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ad:tech Takeaways

April 22nd, 2008 · 231 Comments

I recently attended ad:tech, a digital marketing conference and trade show, in San Francisco (April 15-17). My motivation in going for it was to understand what is happening in the world of Internet advertising, and to see what ideas can be applied to the evolving segment of mobile advertising. Here are some thoughts from the event:

Online Advertising is expected to be a $50 billion industry globally in 2008. The industry has two primary segments: Search and Display advertising. Search will account for $30 billion and Display for $20 billion. The US market is about the same in size of the rest of the world put together. Google is the biggest player in the online advertising, with revenues in 2008 expected to be over $17 billion. Compare these figures with the Indian online advertising market of $125 million in 2007 (growing at about 50% per annum, and part of an overall advertising pie of $6 billion). As someone commented, the size of entire Indian online market is probably equivalent to that of just San Francisco!

Online Advertising is now a complex landscape. In the traditional world, between Advertisers and Publishers are Ad Agencies. In the online world, there are many other entities all vying for a piece of the burgeoning pie that Google doesn’t take away. There are ad networks, ad exchanges, ad network optimisers (for publishers), ad Servers, ad optimisers (for advertisers), and a whole slew of analysers. While Ad Networks remains the biggest category (there are over 300 of them), there are many companies all working on the same premise of helping get the right ad in front of the right person at the right time. All this becomes possible in the online world because of the ability to target and measure.

Online Advertising has become a science. There is so much technology now evolved in getting that single ad on a page – all in the hope of either perfect demographic targeting or a click which results in the desired action. The emergence of Search which surfaces user intent, and the process of attaching bids to keywords have also changed the landscape making it much more analytical. Almost everything can now be measured and improved. One of the key drivers is the huge disparities in CPMs that publishers realise when they sell directly and when remnant inventory is sold via ad networks. There is a lot of room for improving efficiency in targeting. Another area discussed was to go beyond just measuring the last click, but go through the consumer action trail and give appropriate credit to all ads and interactions that may have helped in the final click or action.

In the US, there is a big mismatch between time spent online and ad dollars. US Consumers are now estimated to be spending over 20% of their time online, while online ad spend ($20 billion in 2007) is only 7% of the overall ad budgets. This is seen as the big opportunity to dramatically grow the size of the online ad pie. As the US economy slows, there is a feeling that advertisers will move more money to where it can give better RoI. Print and TV are the two media which will feel the impact and pain of this shift.

Display Advertising is emerging as the Next Big Thing. In the early days of online advertising, it was all about Banner ads. And then, along came Google with its Paid Search solution. Now, even as the pay-for-performance industry linked to search continues to grow, Graphical Display advertising is making a comeback. (Google’s purchase of DoubleClick is a reflection of this trend.) Display advertising can do much for brands than the text ads linked to keywords being searched. And the big money is with the brand advertisers. Bringing targeting, measurements and engagement to richer ad units is what is going to drive the growth in Display ads. The mantra going ahead is not Search or Display, but both.

There are many other emerging growth areas for advertising. Video, Social Media, Mobile, Widgets and Games are five new segments which are likely to start pulling in growing ad revenue in the coming years. At the heart of it is the ‘digitisation’ of media and our interactions. And as the quantum of digital in our life grows, so will the ad spends on these new media. Video is seen as a much more near-term opportunity but needs some standardisation of ad units and creation of better engagement opportunities than just the pre-roll (an ad shown before the start of the video). Social networks (built around user-generated content) have got large traffic but very low CPMs because it is not clear still what is the best way to monetise these interactions between people. One opportunity mentioned in the context of social networks was ‘distributed commerce’ where consumers talk about products they like (or don’t). In that sense, Social networks may be better marketing platforms than ad platforms. Mobile has been ‘happening’ for a long time – there is a certain staleness creeping into the discussion on opportunities around the mobile. (My personal thinking is that publishers haven’t succeeded in creating ‘media on mobile’ and that is a prerequisite for generating audience and advertising.) A line of thought mentioned was that the use of mobile in a campaign (for example, sending an SMS to a shortcode) makes other media interactive. Widgets and Gadgets have grown in popularity over the past year, and are creating new monetisation opportunities. Video Games are also being targeted by advertisers because of the time being spent by consumers. In other words, there is still plenty of room for innovation and growth. Many of these new media require new definitions – among the buzzwords heard often were engagement, conversation, buzz and accountability.

Mobile Advertising needs to combine Search, Location, Permission and Push. Search provides intent, and is natural given that it has worked so well on the Internet. Location provides great spatial context – something that is not necessarily available on the Internet. Permission is important so that consumers do not feel that their private space (on their very personal device) is being violated. Push creates the opportunity for repeated touchpoints. Mobile also has a wide variety of channels that can be targeted by marketers: voice, SMS, MMS, applications, widgets, WAP (mobile internet), Bluetooth-based proximity marketing, and using QR or 2D codes. The US has been slow to move on the mobile front, and it is likely that some of the pathbreaking ideas will come from countries like China and India where the mobile is at the centre of people’s lives. The iPhone is seen as an interesting new platform because it breaks the barrier between the PC-centric Web and the mobiles as we have known them. The last seven years have all been ‘the year of the mobile’; it is not clear how many more such years will need to elapse!

Advertising Agencies are evolving. Two key points that came out were that unbundling (creating separate digital units) does not necessarily work well, and that ad agencies of tomorrow will need to look more like financial firms of today by combining portfolio managers (who strategise and plan given the multitude of options available) and traders (“button pushers”).

Vertical Ad Networks are starting to emerge. Two examples mentioned were Glam.com (which focuses on women by content aggregation across blogs) and ad networks targeting Hispanics in the US. In addition, many US sites have international audiences and many international sites have US audiences – both categories are poorly monetised as of now.

The 2008 Beijing Olympics will likely be a watershed moment for Digital. NBC, which has the broadcasting rights on the Olympics, is pushing the idea of ‘Your Olympics’, giving consumers the control of seeing the content on any device of their choice. Given the nature of the event, the Olympics will drive a lot of global viewership and it will be across multiple media channels. It will become a testing ground for many new digital advertising initiatives also.

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231 responses so far ↓

  • 1 Technology Hacker // Apr 29, 2008 at 10:51 am

    Rajesh..I must say that this is perfect anatomy of the event held.You have summarised it in a beautiful manner.Thanks a ton..

  • 2 anild // Apr 30, 2008 at 12:27 pm

    Rajesh, Quite a lot is happening in the ad world and we can’t afford to fall behind or we will be run over. Great!

  • 3 Vishal Sharma // May 2, 2008 at 4:25 pm

    Rajesh you might be interested in read this and might give some ideas ho digital landscape is changing at leas in Australia

    http://feeds.feedburner.com/~r/FollowingStartups/~3/270392931/sensis-and-australian-search-and.html

  • 4 shankarkotkar // May 9, 2008 at 6:25 pm

    very good presentation,wonderful article.good writeup for newcomers like me.keep it up.

  • 5 Bhupendra.kahar // Jun 2, 2008 at 1:30 pm

    Hi rajesh there are many technologies in world and emerging too.In that mobile is one of them .Today in india mostly 80% of people are having mobile but they dont know the maximum usage of it

  • 6 Tom Schavo // Jul 28, 2008 at 2:32 pm

    $50 billion worth!! that’s huge money spent on advertising. No doubt the big names in this industry.

  • 7 SEO Specialist // Jul 29, 2008 at 6:09 pm

    I agree. Even now Internet advertising is the only area that is holding up. US and UK online marketing has been slowing due to the recent crunch.

    Even Google ad revenues have slowed in the last quarter in the UK for the first time.

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