Rise Of The Advertising Robots
28 april 2009 | 16:56
A parade of new automated ad platforms aim to reshape digital media.Big brands would love to advertise on small, niche-focused Web sites--think Mountain Dew on blogs about windsurfing, or Gerber baby food on sites about vegetarian parenting--but don't have the manpower to screen every site for quality content, let alone negotiate thousands of deals with different buyers.
Yet publishers have it even worse, says Cadogan, Yahoo!'s ( YHOO - news - people ) former head of global advertising. Editors who run small Web sites are so consumed producing content that titillates readers that they turn over their ad inventory to one of hundreds of resellers in exchange for pennies per view.
Through his Pasadena, Calif., start-up OpenX, Cadogan is working on an application to alleviate the anxiety of both beleaguered ad buyers and frustrated Web publishers. OpenX recently unveiled Market, an application that allows advertisers to automatically bid on access to narrow niches of readers across an array of small Web sites.
OpenX is one of many outfits seeking to automate the selling of hyper-targeted digital ads on the Web. A slew of firms--ranging from tiny start-ups to Web giants like Google ( GOOG - news - people )--have rolled out applications purporting to analyze online ad opportunities and help publishers and advertisers figure out how to allocate their respective ad inventories and budgets.
Many of these new applications promise to deploy demographic, geographic and personal interest data to identify attractive readers for advertisers wherever they land on the Web. Such micro-targeting may seem like a potential invasion of privacy, but user data analysis is an established practice. Most data collectors skirt privacy complaints by allowing Web users to block their tracking software.
The boom in new advertising optimization tools could reshape the $7.6 billion market for Internet display advertising. Leery of attaching the brand to sketchy Web content, big advertisers have historically preferred to deal with large Web publishers, such as the digital arms of newspapers and consumer magazines.
But ad tech executives and media planners say the new ad sales tools promise a cheap and efficient way for brands to screen and buy ads on smaller Web sites and blogs.
"These systems help advertisers cut through the clutter online, which will clearly help the 'long tail' publishers,'' says Kelly Twohig, a senior vice president at media planning agency Starcom ( SCME.PK - news - people ) in Chicago, whose clients include Allstate ( ALL - news - people ) and Capital One.
The potential for a reallocation of ad budgets from big publishers to smaller rivals comes at a stressful time for media giants. The New York Times Co. ( NYT - news - people ) announced this week that Web ad sales fell 6% and overall ad revenues dropped 28% year-over-year during the first quarter of 2009.
Earlier this month, Gannett ( GCI - news - people ), publisher of 85 daily newspapers including USA Today, reported that quarterly revenue decline 18% compared to last year.
Publishers participate in the OpenX Market by entering their advertising inventory--the spaces on their Web pages where ads can appear--into an online database and set a floor price for each slot. If an advertiser bids above that minimum, their ad appears on the Web site.
Along with buying on specific Web sites, Cadogan says that ad buyers will be able to use third-party data on Web users' personal interest, browsing history and demographics to find desirable segments of readers across all publishers participating in the market. Web sites currently use OpenX's software to deliver an estimated 300 billion impressions each month.
In addition to the challenge of convincing marketers to spend their ad budgets in a drastically different way, outfits like OpenX have to figure out how to emerge as leaders in an already competitive field.
"We've seen half a billion dollars of venture capital poured into building optimization and planning companies,'' says Matthew Hulett, chief executive of ad network and analytics firm Mpire.
This week, Hulett's firm unveiled an application to help advertisers track on which Web sites networks place ads, where on the actual screen the ad appears and if Web surfers pause their cursor over the ad. The tool is intended to help marketers better figure out how much of their ad spending is essentially worthless.
Google and Yahoo! both operate advertising exchanges that allow publishers to analyze how much revenue different ad sales techniques attract and help advertisers secure the best ad placement for the cheapest prices.
Rubicon Project, a two-year-old Los Angeles start-up that processes 40 billion impressions each month, helps Web sites compare ad prices delivered by different third-party ad brokers. This week, the company unveiled OnDemand, a service that lets advertisers automatically buy ads delivered to specific geographic, demographic and personal interest groups across a network of publishers.
PubMatic, a Silicon Valley start-up known in the ad world for publishing market reports on trends in ad prices, offers a similar optimization product aimed at big media companies' digital arms.
It's too early to say whether advertisers embrace the automated ad buying tools en masse. As people spend more of their lives online, marketers are desperate to reach them cheaply and efficiently. But, as Starcom media planner Twohig says, a human salesperson and trusted media product go a long way in attracting ad dollars.