While the web provides an advertising environment with the potential for unparalleled visibility into marketing spend and ROI, tools to help agencies and advertisers make the most of the opportunity have lagged behind. Many companies are working on pieces of a solution, but few have the scale to implement products that cut across the highly fragmented online landscape and gain critical mass.
Last month Sapient, the online marketing and consulting firm, released results of a survey that suggests the rapid growth of Web 2.0 content and presentation options is only making the problem worse. “Marketers lack the tools necessary to optimize their marketing efforts across the full spectrum of digital channels,” Sapient concluded. Survey respondents were particularly interested in social media, but found those results hardest to track.
The respondents were comfortable with their ability to measure responses to email and search marketing efforts and wanted comparable accountability for spending in other channels. They also wanted reporting that provides “apples to apples” results across all channels to facilitate ROI-based spending allocations, and rapidly updated data that allows near-real-time spending adjustments to capitalize on emerging opportunities.
The takeaway for anyone managing a media site: it’s increasingly important to build measurability into new content products. Until a grand, cross-channel solution comes down from the likes of Google or Yahoo, your ability to provide metrics will directly correlate to your ability to monetize. Advertisers are demanding better measurability and for now, they’re leaving it to you to solve the problem.
Friday, February 29, 2008
Monday, February 18, 2008
Next-Gen Advertising: Technology vs. Business
You may have seen the recent comments by Wenda Millard dissing both Yahoo's and Google's huge, ongoing efforts to reinvent advertising for Web 2.0 and beyond. Wenda used to head Yahoo's ad sales efforts and is now president of media at Martha Stewart Living Omnimedia. She chided both Yahoo and Google for a one-dimensional view of the future of advertising that's too focused on technology, at the expense of advertisers' business needs.
Advertising, she observed, is "not a business only of science. With the Google/DoubleClick combination, and the potential Microsoft/Yahoo combination, it’s like the scientific community is taking over the advertising business--and the ad business is not about algorithms.”
Google and Yahoo are key to the future of online advertising because they command such huge chunks of the online audience. Although many others are interested in evolving the advertising model, most lack the scale to get much traction in an industry where the changes they advocate will require a large redeployment of resources (MySpace could be an interesting exception).
In the last several weeks I've talked to some of the folks at both Google and Yahoo who are working on "Advertising 2.0" projects, so I can verify first-hand that both companies are taking the technology-first approach to their initiatives. The role of business people who understand the advertiser-agency dependency and bigger-picture brand advertising needs varies, but seems a bit higher profile in the Yahoo effort. Both companies, but especially Google, identify as technology businesses and want to present technology solutions.
In advertising this is an especially tricky aspiration. If the problem were straightforward to solve, online advertising advances would have kept pace with those of content and UI...yet they haven't. Online, technology is the sine qua non of innovation, but all the amazing technical possibilities need to be channeled into productive problem-solving and business models to bear fruit.
Part of the complexity comes from the necessary role of ad agencies. Looking at the industry from the 50,000 foot level, agencies seem ripe for disintermediation by more efficient technical solutions. But in reality, they have a vital role in the ecosystem. For media properties they simplify penetration; for advertisers, they open the door to technologies and products that many individual clients are too unsophisticated to utilize on their own. Agencies allow advertisers to outsource many technical complexities, and therefore are more valuable--not less--in the world of Advertising 2.0.
Also, a lot of activities occur under the "advertising" umbrella. Some, such as the straightforward lead generation represented by programs such as AdWords and Yahoo Search Marketing, are spectacularly suited to technology innovations. Others are trickier. Certainly technology can help with the accountability and measurability advertisers demand, but what about engagement? Are these new programs truly seeking to uncover and solve merchants' deepest needs from the media community, or are they aiming to optimize products that are actually flawed vestiges of a prior-day mindset--such as banner ads. The people I met with at Google and Yahoo seemed reluctant to innovate deeply enough. That's one reason I'm wondering whether MySpace and Facebook may end up eclipsing today's moonshot-level efforts to build the ultimate buggywhip.
Advertising, she observed, is "not a business only of science. With the Google/DoubleClick combination, and the potential Microsoft/Yahoo combination, it’s like the scientific community is taking over the advertising business--and the ad business is not about algorithms.”
Google and Yahoo are key to the future of online advertising because they command such huge chunks of the online audience. Although many others are interested in evolving the advertising model, most lack the scale to get much traction in an industry where the changes they advocate will require a large redeployment of resources (MySpace could be an interesting exception).
In the last several weeks I've talked to some of the folks at both Google and Yahoo who are working on "Advertising 2.0" projects, so I can verify first-hand that both companies are taking the technology-first approach to their initiatives. The role of business people who understand the advertiser-agency dependency and bigger-picture brand advertising needs varies, but seems a bit higher profile in the Yahoo effort. Both companies, but especially Google, identify as technology businesses and want to present technology solutions.
In advertising this is an especially tricky aspiration. If the problem were straightforward to solve, online advertising advances would have kept pace with those of content and UI...yet they haven't. Online, technology is the sine qua non of innovation, but all the amazing technical possibilities need to be channeled into productive problem-solving and business models to bear fruit.
Part of the complexity comes from the necessary role of ad agencies. Looking at the industry from the 50,000 foot level, agencies seem ripe for disintermediation by more efficient technical solutions. But in reality, they have a vital role in the ecosystem. For media properties they simplify penetration; for advertisers, they open the door to technologies and products that many individual clients are too unsophisticated to utilize on their own. Agencies allow advertisers to outsource many technical complexities, and therefore are more valuable--not less--in the world of Advertising 2.0.
Also, a lot of activities occur under the "advertising" umbrella. Some, such as the straightforward lead generation represented by programs such as AdWords and Yahoo Search Marketing, are spectacularly suited to technology innovations. Others are trickier. Certainly technology can help with the accountability and measurability advertisers demand, but what about engagement? Are these new programs truly seeking to uncover and solve merchants' deepest needs from the media community, or are they aiming to optimize products that are actually flawed vestiges of a prior-day mindset--such as banner ads. The people I met with at Google and Yahoo seemed reluctant to innovate deeply enough. That's one reason I'm wondering whether MySpace and Facebook may end up eclipsing today's moonshot-level efforts to build the ultimate buggywhip.
Tuesday, February 12, 2008
Yahoo: Time for Act 3
With all the drama around Yahoo this month I’m glad I’m only watching from the sidelines. However things turn out, it’s certain that the company that emerges will be quite different from the one that has disappointed investors, employees, and, too often, users in recent years. Of course, the multibillion dollar question is whether the rapid changes will solve Yahoo’s problems or exacerbate them.
As to a Microsoft acquisition, if scarce resources were the problem—as they often are when early-stage companies are acquired—a buyout could be a solution. Microsoft’s market cap is close to double Google’s. But even in its current reduced circumstances, Yahoo has never lacked money or people to throw at perceived problems. Instead, the shortfall has been in identifying the best opportunities and efficiently deploying available resources to capitalize on them.
Perhaps Microsoft could help there, too. Despite some well publicized flubs no one doubts it’s fundamentally a well managed company with deep technical expertise. Unfortunately, though, history has shown Microsoft’s strength is in software, not media. There’s a huge question mark around the proposition that two companies with faulty radar and shaky track records could, if combined, somehow challenge the market powerhouse.
Yet it’s equally hard to picture the Yahoo that exists today turning itself around as an independent entity. The final tally isn’t in, but so far the names of layoff victims popping up on the web include few of the operating executives who have consistently failed—seemingly without consequences--to set coherent strategic agendas, execute against goals, and raise profits. Maybe bigger changes are coming, but Yahoo needs to understand that dramatic corporate transformation starts at the top, not the bottom. Getting rid of 1,000 mid-level functionaries might raise profits a bit but it won’t revitalize strategy, repair morale, kickstart innovation, or operationalize abstract theories.
If resurrection sounds impossible it’s worth recalling that Yahoo did it once before, in the wake of the dotcom meltdown. In September 2001 the stock bottomed out just above $4 per share (split adjusted), and a year later it dipped almost that low again. Then the price grew almost 10x over the next three-plus years; however, it’s been in fairly consistent decline (until the Microsoft offer) since January 2006.
I joined Yahoo early in the turnaround, in February 2002, and left in October 2005, just before the peak. Watching the company recover and grow—and then seeing the seeds of future failure begin to take root—was a vivid demonstration of management lessons I’ll apply for the rest of my career. Back in 2001 it was far from certain whether Yahoo would survive at all or become another dotcom casualty, the next Webvan or Pets.com. A raft of the company’s most senior executives departed and Terry Semel arrived in the spring of 2001 to launch Yahoo’s second act.
These days Terry’s name is typically associated with Yahoo’s recent decline, but back then he brought a bracingly fresh perspective: to focus Yahoo as a media business whose primary monetization strategy was advertising. Previously advertising was in the mix but the company was also drifting toward low-margin web services. Terry immediately went to work staffing up with media pros who recast Yahoo in a strikingly different and more business-centric mold than the original feel-good dotcom culture. Inevitably there were clashes between company veterans and the newcomers. Most of the time a good business case prevailed over tradition; after all, at that time we all felt that the very future of the company was at stake.
As Yahoo prospered the pendulum began to swing. We made acquisitions and didn’t do a good job of melding their benefits with our winning Yahoo culture. As revenue ballooned, managers became blasé about profits. For instance, a VP I reported to once told me the $10 million one of my projects added to the bottom line only amounted to a “rounding error.” I joined a lean company (2,000 employees in February 2002) where we product managers prided ourselves on efficiently producing the output of two or three people in traditional businesses. By the time I left the attitude had reversed and we were hiring two or three heads to cover work that should have been done by one.
Yesterday’s dotcom darling became today’s dog. Having a nontechnical leader at a technology company led to too much delegating and too many bad management calls. With his more traditional business background, Terry underestimated the pace of change and intensity of competition when you operate on “internet time,” an environment that magnifies the consequences of good and bad decisions alike. In the blink of an eye a competitor can not only surpass you but gain a shocking lead.
Yahoo got lucky a few times in the past but may have run out of rabbit's feet. The company that turned itself around six years ago was smaller and simpler, as were its competitors. The job market in those days was full of untapped talent after the dotcom downturn. In classical drama a comedy ends in a wedding, while a tragedy ends in death. It’s not clear how Yahoo’s third act will conclude, or whether there’s even much difference.
As to a Microsoft acquisition, if scarce resources were the problem—as they often are when early-stage companies are acquired—a buyout could be a solution. Microsoft’s market cap is close to double Google’s. But even in its current reduced circumstances, Yahoo has never lacked money or people to throw at perceived problems. Instead, the shortfall has been in identifying the best opportunities and efficiently deploying available resources to capitalize on them.
Perhaps Microsoft could help there, too. Despite some well publicized flubs no one doubts it’s fundamentally a well managed company with deep technical expertise. Unfortunately, though, history has shown Microsoft’s strength is in software, not media. There’s a huge question mark around the proposition that two companies with faulty radar and shaky track records could, if combined, somehow challenge the market powerhouse.
Yet it’s equally hard to picture the Yahoo that exists today turning itself around as an independent entity. The final tally isn’t in, but so far the names of layoff victims popping up on the web include few of the operating executives who have consistently failed—seemingly without consequences--to set coherent strategic agendas, execute against goals, and raise profits. Maybe bigger changes are coming, but Yahoo needs to understand that dramatic corporate transformation starts at the top, not the bottom. Getting rid of 1,000 mid-level functionaries might raise profits a bit but it won’t revitalize strategy, repair morale, kickstart innovation, or operationalize abstract theories.
If resurrection sounds impossible it’s worth recalling that Yahoo did it once before, in the wake of the dotcom meltdown. In September 2001 the stock bottomed out just above $4 per share (split adjusted), and a year later it dipped almost that low again. Then the price grew almost 10x over the next three-plus years; however, it’s been in fairly consistent decline (until the Microsoft offer) since January 2006.
I joined Yahoo early in the turnaround, in February 2002, and left in October 2005, just before the peak. Watching the company recover and grow—and then seeing the seeds of future failure begin to take root—was a vivid demonstration of management lessons I’ll apply for the rest of my career. Back in 2001 it was far from certain whether Yahoo would survive at all or become another dotcom casualty, the next Webvan or Pets.com. A raft of the company’s most senior executives departed and Terry Semel arrived in the spring of 2001 to launch Yahoo’s second act.
These days Terry’s name is typically associated with Yahoo’s recent decline, but back then he brought a bracingly fresh perspective: to focus Yahoo as a media business whose primary monetization strategy was advertising. Previously advertising was in the mix but the company was also drifting toward low-margin web services. Terry immediately went to work staffing up with media pros who recast Yahoo in a strikingly different and more business-centric mold than the original feel-good dotcom culture. Inevitably there were clashes between company veterans and the newcomers. Most of the time a good business case prevailed over tradition; after all, at that time we all felt that the very future of the company was at stake.
As Yahoo prospered the pendulum began to swing. We made acquisitions and didn’t do a good job of melding their benefits with our winning Yahoo culture. As revenue ballooned, managers became blasé about profits. For instance, a VP I reported to once told me the $10 million one of my projects added to the bottom line only amounted to a “rounding error.” I joined a lean company (2,000 employees in February 2002) where we product managers prided ourselves on efficiently producing the output of two or three people in traditional businesses. By the time I left the attitude had reversed and we were hiring two or three heads to cover work that should have been done by one.
Yesterday’s dotcom darling became today’s dog. Having a nontechnical leader at a technology company led to too much delegating and too many bad management calls. With his more traditional business background, Terry underestimated the pace of change and intensity of competition when you operate on “internet time,” an environment that magnifies the consequences of good and bad decisions alike. In the blink of an eye a competitor can not only surpass you but gain a shocking lead.
Yahoo got lucky a few times in the past but may have run out of rabbit's feet. The company that turned itself around six years ago was smaller and simpler, as were its competitors. The job market in those days was full of untapped talent after the dotcom downturn. In classical drama a comedy ends in a wedding, while a tragedy ends in death. It’s not clear how Yahoo’s third act will conclude, or whether there’s even much difference.
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