Efficient Frontier Insights

A Question and Answer with Suman Basetty, Efficient Frontier's Director of Product Management

What is new in the display advertising world?

More and more non-premium inventory is being accessed through ad exchanges.
A big addition to the exchange supply is AdSense inventory now available through Google's Ad Exchange platform. Ad exchanges and publisher side yield managers are making inventory available through Real Time Bidding (RTB). With RTB, advertisers can decide which impressions they want to buy and at what price. Additionally, data exchanges are selling data independent of media, providing advertisers with information to better target their customers in non-premium inventory.

For several years, we talked about how search and display advertising complement each other. But advertisers did not have tools that track, report or optimize across channels. Cross-channel optimization is coming to fruition now that platforms like Efficient Frontier's are available. All of these changes in the industry have put more focus on performance based display advertising.

What do you mean by biddable display? Can you define it and explain how it's different?

Historically, display ad inventory was bought by advertisers that negotiating CPMs directly with ad network or publishers on a monthly basis as guaranteed buys. This was inefficient both for the advertisers as well as publishers. Advertisers ended up paying for much of the inventory that wasn't valuable to them and publishers didn't make as much as ad networks which took huge margins in between.

With ad exchanges, publishers can now add their inventory directly on the exchanges and advertisers can bid for this inventory. With the addition of RTB, advertisers can bid at an impression level much like search.

Can you explain how to best integrate a display campaign with a search campaign? What are the benefits of doing that?

There are three key areas of integrating a display campaign with a search campaign:

• Tracking: With integrated tracking across search and display advertisers can not only attribute conversions to the right channel but they can track the complete path to conversion across multiple channels.
• Reporting: Provides visibility into cross channel insights. Such reports will give marketers visibility into how search and display are complementing each other.
• Optimization and budget distribution: There are several common dimensions across search and display such as site/channel, time of day, day of week, geo targeting etc. that can be modeled and optimized based on the learnings from one channel to the other. In addition, if you have visibility into the complete path to conversion, you can optimize your display campaign’s bids not just based on the direct conversions but also based on how they are assisting search keywords conversions. Finally, you can distribute budgets across search campaigns and display campaigns based on the marginal costs per conversion. 

By using a cross channel optimization platform, advertisers get better visibility across display and search. And more importantly, they can make their campaigns efficient by integrating them.

What should the industry look for in 2010?

Advertisers will demand more transparency in display advertising and will work with platforms that can integrate both search and display. There will be more focus on performance based display advertising and an emphasis on mobile advertising.

Today, there are a lot of companies specializing in niche areas of the display advertising ecosystem such as dynamic creative optimization, real-time bidding or retargeting. Our prediction is that there will be consolidation and many of these companies will merge to provide complete offerings to the advertiser.

SES Chicago, the Changing SERP, and My Panel

I spent Monday at SES Chicago participating in a panel called "Search: Where to Next?". Overall, the show struck me as well attended with a strong current of optimism for growth in the coming year. I was pleasantly surprised that our panel was packed with folks interested in where Comscore, MSN, and Efficient Frontier see things headed next year.
 
A big theme that was discussed in my panel, as well as in other sessions throughout the show, is the changing SERP. In the panel before mine, David Pann of Yahoo! described the search results page as a "multi-media platform." Do a query like "flights from san francisco to vegas" on Bing or "mortgage" on Google and you'll see a vastly changed SERP. Even a query like "bottled water" on Google yields a SERP full of imagery. While I'm not sold all the changes to the SERP create a better experience. Let's face it, like it or not the days of an image, price, and video free SERP may be gone forever.
 
As a result of the evolving results page, marketers and their partners need to explore all of the new opportunities to expand coverage on the SERP and draw clicks from relevant consumer queries. Exploring the use of images and deeper site links are tactics to investigate. Using all the structured data available from your business, data that may contain locality, product, and pricing information, is an important tactic to increase coverage and relevancy.
 
The buzz on real-time and mobile search was still humming at SES. And the growing exchanges have added display to the mix. But I would argue the changing SERP was shaking things up at SES in a category accustomed to blue text links. One woman in the panel before mine pleaded for a consolidated resource to stay on-top of "the fundamentals of SEM" given how quickly they change. It was a plea that resonated with the audience and a reminder that while we spend a lot of energy on the shiny new objects, we should never lose focus on delivering the fundamentals.
 
Justin Merickel
Vice President, Marketing and New Product Development

Dayparting or Splitting Hairs?

In this month's Search Engine Land "Analyze This" column, I discuss whether dayparting or hour or day bidding is worth the time and effort. For my full analysis, please read http://searchengineland.com/dayparting-profitable-tactic-or-waste-of-time-30727 but here's the bottom line.

For most businesses, dayparting will at best give you a small incremental gain. It is best to look at all of your data, cost and revenue on a per click as well as aggregate basis before making any dayparting decisions.

Dr. Siddharth Shah

When Impressions Count: the Efficient Frontier of Display Advertising

While we applaud the recent MediaPost column about the next efficient frontier of display advertising, given our namesake and recent entry into the display market, it makes a few assumptions that deserve clarification.
 
Assumption 1: Transparency of Information

By way of background, the efficient frontier is the outcome of the Modern Portfolio Theory (MPT). This theory, developed by Harry Markowitz, assumes an efficient marketplace i.e. all investors have access to the same information at the same time. No marketplace is purely efficient but many come close. The U.S. stock market is one example and another is search marketing (although quality scores definitely do make it less efficient). The current display industry is a highly inefficient one. Most advertisers do not even know where all their ads are shown or have access to reporting tools to find them. Ad Exchanges promise to change all of this, with a public auctioning system to ensure both efficient pricing  and a complete tracking solution. In this case, the issue of ads being unknowingly shown on porn sites is moot. If your ad is being shown on a porn sight you will know this right away and will have an efficient mechanism to stop it.
 
Assumption 2: All advertisers have the same goals.

There are brand advertisers, advertisers who focus purely on ROI, aggregators, lead generators who rely on the strength of other brands etc. Their goals are different. A brand advertiser might not want her ad seen in an adult site but what about an adult dating service? The issue then is not that ads are seen in inappropriate sites but more that the ads are seen in websites that are inappropriate for the advertisers goals. However, in a scenario where the entire funnel is tracked, one can optimize to a goal (Example: revenue) or a blend of goals (example: Impressions+ Revenue).
 
The key here is that, the ad exchanges have to provide easy control to advertisers to manage their campaigns to specific goals. We expect this to be the trend, as exchanges such as Adx and RMX have begun providing API access to marketers.
 
Assumption 3: There are multiple frontiers and multiple markets.

Just like there are stock markets and commodity markets which operate on different exchanges, there are multiple markets in online advertising. There is a display market and a search market. Within the display market there is and will be a branding marketplace on premium sites like NYT and Yahoo! Finance and non-premium sites like weatherbug. It does not mean that you cannot apply portfolio theory. In fact, you have to apply portfolio theory in different markets just like we select stocks within the asset allocation model. For example, an advertiser may have to determine how to efficiently spend their advertising dollars between Yahoo! Finance and NYT just as one picks stocks among large cap U.S. companies.

One other piece that I think deserves further clarification is the issue of retargeting. The idea is that a consumer who visited your website would be more valuable then one who saw the ad for the first time. There is more to it. If you have the capacity to track the user on display, search, mobile and organic advertising then further optimization is possible. In this case, the efficient frontiers would combine to become one curve that would answer the question "What would be the best way to allocate all my online advertising dollars and what type of returns can I expect from it?". Tell me one CMO wouldn't like the answer to that question!
 
At Efficient Frontier, we believe that the success of this approach depends on several factors.

1. People know what they are doing: There will be advertisers who succeed with this approach and some who will fail. Its not because the approach is poor but because of their lack of expertise using it.
2. The availability of technology to adopt this approach: From the advertiser side, the portfolio approach is highly automation and technology intensive. To truly leverage the long tail, one needs to be able to dynamically change bids on the ad exchanges over thousands of sites based on ROI and other pre-conversion metrics. This places huge demands on technology. In search you have one knob to turn i.e. the bid for a keyword, in display you have 10 or more including the bid, the site, time of day, the number of times to retarget etc.
3. The ease of use provided by the ad exchanges: At present display exchanges are a dime a dozen. There will be maturation and consolidation in this space with the largest exchanges providing advertisers with the best controls for a more efficient marketplace winning out. In the end, the advertiser will win.

At Efficient Frontier, we have always held the belief that an efficient marketplace serves the best interests of both the buyer and the seller (call us Milton Friedman-ian!). Our beliefs have served us well and have made us the world's largest SEM company. We now look to apply this same portfolio theory to display despite its unique challenges.

We say, bring it on!

Dr. Siddharth Shah

Black is Back!

When we looked at the latest numbers for key metrics comparing the Black Friday weeks of 2009 and 2008, we were quite impressed. Every metric has shown a Year over Year (YoY) rebound. The biggest increase has been in the impression volume which has increased almost two fold YoY. Clicks have also increased by 18%. Both trends indicate that consumers are searching online for products much more than last year.
 
This year, advertisers spent 12% more than last year for 8% more revenue. While we have accounted for delayed conversions in our dataset, we have been conservative in our estimates. Hence, we expect the actualized revenue increase to be closer to 10-12%, in line with the increase in spend. In terms of orders, the average order size has increased by 3%, while the order volume has increased by 4%.

All in all, the trends are promising. More consumers are searching and buying online which has led to advertisers increasing their budgets to leverage the higher revenue opportunities.

We'll continue to watch these trends throughout December to see if black really is back.

Dr. Siddharth Shah