The Online CMO by Philip Hallenborg

Entries categorized as ‘eBiz International’

Everyone wants to be the ad network middle man…

September 14, 2009 · Leave a Comment

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
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Recession hitting Average Order Values Online

May 5, 2009 · 2 Comments

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
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CPM, CPC and CPA Arbitrage- An Emerging Online Opportunity

March 6, 2009 · 5 Comments

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
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The Online Dream Team – Core Org Competencies

April 2, 2008 · Leave a Comment

Over the years I have seen several set ups of online execution teams. Here are the most important functions needed, and the roles and descriptions for each role, to successfully own, analyze, develop and control an online business. It is a seven man team that, with a reasonable level of support functions inhouse and outsourced (IT, Support, Customer Care) should do the job:

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Online Sales & Marketing Director

• Team leadership and development.
• Setting strategic direction for the business (growth, market share, segment etc) and managing budget.
• Overall owner of web key performance indicators (visits, convergence, revenue/ visit etc).
• Driving portfolio profitability, mix and pricing efforts.

Product & Pricing Manager

• Optimize product offering (selection of products and accessories).
• Drive correct margin ladders and promo activities.
• Optimize margin$ – price elasticity (and cross elasticity).
• Create and monitor price point development and portfolio aggression.

IT and Reporting Analyst

• Set up comprehensive reporting on key metrics (productivity, financial, quality and timeliness).
• Perform ad hoc analyses for team e.g. set up multi variate tests.
• Head up knowledge management (manage library of learnings and “playbook”).
• Liaise with IT organization and ecommerce vendors to secure necessary functionality/ road map.

Online Market Communication Manager

• Drive Natural Search and own Search Engine Optimization
• Optimize Internal Search.
• Owner of affiliate programmes and campaigns
• Owner of email marketing, database mining and renewal programmes.
• Owner of blogs, RSS, PR and user generated content.

Usability and Merchandizing Manager

• Optimize onsite pathing and all options (learn mores, avatars etc).
• Optimize landing pages, banner formats, affiliate offer, creatives etc.
• Optimize upsell, cross – sell options.
• Manage and improve customer experience metrics.

Margin Leakage Manager

• Own support, Q&A Continuously improve customer processes.
• Optimize check out and payment options.
• Follow up on all levels of leakage – especially late stage.
• Follow up on all cancelled orders and run out bonding activities.

Copy writer (copy and pictures)

• Own and develop the site look and feel together with Usability and Merchandizing.
• Write proprietary descriptions of products and site assets – tailor language to customers (i.e. don’t automatically upload product descriptions).
• Maximize and test effective copy, headers, fonts etc with merchandizing manager.

Categories: eBiz Big Picture · eBiz International · eBiz Management · eBiz Organizations
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Ladies First – Gender Bias on the Internet

April 1, 2008 · Leave a Comment

Interestingly enough, eMarketer just published an analysis highlighting a gender bias in the internet usage across the world. Turns out 52% of the population of users that goes online at least once a month are female. In specific, blogging and online content generation is biased toward female users.

Categories: eBiz International · eBiz News and Trends
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Coffee Machine Chats Govern Globalized eBusinesses

March 10, 2008 · Leave a Comment

When I was 15, I used to work extra during the summer at UPS Stockholm (when it was called Seabourne). My father was the managing director for the company so I wasn’t exactly employed for my skill but more as a typical “gotta find my son a summer job” employee.

One of the things I used to do was to send telex to other offices around the world. Yes, you heard me. Not fascimile/fax but telex (see the beautiful beast below). I realize that I must sound like a relic from the past. But we actually used to send confirmations on transports and messages on financial daily performance via telex. This was in 1988 and I recall this even at the time being inferior to fax and a tool that was looked upon with some scepticism.

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Today, I find myself in a purely globalized company using an array of communication tools. To name a few I use fax, email, internet messanger (only internal), MS net meeting, MS live meeting, smart phone, Avaya IP Phone software (mobile office), telephone and video conferencing. In the online space we are especially open to new tools given the magnitude of our business outsourced to India and other offshore locations.

Because I tend to IM with colleagues only 5 metres away, the only way to notice that your colleague is on the other side of the world is that you don’t know which part of his name is first and surname respectively or that you ping him in the evening and he says “good morning”.

At least it would appear so. 

I am becoming painfully aware of the downsides of the globalized company. In theory, all the communication methods offer a steady flow of information. But the problem is that information, when offered by face to face substitutes, doesn’t help you understand culture, attitude or informal agendas.

An abundance of factual information derived from the rich palett of communication methods may give you a false sense of being “in the loop” when actual decisions are made by the Coffee Machine in influential corporate locations.

So if you want to be effective in a globalized world, move your desk to the coffee machine and depend less on your email. Direct interaction face to face still rules unless you work in Finland. There you need to remove your clothes and move your desk into the sauna…

Categories: eBiz Globalization · eBiz International · eBiz Organizations
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Where do I test online applications in Europe?

March 7, 2008 · Leave a Comment

The latest data from eMarketer gives us some hints about where the extended European on-line market is going in terms of penetration and  users. The first diagram suggests that Scandinavia and the Netherlands are the most developed connected European countries in the on-line space.

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However, Russia, Spain, Ireland and France are leading in terms of user growth (see below). 

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Similar to the “catch – up” theory or theory of convergence in macro economics these countries will most probably experience abnormal growth until they reach penetration levels in line with the averages for Europe. The fact that these countries are adding a vast amount of new Internet users each year makes them very attractive targets for business expansion.

Nevertheless, it is important to remember that the maturity of users follows their tenure in the on-line space. Many of these users will be users that have not been exposed to the internet. Advanced ecommerce offerings, blogs, widget applications etc are not necessarily easily adopted in these markets.  So for new business development and start up type on-line business activities, I believe Scandinavian markets (and NL) are still the best testing grounds.

Categories: eBiz Big Picture · eBiz Globalization · eBiz International · eBiz Management
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