More and more often I come across companies that are trying to build ad network exchanges. They come from all parts of the world. Some of them are technology based but many are led by former ad network guys who are running with a new business idea.
Typically, these market entrants will address big publishers with the mother of all business propositions: “we will deliver constant money making peaks to your site”. Or even better: “we will optimize your eCPM at all times”.
In theory, the model is a good one and works in most free markets. The unique selling point is spelt liquidity. By plugging in the biggest advertisers in one exchange, publishers can benefit from a constant flow of ad placements to which they can deliver abundant traffic. The exchanges will typically address the biggest online advertisers and the biggest online ad networks to source traffic to their systems.
There are however two major problems that new entrants and exchanges face. Firstly, incumbent ad networks are in fact aspiring to be exchanges in most cases. The ad network business model i.e. making a percentage off transactions is identical to the exchange model where there is always an overall objective to optimize traffic and money making opportunities for publishers.
Secondly, incumbent ad networks are already the middle man and functioning as a market maker. By adding another middle man, incumbent networks become obsolete in so far as they lose their raison d’être and constitute one out of two layers between an advertiser and a publisher. That is one too many.
Bottom line is that most exchange entrants will find that incumbent adnetworks lock them out immediately out of fear of competition. Few exchanges will last without traffic and liquidity (publishers who bought in will quickly move on) more than a month. This is already happening every day.
As a result, we are seeing some aggressive exchange entrants acquire publishers that are not making money (typically old publishers that experience little growth and low profitability). The publishers’ traffic alone is worth little. But as a component in an exchange effort it is worth much more.
Question is – are ad network exchanges just ad networks with new technology?
Categories: eBiz Big Picture · eBiz Demand Generation · eBiz International · eBiz Management · eBiz News and Trends · eBiz Organizations
Tagged: Ad network exchange entrants face difficulties., Ad network or ad network exchange?, Online marketing networks and exchanges., Protective actions from incumbent ad networks., The ad network exchange model.
With some recent stats from one of Sweden’s largest ad networks in my hand for the month of June, July and August, some key trends are clear:
- Clicks are up 5-10% year on year (YoY).
- Click through rates (CTR) are down dramatically YoY. in some programmes and sectors as much as 50-60%.
- Site conversion overall for ecommerce plays is stable or slightly up (0-10%).
Overall it looks like the financial crisis is hurting CTR. Net-net the CTR as is having an adverse effect on total sales suggesting a -10 to -20% drop in total conversion of ecommerce programmes.
Categories: eBiz Big Picture · eBiz Demand Generation · eBiz Management · eBiz News and Trends
Tagged: ecommerce summer 2009, ehandeln ner under sommaren., ehandelsutveckling sommaren 2009, Finanskrisen slår mot viss ehandel., Nedgång i konvertering jämfört med förra året.
Any effective ROI assessment of online demand generation needs to be based on some form of tracking. The preferred method for understanding where the originating customer of a sale was exposed to the marketing message/ creative is the “cookie” i.e. a small text file sent via the browser to the computer at the place of exposure. When the sale is registered the cookie will provide the origination information to the tracking host/ affiliate network provider for accounting purposes.
In affiliate programmes, the key is to understand to what degree a given affiliate can be credited for a sale (I will for the sake of simplicity disregard the problems surrounding multiple origination points before a sale). Today, some affiliate networks do not make any distinction between a so called “click through” sale (the click being a definite link from the site of exposure to the point of sale) and a so called “view through” sale (the cookie has been received by inactive “viewing” i.e. visiting a big news site would be enough to actually be exposed to the cookie, the customer sometimes not even seeing the marketing message itself).
Whereas the click through method is relatively clean, the view through method is controversial for a number of reasons. Many of them should be of the greatest importance for any online marketer.
- There is a weaker link between the sale and the exposure hence one could and should question whether the sale really should be attributed to the view through point of exposure.
- This means that the cost per sale will look good – many more sales at a predefined payout level. Nevertheless, there will be false attribution of sale origination. The marketer/advertiser will think that what should be attributed to TV, radio, banner advertising or simply base demand is originating from an affiliate programme. The advertiser will pay twice for the same sale.
- Affiliate networks that do not clearly separate the two in data reports to customers are in my view not playing fair vis-a-vis the advertiser.
- Affiliates will be inclined to join programmes and affiliate networks where view through sales are highly or equally rewarded to click through sales because they will make more money with less quality effort/ traffic.
- Affiliate networks that do not up front separate the two methods often refrain from doing so because they lack tracking technology to separate the two methods and hence offer the same payout for two very different levels of interaction from the customer.
Don’t use affiliate networks that don’t tell you upfront how they manage and attribute view through vs. click through. It will cost you dearly even if your cost per sale and volumes look great.
Categories: Web Analytics · eBiz Affiliation · eBiz Demand Generation · eBiz Management
Tagged: Accounting for performance in affiliate programmes., Don't pay twice for the same sale., How affiliate performance is credited., iSales vs. Sales., Marketing ROI on affiliate programmes., Online sale attribution conflict., Pitfalls in affiliate marketing., ROI misrepresentation.
It seems more and more advertisers are choosing so called closed keyword policies i.e. they choose not to work with specialized affiliates that employ search engine marketing (SEM) tactics to drive traffic and make money on the difference between cost per click bids and cost per order rewards.
In many markets, savvy keyword affiliates can still make nice profits. However, as marketing departments adopt a proper search strategy and acquire relevant know how, many affiliates that previously delivered search originating traffic through an affiliate programme are sacked. In the short term, they can focus on other programmes and activities. In the long term, we are seeing a migration of affiliate revenues into search. For the affiliate market it is hardly bad news. A short term loss in revenue will be replaced by true affiliate revenues as digital marketing spend grows.
The beauty of true affiliate programmes lies in a common interest in the consumer between an advertiser and an affiliate. Without a relevance between affiliate traffic and advertiser products, the model won’t generate enough return. Affiliate programmes take long time to build (not only technical tracking) and need a lot of tweaking before they can be deemed successful.
So as both demand channels continue to grow, affiliates will become more clean cut. All good.
Categories: eBiz Globalization · eBiz Management · eBiz Strategy
Tagged: Advertiser search know how changing online demand playing field., Affiliate programmes see less search mix., Keyword policies changed as advertisers take over search., Search affiliates in trouble?
Most companies are now looking over how to get the most out of their marketing budgets. Here are my top 5:
- Push a cost per order agenda – reduce risks by getting marketing communications suppliers to share your risk (cost per lead, cost per click or cost per order).
- Transition budget into online vehicles primarily search but also affiliate programmes (skew your spendmix toward last click vehicles).
- Reduce brand focused spend mix and increase sales focus sales mix – i.e. increase campain network budgets – deliver much more at a lower cost.
- Do not cut banner/ display advertising online as a default cost reduction measure. At the end of the day this portion of your budget will create meta effects that improve click through and conversion across all vehicles online.
- Consolidate your suppliers as much as possible. Do not buy online vehicles from three different suppliers. And why not skip the middle man unless you feel he is adding value.
Philip
Categories: eBiz Big Picture · eBiz Demand Generation · eBiz News and Trends · eBiz Strategy
Tagged: Fighting back with marketing spend., Getting the most out of the marketing budget., Top five marketing ROI tips for downturn.
My colleague Åsa Lundell at TradeDoubler, www.tradedoubler.com and www.digipedia.se, showed me some very interesting research on transaction volumes online. The research clearly highlights how average order values (AOVs) are trending down year to date.
What is even more interesting is that the order volumes themselves are not trending down. The number of orders are probably driven by a variety of factors e.g. growth of online users and migration of offline campaigns.
On the other hand, average order values are hit by:
- Purchase patterns amid recession – people have less money and look for bargains and cannot fully afford high end products.
- Increased efficiency in online tracking – the more orders we track as a percentage of total – the greater the number of orders and the lower the average order value.
- Possibility that high AOV ecommerce items (durabels etc) are suffering more than e.g. fast moving consumer goods i.e. mix is shifting to lowend AOV.
Categories: Web Analytics · eBiz Affiliation · eBiz Demand Generation · eBiz Globalization · eBiz International · eBiz Management
Tagged: Average order values online hit by recession., Drivers of lower average order value online., Ecommerce slowing - driven by lower average order values.
It is becoming increasingly obvious to me that corporate buyers of digital media in Scandinavia buy media with their hearts rather than their brilliant minds. I can see no other real explanation to why companies that should be entirely focused on ROI optimization and sales, still choose to focus on “where” they expose there ads at any cost (at 10x-25x cost per thousand impressions, CPM).
Sure I understand brand building and meta effects, but it seems even with similar distribution vehicles e.g. display campaigns, better performing ad network sales are often foreseen as a realistic alternativ due to lack of strong title names (this is the heart in the equation), not to mention other digital vehicles such as affiliate networks and search campaigns (dedicated efforts).
Bottom line – there is a substantial ROI opportunity in opening up for performance networks and looking at alternative models for digital spend (cost per click, cost per action). To do so successfully, key is to find a good advisor. Many major media agencies do not on a regular basis recommend network sales despite highly attractive ROI propositions.
Categories: eBiz Big Picture · eBiz Demand Generation
Tagged: Ad networks perform better., Digital media buyers and ad networks., Why leveraging ad networks pays off.
Soon one quarter in to the dreaded year of financial crisis, I believe I am starting to detect a pattern. It seems that transactions are slowing down somewhat affecting affiliate programmes in general. Nevertheless, it seems online display spend is still strong and growing.
My hunch is that several big offline advertisers are moving budgets quickly into the digital space in search of better ROI. So overall the picture following the first little bit of 2009 seems reasonable for the online advertising industry and I am becoming increasingly bullish about online advertising 2009 vs. bleak projections from the past six months.
Categories: eBiz News and Trends
Tagged: affiliate growth 2009, display advertising growth 2009, ecommerce advertising spend 2009., online demand generation development 2009
For most people, trading equals buying low and selling high. Typical traders will run there own stock or inventory and look for quick in and outs in any given market place.
In financial markets arbitrage is the practice of taking advantage of a price differential between two or more markets: striking a combination of matching deals that capitalize upon the imbalance, the profit being the difference between the market prices (Wikipedia definition). My appreciation of the term arbitrage also includes the notion of the capitalization being “risk free” i.e. the practice described above is done simultaneously such that no risk is incurred.
My colleague Jonas Rundgren brought my attention the other day to the emerging practice of “arbitrage” in the online advertising space. Impressions, clicks and actions are referred to as “currencies” and the arbitrage lies in capitalizing on the imbalance in conversion rates between cost per impression, cost per click and cost per action.
For example, if you know a historic conversion rate of impressions of financial services to clicks of financial services you can start trading when an imbalance occurs.
Let us assume that the market cost per thousand impressions (CPM) for relevant publishers/ site owners is 2€. Let’s say the standard historic conversion rate of financial services is 1%. This would mean that a thousand impressions would give you 10 clicks. In a balanced market, the financial services cost per click (CPC) should be 100x the cost per thousand impressions (CPM) i.e. 200€. If this is not the case there is an arbitrage opportunity.
Publishers (site owners) will be more or less willing to settle for anything else than CPM deals. Let us assume they are indifferent. Opportunities in this case will arise from assymetric knowledge about conversion rates (historical data, publisher data, assessment of offering in question, seasonality). Assuming that the CPM and CPC prices are constant, a higher than average click through rate will allow market makers to buy CPM and sell CPC making a margin off the imbalance. A lower than expected conversion rate will allow market makers to sell in CPM and buy in CPC, again making a margin off the imbalance. A real opportunity, in real dollars, occuring every day.
Some maybe sceptical as to the real value in understanding this? But seeing that impressions, clicks and actions are the new currencies of the next century, with trillions of CPC, CPM and CPA transactions every day, there is a tremendous amount of money to be made in trading them. Only issue is that few players on the market have the adequate data to do it successfuly. And those that do hardly have the competency to understand how to manage risks and structure a trading outfit.
Categories: eBiz Globalization · eBiz International · eBiz Management · eBiz News and Trends · eBiz Organizations · eBiz Strategy
Tagged: CPC, CPM and CPA as traded currencies., Online advertising arbitrage., Online market making.
The email spend portion of the average digital marketer is approx 2% on average (see eMarketer November 2008). Why wouldn’t emarketers spend more on this holy of e-grails? Some would answer that because the cost of sending an email to the customer database is so low, the spend will always be very low and hence a small portion of spend. They may also argue that the majority of email programmes contain price oriented call-to-action messaging and place themselves at the very end of the purchasing funnel.
True. And not true. My view is this: Most companies have no clue of the number of touch points they have in their customer relationships. More often than not customers will receive a call from there favorite sales rep the same week the company is doing TV advertising, sending monthly mailers and worst case also emails. Many large companies run a digital budget that in practice lives independently from the print/ offline budget and vice versa. This is a natural result of multi market/segment/product interests under the same roof.
The problem with low spend is that regardless of a predominantly high return on investment (ROI) on that very spend (which is probably positively skewed given allocation of fixed retainers, IT costs etc), it generates few dollars. Even though margin profiles maybe good, I would claim that many opportunities in business generation are lost in low volumes.
Email is a poorly utlized asset. Here are the reasons why:
- Although media agencies often use email as a component of ad-hoc campaigns, many media agencies are not actively involved in the more bread and butter type recurring campaigns because of their dependency on complex customer data management. This leads to a fragmented approach where email is managed internally and externally (often by a third party email dedicated agency).
- Companies struggle to make any sense out of the vast amounts of customer data. On paper, there are CRM systems with triggers and targets. But in practice few companies have the capabilities to transform promotion decisions into data base requirements and finally into a relevant email with a compelling creative.
- Because many email programmes are not appropriately resourced, negative side effects such as understated ROI (driven by lower than necessary open/click through), opt-outs by attractive customers and even privacy violation charges, arise.
Finding incremental opportunities (read free sales) should be the first priority of any marketer in these times. Forget a CRM system and triggers. I would suggest a much more simplistic approach:
- Work on the organizational parts of how to execute an email. Make sure the entire organization – from product and brand to data mining and creative execution – works together. Create a task force for each email prototype. Include the product manager, the database analyst, the creative talent and you will see wonders. I have.
- Start with some basic tests - create an à la carte menu of 10 successful campaigns across your relevant product categories of your business. Make sure they are known in the organization and refine these. Eventually, your organization should have a library of model campaigns that have been tested and can be used according to your objectives.
- Limit the number of touches. Think: “take out something every time you put in something”. Many emarketers forget that you are looking for the optimum $/ customer over say a year, not the greatest open rate or conversion on one email. Less is more. Make sure not to touch a potential high end customer with a low end offer etc.
Although this sounds somewhat trivial there is a reason why open rates and click through rates seem to be declining over time (eMarketer.com/ “Epsilon Q3 2008 e-mail trends and benchmark”). As emarketers we simply forget that we are sending the same emails that we so much hate to receive.
Categories: eBiz Big Picture · eBiz Demand Generation · eBiz Management · eBiz Strategy
Tagged: How to drive a successful B2B email programme., Tips for email conversion., Why email is underutlized.
