IPO news recently, which is generally a sign they won’t be filing any time soon. In both cases, they talked about a $100 revenue run-rate which would make them smaller than Tremor and YuMe, neither of which has set the markets on fire. Look at M&A exits for both these companies.
OpenX/Pubmatic: They both need another year before their revenue and growth numbers look attractive to public markets.
Flurry: Huge volume and scale in mobile, but revenue isn’t nearly large enough.
Quantcast, DStillery, 33Across, AddThis: All these companies compete directly with Rocketfuel and probably saw the IPO as a wake-up call. Unfortunately, they are all probably still sub-$100 million in revenue. Stock investors are also extremely skeptical about Rocketfuel’s ability to maintain its growth and margins, and any missteps will have a spill-over effect on the prospects for the others.
BlueKai/Lotame/Exelate: Enterprises are adopting DMPs and creating attractive recurring SaaS revenue. But there isn’t a break-out leader in the space ready to capture the hearts and minds of Wall Street. Another area to look for M&A exits since these businesses can easily be recast from the moribund “ad tech” to the new hotness, “marketing tech”.
3D printing is really pretty cool and I think it’s going to change the world. But as enthusiasm grows and we await the “trough of disillusionment” I was wondering what the general opinion was of the applications of the technology.
So I did a quick unscientific study. I searched Google for the phrase “3D printed [Blank]” for every phrase I could think of that made sense and recorded the number of results, below.
Cars and Food are the clear winners. Cars because…I have no idea why someone would want to print a car. Food sounds kind of awesome but maybe impossible in reality given the complexity of aroma and flavor. Shoes, because the ladies. A little surprised how far down the list Sex Toy came out, but they beat the Meat (heh).
My son and I were playing the Dreidel game last night and we noticed a disproportionate number of “Hey”s coming up and very few Gimels. We were suspicious there was something going on so we turned this into a quick little science project.
In my opinion, the most important lesson about science for a young kid is the importance of empirical observation and measurement. This project was pretty simple: We would each spin a dreidel 40 times and record the results to see how close we came to an even distribution.
My results were pretty astounding:
Out of 40 spins, 31 were Gimels! According to my (pretty bad) statistical skills and this page on Stack Exchange, the odds of this are roughly one in 400 billion (give or take).
My son’s observations showed a bias towards Heys (16) and Nuns (17) which I put at one in one-hundred thousand.
Our theory is therefore that the dreidel manufacturer is sloppy, not they are trying to intentionally bias the game. But I’m ready to be disproved!
Last year I posted a fun review of how I tried to explain internet advertising to my son’s kindergarden class. I got a ton of great feedback from other parents about using the techniques, and some folks in the ad industry even used it to explain what we do to other adults!
So when my buddy Max (11) asked me to be the guest speaker in his class I jumped at the chance to continue my experiment in teaching. Max had different motives — he knew that I used to work at Google and wanted me to tell cool stories about self-driving cars, Google Glass, and GoogleX (Sergei’s secret lab where he’s turning himself into Bat Man).
I decided to split the time between the Google stuff and a lesson about how computers really work at the lowest level. Keep in mind that these kids know basic math pretty well at this point, so I was trying to keep it within their abilities for addition, multiplication, etc. Here’s how the lesson went, I hope you find this interesting and helpful and leave comments with your thoughts.
Starting with the Concepts
To get the kids talking and motivated I started with some simple questions:
"How many of you like computers?" — All hands raised
"How many of you like math?" — A couple of hands dropped
"Did you know that math and computers are basically the same thing?"
This got a couple of the kids intrigued and got some puzzled looks from others. I explained that when they’re playing a game or a movie on an iPad, it’s basically just an enormous number of math equations taking place that make that game run, and I was going to explain to them how it worked.
"What’s the one thing that makes every computer run?"
Some kids said “chips”, but pretty quickly they volunteered “electricity”. With that I explained that a computer is just a machine that runs on electricity like a blender or anything else in your house. But how do we translate electricity to math and then to games, words, videos, etc.?
That’s when I broke out the cheap, RadioShack flashlight ($3.99, in-store only).
I turned on the flashlight and asked:
"Imagine if we wanted to count using electricity. If this flashlight was like an on/off switch that was used for counting, how would we count to 5?"
One boy volunteered and came up to the front to turn on and off the flashlight five times.
"Great, now what if wanted to count to a million or a billion?"
The kids were flummoxed. Until I broke our my four-bit array of flashlights:
How high do you think I can count using just four flashlights?
I started counting from zero to 15 using the flashlights, stopping every once in a while to ask the kids how to get to the next number. For example, when I was up to 9, the 8 and the 1 were both on, and I asked “how would I get to ten?” and the kids were able to get it pretty easily.
Once I got to 15 I made the point that with one flashlight I could only count to one, but with four I could count to 15.
Introducing Binary Math
Going to the whiteboard (all kids classes seem to have them now) I wrote down “1 2 4 8” and noted that each new flashlight was double the value of the previous one.
"Help me continue the sequence. Who wants to tell me what’s after 8?"
With some help from me, we pretty quickly expanded two to the 15th power:
With a fairly small number of flashlights we could reach very large numbers.
We could get to the millions with only a couple more doublings.
Each flashlight is a “bit” or “binary digit”
Each group of 8 bits is a “byte”.
To make this resonate I asked if anyone has heard the term “megabyte” (which everyone had, thanks to marketing of electronics) and explained that this was equal to “a million bits, or a million flashlights!” They were impressed.
Next I wanted to transition from flashlights to the ones and zeros used in binary notation. I had prepared slides/print-outs to use, starting with the familiar decimal notation:
Then showing the binary notation:
I was pressed for time, and the kids seemed a little freaked out, so instead, I used the whiteboard and wrote out much simpler decimal examples with only three digits like 156 = 1x100 + 5x10 + 6x1 vs simply binary numbers like 111 = 4x1 + 2x1 + 1x1 = 7.
At this point, I’d say there were one or two kids who’s entire minds were blown wide open. The remaining kids were about 50-50 between those that were still with me and those that were a little confused.
But How Do We Get from Flashlights to Games?
Counting in binary is a building block, but I wanted to reinforce the lesson that binary math is the essence of all the higher level programs kids enjoy. I wanted them to use the binary math to create something visual, and an exercise was the best teaching technique.
I printed out strips of paper that represented a 5-bit array and included greyed-out “cheats” to let them know the decimal value of the places withiin the binary number:
In advance, I had hand-written a set of specific numbers on each slip. I asked the kids to put a big “X” within the cells of the paper slip that added up to the written number. For example, if I wrote “17” on the slip, the kid should have put the X in the 16 and the 1 boxes. (These instructions ended up being confusing, I’m sure there’s a better way to explain this and switching from ones and zeros to X’s was probably a mistake).
Most of the kids were able to complete the task pretty easily and I walked around the room to help those who were having difficulty.
I then called out the following numbers in order and asked that if a kid had a slip with that number to bring it up to me:
4 10 17 17 31 17 17
As I got the slips I taped them to the wall. When they were assembled, the “X” marks in the boxes created a bitmapped image of the letter “A”. This photo shows it, though its a little hard to make out since some kids put 0’s in the empty spaces:
Using just numbers, which were the equivalent of flashlight on/off switches, we had created the letter “A”, and the same techniques could be used to create an image, a video, a game, or anything else you might see on a computer screen. I think they got it, and if not it gave them a little inkling of what lies ahead as they learn some of these concepts in a more formal setting.
I’ve put together my examples and exercise materials in a Powerpoint, let me know if you would like a copy.
If you live in New York you’re no doubt talking about Citibike. I haven’t tried it yet, and in fact, my family has the dubious distinction of driving in Manhattan to work and school each day (we’re very far from the train, no realistic bus service to get there, etc).
So, while in the car with the kids we’ve invented the Citibike Game. It’s pretty simple: you get points for each Citibike spotting and we try to beat our high score. Meanwhile, the kids are doing math and don’t realize it.
The point system:
Citibike rack: 5 points
Citibike biker: 1 point
Citibike biker with helmet: 2 points (yet to be seen)
Citibiker talking on cell phone: 3 points
Citibiker carrying baby, child, or pet: 4 points
Someone actively taking bike out of rack at the time of sighting: 10 points
So far our top score is an 11, which we know we can beat. Let me know your top score if you choose to play.
I was on the job market for the past couple of months and I took a very expansive approach to the search, taking an average of 5 networking meetings per day, every day, with essentially anyone who would meet with me. And in every meeting I would ask the same question: “What’s going on in New York that’s really cool and exciting?” And you know what, there’s lots of amazing stuff going on in New York!
Now that I have a job, I thought I’d give a shout out to all the companies I’ve chatted with, met, heard about, etc along with my own plain-English description of what they do (along with a little snark). This isn’t a comprehensive guide to NY start-ups, but rather a window into some “movers and shakers,” many of which may not be on your radar.
Adaptly: Platform for buying and analyzing social advertising. A leader in a hot market. Winner: Coolest website navigation.
Art.sy: Pandora for fine art. The only start-up with art historians on staff, they classify works along a comprehensive taxonomy to allow discovery of art within galleries. Winner: Best office view.
Fancy Hands: Outsourced personal assistant chores like “order me a car service to get to JFK”. Winner: Best company name.
Innovid: Online video advertising is exploding, but advertisers and agencies lack tools for measuring and controlling their spend. Innovid gives a single view for all video advertising across the web and mobile. Disclosure: I am an advisor. Winner: Right idea at right time.
Intent Media: Imagine showing ads for your competitors on your own website, and making a coherent business case on why this is a good idea. Sounds crazy, but this is exactly what Intent Media has done in the travel vertical — showing ads for Expedia on Travelocity and vice-versa. Winner: Most dogs in office.
Jirafe: Jirafe offers eCommerce merchants an advanced dashboard for gaining insights into their sales, marketing, and operations. Winner: Worst office (aka, most frugal. Seriously, when they’re not coding the Jirafe team must torture POWs or butcher livestock in their office.)
LiveIntent: Advertising within email newsletters has been a notoriously difficult market and most of that inventory goes under-monetized. LiveIntent has solved this problem and is creating a marketplace for display-style advertising within emails. Winner: Best jerky.
LongTail Video: Which video player is the most common across the web? YouTube? How about the JW Player, an open-sourced video player owned by LongTail Video. LongTail gives away the player for free, then upsells small and medium-sized publishers on video hosting, advertising services, etc. Winner: Best no-brainer exit.
Lua: Collaboration software specifically designed for multiple-location projects like concerts or movie productions. Very slick, very usable application across devices. Winner: Best t-shirt.
Magnetic: Harvests intent and search data from many, many websites and uses it to better target ads across the web. Winner: Best company name.
Percolate: Percolate makes sure that social media messaging is on-brand by analyzing and calibrating the social influences of a brand then recommending items for the social media manager to post. This sounds simple, but is actually quite important to the CMO and the rest of the marketing organization. Winner: Best idea you’re likely to ridicule before you understand why it’s important.
PlaceIQ: Short description: PRIZM for mobile. Longer description: They’ve divided the US into 100 yard squares and can identify consumer characteristics within each square such as income, gender, at-home vs at-work audience, etc. Very useful for mobile advertising. Winner: Most likely to remember the difference between latitude and longitude.
Pricing Engine: Lots of companies help small businesses spend money online, but Pricing Engine tells them how much and where they should be spending money by benchmarking their AdWords and Bing accounts against similarly-situated small businesses. Disclosure: I am an advisor. Winner: Best logo/mascot (mad advertising professor).
Rewind.me: Mobile App that lets you collect all your social data in one place to make it more useful. What restaurants have you or your friends ever checked into in this neighborhood? Winner: Most likely to be a service I personally use.
SailThru: Customized email and onsite offers for media companies and eCommerce. Unlike traditional email providers (e.g. ExactTarget, Responsys), they don’t segment your audience then send different offers to each segments. Instead they personalize the emails in real-time and match the messaging to your latest on-site activity. Winner: Best office hammock.
TayKey: Figure out what topics are trending on the Internet, figure out which type of people are interested in those topics, then very quickly target ads to those topics. Winner: CEO most likely to make you feel old.
TapAd: Target and measure advertising across mobile and desktop screens based on proprietary algorithms. Disclosure: I am an advisor. Winner: Company name most likely to be used in a hip-hop lyric.
Yext: Keeping business listings up to date across Yelp, FourSquare, and everywhere else is a significant problem for retail businesses. Yext does it for you, and is making bank doing so. Winner: Most upbeat boiler room.
YieldBot: Publishers don’t use the majority of their on-site data to target ads. YieldBot finds the relevant data on the site and targets it like search, instead of display. Winner: Best cute little robot give-aways.
Everyone loves a public offering! It’s a coming out party for your favorite company, a liquidity event for your shareholders, and a fun opportunity to dress up and ring a bell. Within the ad tech sector there are a surprisingly large number of companies talking about going public in 2013, so here’s a handy preview of the year to come based solely on my unbiased opinions*. Let me know what I got wrong in the comments.
Ad tech IPO candidates in reverse-order of likelihood to go public in 2013:
Update: Totally spaced on Marin, so added them in with Kenshoo.
Criteo: Rumored gross revenue of $500 million and very strong global growth put Criteo in the pole-position for most likely to exit. I had heard the S1 was coming in late-Q1, but, as with everything in this market, that’s probably smoke.
Rubicon: CEO Frank Addante recently declared the company profitable and with Pubmatic in decline and AdMeld in rewrite mode Rubicon has the SSP field largely to itself. Rampant rumors have Rubicon being courted by Yahoo!, but in the absence of a deal a public offering could be in the works. Alternatively, they may want to bulk up their offerings with some M&A of their own to make a more attractive candidate for the markets.
Kenshoo/Marin: I’m not an expert in search advertising, but both Kenshoo and Marin appear to be clear leaders in the space and they’re making noise about a filing in 2013. I’ll give them both the benefit of the doubt. UPDATE: Marin has filed (2/14).
Adap.tv: Video is incredibly hot right now and Adapt.tv has one of the strongest stories in the market. They’ve been able to position themselves as a tech company in the emerging video advertising space, as opposed to Tremor and BrightRoll (below), both of whom are more pigeon-holed as ad networks. (Whether this is a fair characterization is totally irrelevant). Hiring Tim Morse as CFO from Yahoo! is clearly a signal of intent to offer. And, as a side note, all the video companies listed here have much more solid fundamentals than Millennial Media, which the public markets, for some unknown reason, continues to value at $1 billion in market cap.
Tremor/BrightRoll: Going to put both video leaders in the same bucket. Fast-growing video ad networks with healthy margins in a hot space. Not clear if either is big enough to get the attention of Wall Street, so may need to wait for 2014 and/or some M&A to shake up winners from the second-tier.
Turn: 2012 was a break-out year for Turn in the DSP space, and I’ve heard they are transacting something like $400 million in media on behalf of their clients, which would compare very favorably with some of the others on this list. My guess is they need another year of growth and internal maturity before filing.
RocketFuel: By all accounts RocketFuel is growing rapidly as a buy-side ad network/DSP, representing, in my guess, among the top 5 sources of programatic demand. I don’t have a lot of visibility on their numbers, but have heard they’re looking at filing in 2013. Take with a grain of salt.
* - I have excluded my former employer, AppNexus, from this blog post since I can’t comment freely about their business without overstepping confidentiality obligations.
This article originally appeared in AdAge on November 29, 2012.
One the hardest decisions to make as a product manager is whether a feature is really ready to launch. Which brings me to the ongoing drama around the IAB’s push to for display advertising to use “viewable impressions” to replace impressions as the currency for online display advertising. In short, viewable impressions are not ready to be launched and we need an alternative roadmap for the industry. The IAB, to its credit, recently admitted as much, after tests of viewability measurement resulted in widely disparate results. However, the intention remains to drive towards a currency, which is in my opinion is the wrong goal.
The problem that we’re trying to solve is one of microeconomics. The display advertising world has too much supply — one might say, infinite supply — as compared to large, but finite demand. Sellers of ad inventory (aka publishers) can artificially create as much supply as they choose by simply adding more ad slots to each page of content. These new ad slots may be of unquestionably poor value to the advertiser given their position “below the fold” or, in some cases, they may only be viewable with extensive scrolling on behalf of the user. This situation devalues the inventory of the whole market, and especially hurts premium, high-quality publishers whose inventory is being compared to the inventory of low-quaity sites and/or sites with outright fraud.
The solution to this problem is to enable buyers to better differentiate between and transact based on the quality of the ad slots, such that sites that serve non-visible ads are punished and those with visible ads are rewarded. No argument from anyone so far. The proponents of the new viewable impressions currency have made a mom-and-apple-pie argument: how can you charge for impressions that can’t be seen? We’re just bringing the displays business into conformity with other media like TV. Hogwash. TV commercials play whether you’re in front of the set or in the bathroom, or TiVoing through at 30 miles-per-hour. Most print ads are never seen. No one has any idea whether people look at billboards. (Note, I’m using a bit of hyperbole to make a point, measurement nerds please don’t blast me in the comments about all the obscure techniques used throughout the industry. Thanks.)
The problem comes in the practical applications of such a change. The IAB and Media Ratings Council (MRC) have advocated making viewable impressions a new currency for online advertising. But viewable impressions lack some of the key attributes of a currency — they are not standardized, and they cannot be measured consistently between campaigns.
Let’s discuss what it means to be a “currency”. Every media business has a source of measurement truth that both buyers and sellers agree is the billable record for the media. In the US television market, the currency is the Nielsen ratings. In radio, it is Arbitron. In search, it is Google’s record of clicks. In online display in the US, it is currently the advertiser-recorded impressions through whichever ad server they’re using e.g. DFA or Atlas. (Interestingly, in the rest of the world the online display currency is the publisher-recorded impressions.) Whatever the currency, the important points are that a) everyone in the market agrees on the currency; b) the numbers must be consistently right since they will be used for billions of dollars of transactions. It should also be noted that changing a currency is a very big deal.
So, what’s wrong with viewable impressions? Simply put, they can’t be measured consistently enough to serve as a currency. Tech talk ahead…
A standard impression can be measured by either the delivery of a “302 redirect” from an ad server or the delivery of a beacon (pixel) within the ad from the user’s browser. This standard, set by the IAB ten years ago, is remarkably easy to understand and implement. Much of the IAB’s industry efforts have been focused on reducing the potential discrepancies between impression counts on different systems and bringing them to within a 10% threshold. The reason it is possible to bring the counts to within such fine tolerances is that the causes for miscounting or divergent counting are limited and unlikely to vary much between systems. For example, if a publisher system records an impression when delivering the ad tag to the browser, then the advertiser system does so immediately thereafter, discrepancies are going to be limited to the falloff in traffic between two consecutive http requests with very light payload. Sure, discrepancies still happen, but they are mostly based on trafficking errors, browser latency, or differences in fraud detection.
Also, none of this works inside Iframes and roughly 40% of all ad impressions are served into IFrames. The IAB is proposing SafeFrame, an alternative to IFrames, but this means that effective deployment of the new currency is dependent on everyone in the industry retagging. Vendors claim to be able to “break-out” of IFrames but these techniques are usually based on browser hacks that are not near 100% reliable.
Also, this standard doesn’t easily work for video ads, native ads, or most mobile ads. These are the three fastest growing sectors of “display”.
Also, viewabiltiy is not a feasible currency in programmatic/RTB markets since realistically the impression can only be evaluated after it is auctioned and served. RTB is the fastest growing method of purchasing display.
Also, the ability to measure viewabliity is threatened by patent lawsuits from ComScore. If those suits are successful then the industry will have handed the currency to one company without extracting any value from that company.
Also, viewability doesn’t take into account traffic generated by bots, which some estimates put at over 20% of online traffic and which could be a bigger source of waste and fraud than below-the-fold impressions.
Also, the international community has made no movement towards adopting this standard, making the currency and technology potentially quite different in the US and the rest of the world.
Also, because the viewability of a campaign is difficult to estimate in advance, publishers will be forced to over-allocate inventory to hit viewable impression budgets, resulting in waste and confusion.
Also, from tests thus far, different vendors are seeing radically different results for viewabliity on the same campaigns.
So here’s my modest proposal. Let’s all agree that viewability AND bot detection are vitally important to the success of the display ecosystem. Let’s establish IAB standards for measuring these, and MRC certification for doing so. But, let’s revise our goal from replacing the currency until we have a solid track record or consistent and agreed-upon measurement over a meaningful period of real-world activity. Moving ahead with a currency too quickly will be a huge setback to display and will reinforce the perception that it is hard to measure and subject to technology for its own sake.
Instead, let’s update the IAB standard Terms & Conditions (“Ts & Cs”) used throughout the industry to require all line items to preform with a minimum X% human-viewability and no more than X% in cross-domain IFrames as measured by any MRC-audited system and require publishers to offer make-goods on those line-items that fall below that threshold. Just as with impressions, in cases where publisher- and advertiser viewablity metrics have large discrepancies, both parties use reasonable efforts to uncover the sources of the discrepancies and come to reasonable solutions to reconcile the discrepancies. If we consistently have these large discrepancies then we know we have a deeper problem with the technology, if we don’t then we’ve created a de facto currency, but with enough fault tolerance to deal with the uncertainty of measurement.
This Ts&Cs approach will make viewability a vital part of the media negotiation but will acknowledge that the technology for measurement is far from exact and too unreliable to be used as a currency at this time. The stated goals of viewability will still be accomplished: publishers will redesign sites to reduce poor-viewable ad slots, advertisers will use view ability as a metric for negotiation, and bad actors will find their inventory increasingly de-valued by the market, resulting in reduced overall supply and increased quality.
Following up on yesterday’s tweet about the Steve Jobs of Yogurt, I was wondering how many Jobsian folks there were out there. Turns out Steve’s genius was hardly unique, nor confined to the area of personal computers and communication.
In my first post I described an exercise to explain Internet advertising to my son’s kindergarten class. That lesson really on the mechanics of how the ads got to the pages and how the web, in general, works. The next step was to explain how advertising itself works.
The kids know what advertising is. I wish I had videotaped their descriptions (“it’s when they try to trick you into buying something you don’t need”). But how does it work? I started by telling a joke:
ME: There was a man, who lived pretty close to here, and he said a funny joke. Do you want to hear the joke?
ME: Half of the money I spend on advertising is wasted, but I don’t know which half!
KID IN FIRST ROW: That’s weird.
So let’s show the kids how advertising works. First principal: kids like snacks! I brought two kinds of cheese sticks to the class, “regular” and “cheddar”:
I held them up the class and the kids were excited (everyone likes cheese sticks!). I asked for a volunteer who was a good counter. My son raised his hand (so proud!). I then asked the kids to vote on which type of cheese stick they wanted, regular or cheddar. The results were tabulated by my little man and written on the board as follows:
Then I reached into my bag and pulled out an advertisement…for cheddar cheese!
I think I caught one of the teachers snickering at me at this point. I gave a little voice over extolling the benefits of cheddar cheese. “It is delicious!” “It is aged in a cave!” “It can be orange or yellow or even white!” Let’s pass around the cheddar cheese ad so everyone can see…
"Did I mention that cheddar comes from happy cows?"
"Yes, the cows live on the green fields of Ireland and their only care in the world is how to create the world’s greatest cheddar cheese." Let’s pass around the pictures of the cows and sheep to the little kids.
I think it’s time for a post-campaign survey. Let’s raise our hands again and vote. Who wants regular? And who wants cheddar?
Postscript: My wife texted me later in the day to say “Your son is saying you tricked him into liking the wrong cheese”. Indeed.
My five year-old’s kindergarten class is studying jobs and they asked parents to come in and explain what they do for a living. I jumped at the chance, but then reality sunk in. The little tykes wouldn’t really get the “Luma Slide" and an explanation like "I build high frequency trading platforms for real time advertising" probably wouldn’t work too well either. So I built a little exercise for the classroom that I thought I would share for everybody in case it comes in handy.
Let’s start by explaining the Internet. Kids all claim to know about the Internet, but I wanted to get across the concept that the web was about computers making requests and responses to one another, as opposed to TV where you just turn on a channel. To do this in a classroom setting I figured the best approach was to get the kids moving around and interacting.
Like most internet business models, my first problem was finding decent content. I went to a party planning store and looked for posters or other images of superheros that could serve as desirable content. The best option was rectangular paper party plates ($3 for 8). I bought a set of Captain America and a set of Happy Feet then took a scissors and removed the raised brim of the plate to make a simple square mini-poster. See photo below:
Content secured, I needed hosting. Two helpful little girls volunteered to be the “Servers” and were given stacks of “Websites”:
Next, I needed to worry about connectivity. My original plan was to have the kids enact every layer of the network (“Daddy, I was DNS today!”). This was too ambitious. I settled for a one-hop solution and explained to the kids that web sites are known by their numbers rather than names. One kid volunteered to be “The Router”. His job was to stand next to the address poster (photo below) and direct kids who wanted Captain America to server #1 and kids who wanted Happy Feet to server #2.
Finally, we needed to pay for our content. I made some banner ads and asked for a volunteer to be the “ad server”. I told him to give each kid the ad he thought they would want the most (behavioral targeting!). The banner ads:
Putting it all together, the diagram below shows how the kids flowed through the exercise:
So how did they like it? Overall, I think it went well. The router thing was fun (for me) but the kids basically overwhelmed the throughput of the volunteer giving out the addresses. We ran out of Captain Americas (apparently girls like him as well), which caused some frowns. But in the end the kids got their content and their banner ads and had a fun time.
The next step was explaining ad effectiveness measurement. I’ll leave that for another post later this week. UPDATE: Read Part 2!
I didn’t do predictions in 2011 and wasn’t going to in 2012, but two big trends seem pretty evident and worthy of prediction.
First, in 2012 you’re going to hear some major publishers claim they are making more revenue from online video than from online traditional (“banner”) advertising. It will probably start with pubs in the viral/comedy video space, or any type of quality content that can get viral or SEO distribution.
Second, in 2012 some other publishers, probably in the tech or blog space, will claim to get more traffic from mobile/tablet devices than traditional pc-like devices.
The first prediction is great news for pubs with video content. The second is dire news, unless monetization of mobile quickly catches up with established web-based deals.
This article originally appeared on the AppNexus Blog on August 1, 2011.
In my recent Ad Age piece on the disruptive nature of RTB technologies I took some shots at the rich media business. Specifically, I called it a “tech hairball”. Of all the points in the article, the rich media comments got the most feedback so I want a chance to explain exactly my criticism.
First, some brief background. The term “rich media” refers to display advertising creatives that utilize an ever-expanding collection of features like video, larger file size, social interactions, expansion beyond the banner slot, etc. Within the industry the term generally is associated with a set of vendors including PointRoll, MediaMind and DoubleClick (where I built and managed the rich media products). The fact that the whole business cannot be easily defined except in relation to the vendor offerings should raise eyebrows. Imagine if you couldn’t fully describe what a database was without reference to Oracle or Microsoft — that situation doesn’t exist in mature tech sectors, yet it is the case for the technology behind the most valuable digital ads running in display today.
At heart, the key issue that holds the rich media sector back is that the technical foundation of these ads remains immature and fragmented causing inefficiencies and complexities throughout the value chain. Rich media was invented by EyeBlaster and Unicast over ten years ago, yet virtually no standards have emerged to govern the delivery, reporting, or effectiveness of these creatives. In contrast, the in-stream video world has gone from inception to widespread adoption of the VAST and VPAID standards in less than five years. Mobile rich media is rapidly developing the ORMMA standard, potentially leaving us in a situation where it’s easier to develop cutting-edge mobile ads than browser display ads. Let’s examine the current state of rich media technology along the path of planning->creation->delivery->reporting->effectiveness and see how fragmentation continually limits the growth of the entire display business.
“Hey, let’s run a FatBoy on that placement!” For those not intimately aware, FatBoy is a trademark of PointRoll, and roughly corresponds to an expanding ad. I applaud PointRoll’s marketing strategy, which by all accounts has been hugely successful. But once again, imagine how silly this would sound if we were talking about databases in this manner, where the functionality was defined by a single vendor. For the sake of media planners and publisher campaign managers there needs to be a cross-vendor understanding of what the ads do. This lack of clarity on what rich media actually is, has practical effects because the same creative execution can be implemented very differently, and sometimes with different costs, across different vendors. The cost to the industry is wasted time, confusion, rework, etc.
Almost all rich media creative is based on Adobe’s Flash platform. Each vendor has built its own platform for extending Flash’s capabilities to achieve the various effects when the Flash creative runs in the browser. For example, in order to build an expanding creative, a vendor will build an interface for the Flash designer to expand the creative, and related functions to control the animation of the creative when expansion happens. But each vendor’s API is different, so while a DoubleClick creative might expand by the command conduit.expand(); the PointRoll creative will expand by pr.openPanel(1);. These are the obvious differences, but there are tons of subtle nuances you have to watch out for as a developer, like whether you need to manually stop your videos when an ad closes or not. Anyone in a creative department can attest to the fact that learning and optimizing against each vendor’s API is a massive pain in the neck, and causes the cost of creative development to go up and the quality to go down.
There is a fundamental tension between the desire of the creative agency to push the envelope and the desire of the publisher to maintain a clean and orderly website with well-understood performance measures. Unfortunately, this tension is largely administered through ad hoc processes and undocumented controls. Publishers want to control which types of creatives can appear in which ad slots on their page. For a simple example, imagine a publisher wants to only allow 100K of file size per creative on the homepage, but up to 200K would be permissible on deeper content pages. There is simply no effective way to execute this strategy at scale. The current strategy is to load every creative in a browser, check the fiddler logs, and try to decipher how each vendor does “polite download” to limit customer impact. Most publishers still can’t either proactively control what shows on their page, or at the very least figure out precisely what’s being sent behind advertiser tags.
Let’s talk about iFrames. Publishers put their ad tags in iFrames to speed page download (the content of the iFrame loads asynchronously, thus prioritizing the rest of the page over the ad), and to protect their page from malicious creatives that might read the page content or otherwise affect the user experience. Rich media ads, though, need to affect the page content by expanding or otherwise giving the rich out-of-banner experience. The 10-year old solution to this problem is for each vendor to place its own customized “iFrame breakout” file on every publisher’s domain, thus bypassing the security of the iFrame. There’s so much wrong with this, I’m tempted to write a separate blog post. First, you’ve moved from an environment of security to one governed by trust. Second, the ad server needs to know, somehow, which domains have which breakout files. Third, there’s a huge barrier to entry for serving rich media creatives from new vendors, since they’ll have to do all the legwork to install the file on 5,000 sites. All of these problems get worse — much worse — when we move from a direct, sales dominant model to an exchange model since the algorithms will not reliably be able to determine which ad can run successfully on which site. The current plan from most vendors and exchange providers (AppNexus included) is to create lists of site-vendor combinations and target accordingly… Ugh.
In an ad network or exchange environment there are many additional data points we need to know in order to successfully deliver a rich media creative. For example, which direction should the expandable expand? The current solution is to ask the creative designer to develop the ad such that it works in multiple directions, but this is, in practice, inconsistently done. Another option is to choose the most common combinations (skyscrapers generally expand left, leaderboards generally expand down), and only support those in non-direct environments. But even if we knew which direction the ad slot could expand, we would have no way to programmatically know which direction the creative was built to expand, so we’re back to manually checking every creative in a browser. Obviously, that’s not ideal.
Reporting is the most egregiously broken area for rich media, especially considering how important this is for evaluating the creative. Consider the clients’ perspective when buying expensive media with highly customized creative features like video or a game. The first question to the agency is “how did the ad perform?” Each vendor has created its own set of metrics to measure “interactivity,” “expansions” and other metrics. Unlike impressions and clicks, there are no standard IAB definitions for these metrics, how to calculate them, how to audit them, etc. As a result, the “interactivity rate” for a PointRoll creative will be different from the same rate on a DoubleClick creative, even if all other variables are the same. Consequently, the metric is devalued and the medium as a whole suffers. Next time you hear someone at a conference complain about “how confusing online metrics are,” think about this example.
Building on the lack of standard metrics for rich media, very little research has been done to prove that these expensive, highly customized ads are actually more effective than more simple Flash creatives. Personally, I’m convinced they are – I just haven’t seen the data. At DoubleClick, we published a study showing correlations between rich media and Dynamic Logic brand studies, which was terrific. However for such a large portion of the display spend, it’s astounding to me how little justification has been done.
Here’s a partial list of what needs to happen to help rich media scale:
The IAB should establish standard format definitions and names. What is an “interstitial” and what is “polite download”? This shouldn’t be too difficult or controversial and has already been done for video.
A working group consisting of the top vendors should look to standardize their Flash APIs. A tricky project, but incredibly valuable to the creative community.
For the purposes of real-time bidding, the various delivery vendors are working incrementally to develop ways to express the metadata needed for ad requests and delivery. For example, indicating which vendors are supported on a tag prior to requesting the creative. A lot more needs to be done here, especially by the vendors, to allow automated discovery of creative metadata.
The industry needs to adopt the so-called “Friendly iFrame” (PDF) technology developed by AOL, Yahoo! and Microsoft. To simplify iFrame environments. I’d like to see the IAB take more of a leadership position on this technical innovation.
The IAB must finally define rich media metrics. It doesn’t make sense that we have standards for impressions but not interactions. Remind me what the “I” stands for again?
As someone with a history in this space, I take some personal responsibility for not pursuing these initiatives myself! Moving forward, I would be happy to help in the development of solutions. I look forward to hearing your feedback.
Don't Look Now: Classic Disruption Is Taking Place In Advertising
This article originally appeared on AdAge.com on July 22, 2011.
Real Time Bidding is the hottest technology in online advertising, and with good reason. By connecting buyers and sellers in real-time, on an impression basis, RTB has enabled an explosion of technology, experimentation, and measurement, resulting in improved results for buyers and yield for sellers. But even with the hype cycle in full force and growth in a hockey-stick patterns, the importance of RTB as a disruptive innovation is largely underestimated.
Clayton Christensen first identified the concept of the disruptive innovation in the Innovator’s Dilemma. The basic idea is this: a new technology slowly undermines an existing, dominant technology, by starting out cheaper and “worse,” then slowly improving until it is a full replacement for the dominant one, but with newer, more flexible capabilities, and usually a lower cost basis. Classic examples of disruptive technologies include the PC (which disrupted mainframes and minicomputers) and desktop publishing (which disrupted the print industry).
What started as “worse” will soon rule Ad exchanges were largely invented to enable ad networks to more efficiently and cheaply trade available impressions in order to meet performance goals. The word “performance” is important here — we’re talking about cost-per-click and cost-per-action deals and lead generation. This is the marketplace that, frankly, many of the mainstream members of the display ecosystem don’t consider very sexy or, even, in some cases, reputable. The liquidity this enabled was largely middlemen selling to middlemen, and the advantage of the technology was the avoidance of truly terrible operational options like “daisy-chaining” ad server tags and “pass-backs,” where impressions were passed back forward to an ad network, then passed back if unsold.
So while exchange technology was valuable to those who used it, it was (and still is) considered a low-end innovation, and much “worse” than traditional display buying. Certainly the interactive agencies handling brand campaigns, major product launches, and the like, weren’t getting excited about these buying opportunities a few years ago.
In the second phase of ad exchanges, RTB-powered buying and selling grew like weeds, rapidly displacing most non-RTB, and simultaneously exchange buying displaced a significant portion of direct remnant sales to ad networks. With the leadership of the agency trading desks like Publicis’ Vivaki, ad agencies got the religion and started diverting real budgets from other indirect channels to RTB. This was very exciting! But even today the consensus remains that RTB is a great remnant technology, and will never seriously challenge the world of three-martini lunches, faxed IOs, relationships, and homepage takeovers.
Simply put, it remains “worse” than the incumbent ways of doing business.
Disruptive technology As ad exchanges went real-time, a whole new set of companies emerged to enable buying and selling in these environments. Products like Google’s RTB, and buying systems like those created by so-called demand-side platforms didn’t take the existing ad serving paradigm to heart, but rather created their interfaces from scratch for the new environment. Some interesting things happened in this build-out. A lot of the assumptions that are at the heart of the display ad technology went out the window. Instead of exchanging ad server tags by email and with manual checks for syntax, this process became an API. Instead of trusting that every buyer met the conflict rules for competitive advertising, the servers started making requests and responses with blacklists and advertiser declarations. These decisions, and many like them, are the building blocks on which this “worse” technology will challenge the old way of doing things to it’s core.
According to various studies the cost of buying online display advertising is roughly 2x to 10x that of other media. This overhead problem is blamed on the micro-targeted nature of online, where there are a near-infinite venues on which to buy, multiplied by numerous strategies of how to buy. This causes fragmentation of buying and selling, which, since the display market workflow was largely based on operational tactics borrowed from traditional media, doesn’t scale. The proposed solution to this problem has been to layer on interoperability layers like the IAB’s eBusiness initiative which automate the communication of the complexity across buyers and sellers. But what if a couple of years from now all the complexity just…goes…away? What if we don’t need to communicate the complexity. But rather we manage the complexity on an impression-by-impression basis using our own algorithms. If you just read that last sentence and said to yourself “no way, it will never work like that, it’s too complex” you just committed the first sin of evaluating a disruptive innovation.
Here’s another example: rich media. The rich media business in display advertising is a poster child for dysfunction and lack of scale. Every vendor’s poorly-documented and relatively arbitrary product architecture is held together by bandages and bubble gum, yet these ads represent some of the most lucrative impressions online. This technology hairball simply won’t work in the RTB environment. So there are two options; either rich media ads won’t run in RTB (the current situation), or the more rigid and defined structure of the RTB environment will force standardization and declaration of rich media experiences, cutting through the gordian knot.
Lower costs Most disruptive innovations exhibit lower long-term marginal costs than incumbents. Does RTB cost less than traditional ad serving? On the one hand, you have traditional ad servers, with fully-loaded cost structures designed for relatively simple decision making, which then have to rework their technology stack to the complexity of RTB. On the other hand, you have a brand new stack built from the ground up for RTB that then addresses the traditional market by operating on a vastly simpler decision making scale for selected clients. Which of these two stacks do you think will have even lower marginal costs as it scales to even larger volumes?
But what about homepage takeovers and martinis? Homepages are always the argument people make with me about the limits of RTB. Let me be clear, I’m not suggesting that the human relationships, creativity, packaging, and overall high-touch associated with display advertising will be replaced by RTB. But, there’s no reason why RTB technologies couldn’t be used to execute a homepage campaign that was sold in the more traditional way. Gone will be the IOs and T&Cs, replaced with pre-defined private deal parameters. Gone will be the emailed tags, replaced by APIs. Gone will be the broken pages because of last minute trafficking errors, replaced with verified and audited creatives within a documented environment. And gone will be discrepancies and piddling fights over counting and data ownership, replaced with well-defined interfaces for counting and anonymizing data.
Whither the media buyer? The Media Buyer’s role in RTB becomes much more important than ever before. But instead of evaluating sites and line-items on the budget, the media buyer needs to adapt to a world where each clients’ strategy may be wholly different, and where little counts other than the data. Brand buying moves from monthly panel-based statistics about top sites to historical views of past results and projections of those available through different buying strategies. Publishers need to step up with the data as well to differentiate and win the deal in an environment where supply is near unlimited.
The fact that RTB is quickly taking over remnant inventory is, in fact, the first step in a major disruption to the entire online display ecosystem. The new technology stack will replace, in full, the current way of doing things, and sooner than many expect. The next time you hear a comment about RTB being only for the “least valuable” inventory, think twice about what the speaker is really saying, and try to imagine it playing out a little differently.
For the past three months my Chrome browser has occasionally crapped out and stopped loading any pages at all while displaying the infamous “waiting for cache…” status message. The only fix that consistently works is to delete the cache from the tools menu, but this process can take 15 minutes to a half hour.
Some message boards recommend killing the cache files directly, but only for a PC. On a Mac, I couldn’t find anyone with useful information on how to permanently fix. Everyone seems to recommend deleting the cache located at ~Library/Application Support/Google/Chrome/Default/, but this directory doesn’t actually include the cache!
On a Mac, the solution is to delete all the files in the following directory:
I just did it and it works like a charm. I’m writing this article in the hope that future sufferers can find the answer faster than I had to.
2. Clicks and Clickthroughs Matter
This is only a lie to the extent that intelligent people benefit by continuing to believe it. Studies have shown that most people don’t click; that those who do are less desirable consumers; that most clicks are accidental; and that in any case clicks are very rare. Yet, clients and media planners continue to evaluate online advertising based on click-through-rates. There’s still a place for clicks on pure direct response offers or specific calls to action, but they aren’t a viable currency for generally evaluating online ads and should stop being treated as such.
Reach is defined as the number of people reached by an advertising campaign or media property. Cookies can measure the number of browsers exposed to an advertising campaign. Browser<>Person. Unless you have a mapping (panel, statistical, or otherwise) such that f(browser)=people then you can’t calculate reach. And just grossing up based on deleted cookies doesn’t qualify.
4. Television Dollars are Coming
Online advertising is a great medium that delivers quantifiable results to both brand and direct response advertisers. People are also using the Internet more every year, and watching less television. Therefore, Online Advertising will eventually take TV Dollars. No. This argument has more holes than Nielsen ratings. Online has done an amazing job growing at the expense of print, direct response, classified, and other media, and yet TV is bigger than ever. Until Online has the sight, sound, and motion of TV and ads are watched for more than a split second before the user browses away, it isn’t a viable alternative spending channel for TV dollars.
5. Display Needs to be More Like Search
Yes, search is incredible efficient, and measurable, and offers huge value to advertisers. And display is a pain in the ass, and fragmented, and difficult. But fixing display doesn’t mean making it more like search, unless by that you mean giving Google total control of the ecosystem. Oh whoops, that already happened. No, seriously, the great benefit and drawback to search is that every ad can be represented in 95 characters. In display, the whole point is to use creativity, color, context, and emotion to cut through the clutter. So while the mechanisms of buying and transacting display may become more like search, the creative itself will resist efforts at automation and that’s a positive.
6. Privacy is an Important Issue
Privacy in online advertising is an issue, to the extent that everyone is scared shitless that the government will do something stupid. But it’s a total non-issue in reality. There’s not a single documented case of a real-world harm coming from privacy-related abuses in online advertising. Fraud is an issue. Spam is an issue. Malware is an issue. Search results and social media contain a ton of privacy land mines. But the ability to know that an anonymous cookied browser represents is an “in-market car buyer” who recently visited KBB.com has yet to enter the realm of crimes against humanity.
7. “Faxing IOs”
This is my favorite since I think I personally used this lie hundreds of times. No one actually “faxes IOs” anymore, yet any vendor in the space who is talking up their crazy scheme to automate the workflow of the ecosystem likes to trot out this fallacy as a way of making us feel bad. We don’t fax IOs, we email PDFs of IOs.
8. Creative Burn-Out/Frequency Matters
This isn’t so much a lie as a rule of thumb that is outdated. Every agency out there makes sure to manage the frequency of exposure of their creative to avoid burn out. (Note, frequency is based on cookies, which are unreliable). The exact frequency is debatable, but is usually somewhere between 5 and 10 per cookie. Let’s do some math. In the TV world, an advertiser might try to limit frequency to 5 per household (of course, they can’t actually cap since it is broadcast). Five TV commercials = 150 seconds of ad exposure. The average web page is viewed for, I don’t know, maybe 5 seconds? So if you wanted the same exposure for web ads you would need a frequency of 30! And that assumes that a non-interactive, non-audio playing banner ad has the same effect per second of exposure as a TV ad blaring in an interruptive context. Personally, I think the ideal frequency for banner ads is near infinity.
9. Viewthrough Conversions with a 30-Day Lookback
A viewthrough conversion is when a user (really a cookie) buys something on your website and you give credit to the last impression seen by that user, within the “lookback window.” A lookback window is an amount of time in which you will give credit to that impression. The default lookback window most agencies use is 30 days. So if you saw a banner ad a month ago for a product you bought today, that banner can be given credit for influencing your purchase. Doesn’t make a whole lot of sense intuitively, and, to my knowledge, has no empirical research to support. The correct viewthrough lookback window is probably less than 2 hours.
10. Mac Users Don’t Matter
No one ever says that Mac users don’t matter. But they don’t. You know why? Because most Mac users use the default browser, Safari, to browse the web, and Safari, by default, does not allow any third-party cookies. So if you’re a) using cookies for reach/frequency calculations; b) using cookies to monitor and attribute conversions; c) using cookies to target users on your inventory; or d) using cookies to bid on impressions on exchanges, then you’re out of luck. Oh, also, Mac users are more educated and affluent.
Earlier today I tweeted my displeasure over the misleading headlines making the rounds that Facebook accounted for 31% of online display market share. A lot of fellow tweeters agreed or disagreed so I thought I would explain.
First, let me say this is not a disparagement of Facebook or their ad platform. While I was at Nielsen I worked closely with Facebook and there are some interesting studies showing the effectiveness of ads on the platform.
My objections is twofold:
Facebook isn’t “display” in the sense everyone in the marketplace thinks about display as a meaningful market, so calculating market share doesn’t make sense; and
Using impressions as a proxy for any measure of market success is absurd.
What is Display, or How do we Define the Market
This is the crux of the issue. Is the market for “display” equivalent to the market for “ads that have images”? And if Facebook isn’t display, what is it?
From the perspective of all the current players in the display market, Facebook is a not part of the ecosystem. You can’t buy or sell ads on Facebook in the same ways as the rest of the market. You generally can’t use the same technology. You can’t use the same creative executions. It’s like we run an ice cream store, and when a new pizza shop opens across the street the press claims “pizza shop now half of calories in market.”
From the perspective of the buyers, there may be some overlap in budgets between Facebook and display, but there’s also tradeoffs in budget between display and search, email, video and every other “market” you might want to evaluate. So if you want to consider market share for “digital media buying” or “all advertising” then fine, go ahead and give Facebook the credit it deserves, but just assuming that all Facebook spending is competing against display is arbitrary and incorrect.
But it has Images!
Yes, Facebook ads generally include images. Does that make it display? Let’s imagine that Google announced tomorrow that for an extra $0.05 CPC they would allow advertisers to include a small image with every AdWords impression. Would all of AdWords suddenly become display? Or what if Facebook changed its mind and decided to not allow images anymore in their ad platform, would they suddenly be in a different market?
Then How Should we Measure Facebook?
There are plenty of very effective ways to measure Facebook’s progress against other media. Here’s a quick list:
I really came to understand that gays and lesbians were just real people who wanted to live real lives and be treated equally as opposed to, for example, wanting to destroy American culture. No, they didn’t want to destroy American culture, they wanted to openly particulate in it. I was well on my way to becoming a supporter of civil marriage equality.
“At this point, it’s worth remembering that the NYT paywall is really, at heart, a navigation fee. The side door is always open: if you get to the NYT website from, say, the HuffPo story, then you’ll be able to read that story no matter how many other stories you’ve read that month. The NYT has said that 80% of its visitors don’t read enough pages per month that they’d have any need to subscribe at all. But it’s pretty obvious why that is: the NYT is making precious little effort to encourage people to want to click around the site and view more pages.”—Why The New York Times Will Lose to The Huffington Post | Epicenter | Wired.com
Do you care about revenue or profit? Answer this question and I’ll tell you if you belong at a start-up or a big company.
Your quick response is enough to judge. “Real” businessmen will always be on the profit side. What’s the point of business if there’s no profit? And what’s the value of a business if not the discounted cash flows (profit in cash form)?
Yet, no entrepreneur or small company CEO I know cares much about profits, except as a way to validate their business as “profitable” or “cash flow positive.” Entrepreneurs talk about “run rates” and “growth,” both of which are measured in revenue.
Where’s the disconnect?
In the digital arena, there is a largely unspoken assumption that costs can be reduced by bringing businesses to scale and by applying technology. Many digital businesses build revenue by throwing bodies at the problem. Yahoo! originally had people classifying every site on the Internet to create their directory; Netflix had (and still has) people in warehouses sending out DVDs; GroupOn has salespeople calling every local business trying to create deals.
The assumption of eventual scale allows start-ups to focus on the really hard problem, attracting customers and their money — i.e. revenue. The assumption can be translated and parsed as “once the revenue is there at a sustained rate, the processes can be automated, technology can be applied to the problem, and the profits will follow.”
In larger companies there is far less tolerance for money-losing businesses. There is no shared assumption of future efficiency. So starting a new business in a larger company is a political minefield. Everyone who runs a profitable existing business will be wondering why the unprofitable new enterprise is allowed to exist. The expenditures on the unprofitable business will be scrutinized and concern will be expressed. It is in this way that new ideas are killed at bigger companies.
But what’s really interesting is what happens when the small, growing-but-unprofitable company is acquired by the larger, profit-seeking company. Under what criteria is it judged? Is it still allowed to grow to scale, or does the profit imperative kick-in too early to realize it’s ultimate objective?
One of the best sources for insights about product development comes from observing how your users avoid using your product. It is often a huge shock to a product manager when they sit next to a loyal user or paying customer and watch them do something totally bizarre in order to work around a perceived shortcoming you never knew about in the first place.
Since Twitter doesn’t easily let you prioritize tweets for reading later, a friend clicks on all tweets that seem interesting, then clicks their “Read Later” link on Instapaper, then feeds the Instapaper RSS feed into their Flipbook account.
In my last job the services team insisted on being able to upload video files directly to our CDN using FTP even though there was a web UI for secure uploads. Turns out that using the UI you couldn’t share video files between creative executions, so it created lots of extra work.
My kid isn’t allowed to play Angry Birds on my iPhone. Why? Because I don’t want him to unlock levels I haven’t unlocked, and there’s no way to switch users.
Well, I think we are in the middle of a massive, widespread workaround regarding social networks and status updates. Let me explain.
I am a Foursquare user, a Yelp contributor, and overall active social being on the web. And every one of those services offers me a helpful “post to Twitter” option that I politely uncheck. While I’m at it, I also decline to post to Facebook. These two services are the widest and most social of my online networks, yet I don’t want to spam my friends with anything but the most interesting updates. Essentially, I’m working around the inelegance of these social services by censoring myself.*
There is a disconnect between the competing ideas that Facebook and Twitter are a) Social, like a great big party where you want to make sure not to be too boring, and b) Informational, where your affiliation with different parties filter the noise of the world into a signal of interest and relevance to your life. While both services started our purely social, they are quickly moving to the informational, and still have a world of work to do to get there.
So what would I really like to share with my “friends” and store in my stream?
Every song I listen to
Every place I eat, drink, shop
Every TV show I watch
Everything I read that is even vaguely interesting
And my friends shouldn’t mind, since the services they use to follow me should only show them the parts they find interesting. But until we get there (and we’re not close) we’re stuck with two alternatives:
Use specialized social networks for each type of activity (Ping for music, Foursquare for going out, etc) so we don’t clutter up our “primary” stream
Continue self-censorship, causing sub-optimal usage of the tools and untold millions of missed connections.
* - For those of you who follow me, the natural reaction to this post is “oh my God, he would actually post more if he could?” Yes. Yes I would if I could.
About a year ago I found that I was using Twitter as my primary blogging mechanism and only occasionally updating my long-form blog at aripaparo.com. So I tried an experiment where I would use Tumblr to integrate my tweets with my posts, and it would be cool and all that.
Turns out, since 99% of what I write are the tweets, if you want to know what I’m up to, you can just go to my twitter feed. That’s how my Mom keeps track. Or better yet, “friend” me on Facebook, no muss, no fuss.
With that said, I’m going to make an honest attempt to keep my old blog at aripaparo.com up to date. So update your RSS readers (for those of you who still use those), update your bookmarks in whatever cloud-based bookmark management system you might choose, and stop coming here.