Here are the three reasons most of the companies within Terence Kawaja’s display advertising landscape map will fail, and the three types of companies that will win big.
Much has been written about the notorious “logo vomit” map
of famed internet banker Terence Kawaja. I reference his handy charts on
my blog, and often his “Display LUMAscape” as a reference point for thinking
about the digital display business, and what will happen to it.
Many have tried
to navigate through the various categories and dissect what may be “happening”
in the space, which is a favorite pastime of company executives trying to raise
money for many of the identified advertising technology outfits referenced
Nobody ever really tries to explain the whole thing, though. It’s just
too complicated, I guess. Allow me to try:
A few years ago, people started to figure out
that you could use technology to target advertising to people on the web. Ever since
then, 250 companies have placed themselves in the middle of the transaction
between the advertiser and the inventory, confusing everyone.
Now, most of them
are running out of money and will sell cheap, get acquired, or go out of
Perhaps that oversimplifies things slightly, but the reality
is that there are many companies in the space that are primed for one of those
three scenarios. Unfortunately, most of them will sell for less than their
investment, or go out of business.
Here are the three big reasons we have gotten
It was a bad idea
The whole point of most of the companies on the Kawaja map
is to help advertisers use data to find exactly the right audience at the right
time, serve them the right ad, and maybe find something out about them that
helps drive branding or sales.
In the past, most advertisers used to do that contextually
(putting ads for shoes in Vogue, for example) and it seemed to work pretty
well. When that internet thing came along, publishers could get something
nearing their print CPMs for “site sponsorships” and premium banner advertising
alongside good content.
Sooner or later, however, publishers decided to put
banners ads on all of their pages, creating the advertising largest inventory
glut known to man. That created a big problem.
All of that banner space needed to be monetized somehow, and
publishers were quickly discovering that it was hard to make money on the
trillions of monthly advertising impressions they had created.
wanted to buy $10 CPM banner ads on message board pages, and the “contact us”
page. So, in order to “solve” this problem, exchanges popped up and allowed
publishers to “monetize” this space by having various parties bid on the
Things got even better when data companies came in, and were able to
layer some demographic data atop those impressions, making audience buying possible
for the first time. The venture money flowed, as smart young technologists created
fast-moving software companies to help marketers exploit this trend as they
sought a way to help reduce industry average CPMs from $20 to $2.
Mission accomplished! In the last ten years, average CPMs
have been drastically reduced, 100% of a publishers inventory is being “monetized”
(often by ten or more companies), and you can target an ad down to one’s shoe size.
So, what’s the problem? Hasn’t turning
advertising from an art into a science worked?
The answer is: Yes, but not for all of the companies on that
map. People visit three sites a day, and one of them is Facebook. If you want
audience targeting, why not just find exactly what you want from a social network?
They are the ones with the real audience data. They are also the ones
with the audience scale, having about five times as many “profiles” as the next largest
The problem with all the companies trying to sell you audience
targeting and ad technology is that it only works when you have audience scale (they
don’t) and deep audience data (they don’t have that either).
Facebook, Google, and LinkedIn (and the next company that
people are willing to share their private information with) are going to win
the audience targeting game. When you are talking about audience buying at scale, social media IS digital media.
It’s still about art
If you believe that the average web user visits only two
sites a day besides Facebook, then you better find them on those sites—and give
them a really amazing experience with your banner ad.
That thing should play
video, games, talk to you, and almost pay you to look at it. Since only three
out of every 10,000 people will click on it, you had better make sure the
creative really tells a terrific story and gets your brand message across too.
That means standard sized banners that work with exchange-based
buying are pretty much irrelevant, since they have a hard time doing any of the
above. It also means that context has to accompany placement.
It is not enough
to reach a “35 year old woman in-market for shoes.” You have to reach her when
she is on her favorite fashion site, or otherwise psychologically engaged in shoe
consideration. The ad should be in a brand-safe environment that engenders
trust—and compliments the creative in question. That sounds suspiciously like premium
display advertising…the stuff that was being sold ten years ago!
In a certain sense, we have almost come back full-circle to
guaranteed, premium advertising. And that means an emphasis on the creative itself. If you
look at the map, it’s clear that creative isn’t a part of the picture…but it
might be the most important thing driving the future of the digital display
Even if agencies and advertisers wanted to take advantage of
a few of the of companies cluttering the “landscape,” they would need to
log into and learn multiple systems.
As a marketer looking to reach women, am I
really going to log into Blue Kai and bid on demographic “stamps” from Nielsen,
log into AppNexus and apply those to a real-time exchange buy, constantly log
into my DART account to check ad pacing and performance, periodically log into
my Aperture account to download audience data, and then log into my Advantage account
every month to bill my clients?
Maybe—but that’s exactly the reason why digital
media agencies are making 3% margins lately. Most of these technologies are really
great on their own, but string together too many of them and you start to get
lost in the data, and are unable to react to it.
For digital marketing to be effective, a set of standards
need to be created that enables systems to work together and share information.
Basic B-school dogma teaches you that effectiveness starts to break down when a
manager has more than five direct reports.
If you believe that, then it’s not hard
to imagine the effectiveness of a 22-year old media planner managing five logins
on behalf of his agency. It’s not just
confusing, it’s impossible.
We have built an industry ripe for aggregation, and the Googles,
Adobes, and IBMs of the world will not disappoint us!
So, what companies will
succeed in this ecosystem?
If you agree that all reach advertising targeting audiences will eventually
be on social networks, then you should look to work with companies that are
making social advertising scale effectively.
Doing Facebook advertising is incredibly easy, but
doing it right is hard. Doing it properly requires extreme multivariate creative
optimization and, more importantly, knowing what to do with the mounds of truly actionable
audience data that Facebook and other social networks will hand you.
XA.net that are doing this are EPIC WIN.
Since the conversation is coming back to the creative, how can
technology help make great creative even better and help advertisers understand
how that creative is being engaged with?
The click is a dead metric to most
seasoned advertisers, who are spending more time with branding measurement
tools (Vizu) and creative ad analytics startups
(Moat) that are well positioned to “science-ify”
the truly important part of advertising: the creative itself.
that well are also going to be EPIC WIN.
With all of the logins out there, it is inevitable that one company is going
to try and create the technology stack for next generation media buying that
puts all the pieces together seamlessly.
There are a number of companies trying
to do this right now (full disclosure: I work for one of them), and I believe there will be a
lot of advertisers and agencies relieved to log into a single platform, and be
able to access all of their vendor relationships in one dashboard.
This will take some time, but the companies
that enable standardization across technology providers will also WIN big.