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Online Advertising Business 101, Part VII: Demand-side Platforms (DSPs)

It turns out, alarmingly, that it’s been over a year since my last Online Advertising Business 101 post. And a year is an awfully long time in the world of online advertising. Long enough, in fact, for an entirely new kind of company to emerge and become the next big thing. I’m talking, of course, about Demand-side Platforms. You’ve heard of them, I trust? No? Then read on.

 

DSPs, RTBs, oh my

As it should happen, my last post in this series was on the subject of Ad Exchanges – a new kind of participant in the advertising value chain that acts as an intermediary between ad networks, allowing them to exchange inventory to make up for shortfalls in supply and demand among their own publishers and advertisers, and also allowing other scale players (e.g. big advertisers like eBay, or a big agency) to buy inventory dynamically across a number of different networks. All those folks had to do was implement some technology to interact with the exchange, and place bids in real-time (on of the key characteristics of an ad exchange being that it can auction inventory in real-time).

It turns out that that last glib sentence conceals an awful lot of complexity. Real-time Bidding (RTB), as it’s known, is a pretty complex technical challenge to pull off. It involves building a system that can listen for inbound impression opportunities, and parse them more or less in real-time (milliseconds) to transmit back a bid for that impression. If you just wanted to send the same bid back for every impression, or vary the bid on the basis of some very simple variables (e.g. the size of the ad unit), then you could probably hack something together reasonably easily, but of course it’s not that simple.

Once you get into the business of real-time bidding, you want to take into consideration a wealth of data (the more the better, in fact) about the impression, including (but not limited to):

• Ad unit size/format (e.g. Rich Media)
• Site
• Page content category
• Geo
• Time of day
• Frequency
• User profile

Of course, if you’re an agency or network doing this, you want to be able to manage different bids and budgets for your different advertisers, and also to incorporate things like advertiser/publisher block lists (e.g. Wall Street Journal doesn’t want to advertise on the NYT site). And you probably want to enable advertisers to manage (or at least track) their campaigns through the third-party ad servers (Atlas Media Console, DFA, OAS) that they’re used to.

 

What’s a DSP?

The complexity of building something like this has spawned the new technology category of the Demand-side Platform (or DSP, which always makes me think of something else, showing my age). The name comes from the fact that these systems “aggregate demand” – i.e. they provide a single interface to the supply-side of the value chain for a number of advertisers.

Since many of the established participants in the advertising value chain already represent (or serve) advertisers, almost everyone – agencies, networks, exchanges - is these days calling themselves a DSP, much to the annoyance of Mike Nolet at AppNexus. Mike argues that the glib name, together with its appropriation by every man and his dog, make it all but useless to claim (or describe) something as a “DSP”.

It is true that the “Platform” in “Demand-side Platform” is a bit of a stretch, but I’m a little bit more forgiving than Mike, and don’t think that it’s an entirely useless term. As to what defines a DSP, I would offer the following definition, based upon this list of capabilities in the table below. If a company offers a well-integrated set of, say, three-quarters of these capabilities, and offers a real-time bidding capability, then you’re probably looking at a “proper” DSP:

DSP typical capabilities

Advertiser bid/campaign management UI or API

Ability to execute real-time buy bids with exchanges and other “RTB-enabled” counterparties

Multidimensional bid optimization

Ability for advertisers to provide their own data (e.g. targeting cookie data) to refine bidding

Universal user management (e.g. frequency capping) across multiple inventory sources

Integration with third-party ad servers

Consolidated reporting/billing/payments across multiple third-parties

Most of these “DSP capabilities” are nothing new. The items above can be found in other systems, such as those provided by some ad networks and third-party ad servers – which is why companies in these businesses are busily launching DSPs. What is new is the consolidation of these features into discrete offerings – and the new boundaries that are being drawn as a result.

 

Where to find a DSP

As well as stand-alone DSP providers (see the list below), DSP functionality is appearing in two other main places: ad networks and media agencies.

Ad networks are incorporating DSPs into their advertiser-facing offerings so that they can broaden the range of media they can offer to their advertisers beyond that which they directly represent. The latest network to do this is your friend and mine, Google, which this week announced the acquisition of Invite Media, which brokers bidding on Google’s own DoubleClick Exchange, but also a range of other exchanges including our own AdECN.

Networks will also increasingly use DSPs themselves to source their inventory, gradually replacing their “in-bulk” supply-side relationships with DSP-mediated deals where the network gets to pick and choose which impressions to add to its pool.

The other place that is getting all DSP’d up is the media agency. Several large agency holding companies are establishing ‘trading desks’ which are consolidating the buying (aka demand) from across the company’s advertiser base and leveraging that demand to drive better-value deals for the agency. These trading desks are becoming increasingly sophisticated and have recently started engaging in real-time bidding. Some of the better-established trading desks (with the providing agency in parentheses alongside them) are in the list below:

• Vivaki Nerve Center (Publicis)
• Omnicom Trading Desk
• B3 (WPP)
• AdNetic (Havas)
• Cadreon (IPG)
• ATOM (Razorfish)

 

Who are the DSPs, then?

Well, that depends who you ask, of course. But now you’re this far down this post, I feel emboldened to provide you with a list of the best-known independent DSPs. If I’ve missed someone, please let me know, and I’ll add them in.

Company	Description
AdChemy	Provider of audience-based display and search advertising platform (the “AdChemy Experience Platform”). Focuses on generating a “relevant” experience for consumers, bundling in dynamic creative generation with other DSP-style services such as segment targeting & optimization. Typically partners with Agencies – largest partnership is with Accenture Interactive.
x+1	Offers campaign/media optimization (“Media+1”) as part of a suite that includes landing page & site optimization (straying into MVT territory). Media+1 enables real-time bidding for exchange-based inventory - x+1 has created a “Virtual Audience Network” across multiple Ad Exchange & Network inventory sources, to compete with traditional ad network offerings.
Media Math	“The new marketing OS”. Provides a DSP offering (“TerminalOne”) to agencies, through a combination of technology and services. One of the first companies to market with such an offering.
Turn	Offers both agency trading desk and full-fledged network management software – both include the full range of DSP “table stakes” features such as exchange integration, RTB, targeting & optimization. Network offering adds cross-network inventory/campaign optimization. Because of both offerings, Turn works with both agencies and ad networks.
DataXu	Fairly straightforward independent DSP – offers real-time bidding across a handful of exchanges, with optimization and tracking built in.
AppNexus	Styles itself as a cloud-based platform on which RTB/DSP-style systems can be built, rather than a DSP in itself. Partners with agencies and ad networks to enable them to build out their own DSP or trading desk capabilities & offerings.
Triggit	Another fairly vanilla DSP, with a fairly standard range of capabilities & partnerships. Fairly strong portfolio of data partners to aid with campaign targeting.
LucidMedia	Offers self-serve DSP (LucidMediaDSP). Claims to be able to reach 95% of the US online audience via partnerships with the usual suspects (Google, Yahoo/RightMedia, Rubicon, PubMatic, etc).
Invite Media	Now no longer independent after its acquisition by Google. “Bid Manager” tool provides cross-exchange buying; supports the major exchanges (Google, Yahoo! RM, AdECN) plus other supply aggregators such as PubMatic.

 

Where next for DSPs?

That’s an excellent question, and I’m glad you asked it. The short answer is, ah, not sure. But one thing I can aver: if you come back to this post in a year’s time, you’ll chuckle at the (by then) wildly out-of-date list above. Some of the companies in the list will no longer exist, either because they’ve gone out of business or been swallowed up by a larger fish, and there’ll be some new wunderkind on the block who I’ve completely missed out.

Which is all to say, there’s a lot of change going on in this area. The balance of power in the industry is shifting, and right now it seems like the DSPs are calling the shots, but don’t expect the big ad networks to sit around idle and let DSPs drain away the demand-side of their business. We may well find (as is happening in the web analytics industry) that very soon, there are no independent DSPs left, and every agency is a DSP also.

On the other hand, life is becoming much harder for small networks to survive in this new world; first their advertiser base will be wooed away by the DSPs (and by DSP-enabled network competitors); then their supply may fragment as DSP-based agency buying takes hold. If you thought the online ad industry was starting to settle down and make a little more sense, then, well, too bad. But at least it’s not boring.

Online Advertising Business 101 – Index of all posts

Wanna work for me?

Have a passion for data? Think yourself something of a BI/analytics guru? Does your heart sing whenever you see a well-turned chart (and your toes curl whenever you see something like this)? Looking for a new gig worthy of your exceptional talents?

If so, then I might just have the perfect opportunity for you. I’m looking for someone to head up the planning & product management for a big chunk of the internal BI & reporting systems that I manage here at Microsoft – systems which help hundreds of people cross Microsoft’s Online Services Division to make smart decisions about how to run our gigantic display advertising network.Only downside of the role is that you have to work for me.

I’m looking for someone who loves the numbers and has the flair, creativity and communications skills to make other people love them too, who’s comfortable working the politics of a big ol’ behemoth like Microsoft, but who likes to move quickly and, as I like to put it, “get sh*t done”.

In this role, you’ll wrangle gigantic, disparate data sets and juggle the competing demands of field sales, Finance and monetization specialists as you toil to deliver the definitive view of the performance of our display network. You’ll relish the attention of a broad and demanding audience for your data, including Online Services Division President Qi Lu and some other colorful characters. You’ll think nothing of staying up late to make sure the numbers are right before they’re published in the morning, and then getting up early to check that they are.

The full job description is here. If you think you’re selling what I want to buy, you can apply for the job on that page.

What’s another word for “Web Analytics”?

For as long as I’ve been involved with the field, the term “Web Analytics” has never felt like the very best way to describe, well, Web Analytics – it’s somewhat limiting in many ways (the “Web” part doesn’t help there), and the “Analytics” bit does seem a bit, well, geeky.But another, better, term has never emerged – Web Measurement, Web Stats, Clickstream Analysis and a blizzard of others all have their own limitations (and don’t even get me started on the egregious “eMetrics” – sorry, Jim).

Now it seems that folks at the Web Analytics association are finding the term too limiting too, at least in terms of what they consider their remit, as they’ve launched a survey to poll people’s views about whether they should change their organization’s name to something else, and, if so, what they should change it to. You can share your own thoughts here.

I can sympathize with the Association’s motivation here, but I’m not very thrilled about the way it seems their thinking is leaning. The survey contains a set of possible alternative names which mostly includes various permutations of including the word “Marketing” in the name of the body (such as the “Digital Marketing Association” – has no one at the WAA heard of the DMA?) I think  putting “Marketing” in the title is a mistake, since measuring online marketing effectiveness is only one application of web analytics. Worse, I think the M-word risks making the WAA sound like another wishy-washy Marketing industry organization (AMA, BMA, CMA, DMA, EMA, FMA, GMA anyone?)

My inclination would probably be for the WAA not to change its name – it’s unlikely that any new name would be so significantly better that it would overcome the drop in name recognition that would come with a name change. But if it really wants to change, my guidance would be to consider names which talk more about Digital Media rather than Digital (or Online, or e-)Marketing. Sure, there are lots of Digital Media this-and-thats, but the term is a broader church IMHO, and I think that will help the WAA to continue to serve a diverse audience in the future.

I love it when a mail-merge comes together…

Would you buy BI services from a company that can’t successfully execute a mail-merge? Not to mention ones that send unsolicited e-mails to drum up business…

Data is (are?) Beautiful

It’s usually my lovely wife who blogs about jewelry, and me who blogs about charts and data, but today the tables are turned – well, almost. Wieden+Kennedy London has come up with a range of designer necklaces which celebrate the beauty of data, under the name Plot.

The necklaces use charts of thirty years of various commodity prices (gold, silver, oil and lead) to form the motifs that are embedded within the resin pendants. They’re the brainchild of Lisa Prince, a strategist at Wieden+Kennedy who apparently got the idea while sitting in a meeting staring at PowerPoint charts.

So if you happen to have a data-geek woman in your life, and you’ve dismissed my previous nerdy gift idea as too fattening, one of these necklaces could be just what you’re looking for. Unfortunately Mrs. Thomas does not find charts quite as fascinating as I do, so my quest for the perfect Christmas gift continues (although I have been pointed in the direction of a nook).

Adobe + Omniture = …what?

By now, almost 12 hours after the announcement, you’ll have heard the news that Adobe is to buy Omniture for $1.8bn. If you haven’t heard, then, I mean, duh. It’s all over Twitter, dude:

(As an aside, the guys at Omniture should be proud of themselves that they managed to beat out Joe Wilson as a trending topic for a little while, even as the latter was busy facing down Congress).

I don’t think I’m putting myself in the minority when I say that I was totally blind-sided by this announcement. And while I’ve had time to think about it since my first reaction, I’m still a bit mystified by this acquisition.

The official line from the press release is that Omniture’s products will help Adobe’s customers optimize, track and monetize their websites & apps. Unofficially, the rationale for the deal seems to be that Adobe needs Omniture’s revenue to supplement its declining income from its range of software. I can see the logic of the official rationale, but I have serious reservations about Adobe’s ability to extract value from this deal, for the following reasons:

No pedigree in services: Adobe is primarily a software company; whilst it offers a full range of support services around its products, it doesn’t really have experience in providing the very deep, consultancy-like services that Omniture provides. This means that it’ll likely be challenging to attach Omniture offerings to Adobe’s customers; the opposite may be more likely to be true, but does Omniture bring enough customers to make this worthwhile?

No online scale: I’ve said before that one of Omniture’s key challenges as it strives for profitability is to scale out its infrastructure on a cost-effective basis.Adobe does offer a range of online services, but not on any kind of scale that could enable it to really drive cost out of the provision of Omniture’s services. So it’s unlikely that Omniture’s bottom line will improve in the wake of this deal.

Channel/partner conflict: The presence of the Omniture toolset in Adobe’s product lineup will complicate Adobe’s efforts to work with other agencies, EMM and web analytics tool providers, who in turn may find themselves more reluctant to encourage their clients to embrace Adobe technology for fear that it may lead to Omniture making calls on them.

Overall, I just find myself wondering whether Adobe really needed to do this deal in order to be able to leverage Omniture’s capabilities. Adobe has to be looking at some kind of synergy effect to extract value from the deal, because Omniture’s financials aren’t strong enough on their own to move the needle on Adobe’s bottom line. Would a strategic partnership not have been a simpler (and undoubtedly cheaper) option? One possible answer that presents itself is that Adobe had its hand forced by an imminent sale of Omniture to another party. What do you think?

 

Disclaimer
This is one of those posts where I perhaps need to remind you that this is a personal blog which does not reflect the opinions of my employer, Microsoft. Furthermore, you shouldn’t infer that anything I’ve written above implies any foreknowledge or special knowledge of this deal, especially in the context of Microsoft. That is all.

My face, on the Internet

I have just noticed (rather belatedly, to say the least) that Laura Lee Dooley has posted a complete video of my encounter with Avinash Kaushik at the May E-metrics Summit in San Jose on Vimeo. The sound quality is a little poor, but you can more or less follow the thread of the conversation.

I come across as a cross between Prince Charles, Alastair Campbell and my Dad. Avinash does rather better, particularly around the 26 minute mark. Anyway, watch it for yourself and see who comes out on top.

Does Display help Search? Or does Search help Display?

One of the topics that we didn’t get quite enough time to cover in detail in my face-off with Avinash Kaushik at last week’s eMetrics Summit (of which more in another post) was the thorny issue of conversion attribution. When I asked Avinash about it, he made the sensible point that trying to correctly “attribute” a conversion to a mix of the interactions that preceded it ends up being a very subjective process, and that adopting a more experimental approach – tweaking aspects of a campaign and seeing which tweaks result in higher conversion rates – is more sound.

I asked the question in part because conversion attribution is conspicuously absent from Google Analytics – a fact which raises an interesting question about whether it’s in Google’s interest to include a feature like this, since it may stand to lose more than it gains by doing so (since the effective ROI of search will almost certainly go down when other channels are mixed into an attribution model).

Our own Atlas Institute is quite vocal on this topic, and has published a number of white papers such as this one [PDF] about the consideration/conversion funnel, and this one [PDF], on which channels are winners and losers in the new world of Engagement Mapping (our term for multi-channel conversion attribution).

The Atlas Institute has also opined about how adding display to a search campaign can raise the effectiveness of that campaign by 22% compared to search alone – in other words, how display helps search to be better.

However, a recent study from iProspect throws some new light on this discussion. The study – a survey of 1,575 web consumers – attempted to discover how people respond to display advertising. And one of the most interesting findings from the study is that, whilst 31% of users claim to have clicked on a display ad in the last 6 months, almost as many – 27% – claimed that they responded to the ad by searching for that product or brand:

This raises the interesting idea that search can actually help display be better, by providing a response mechanism that differs from the traditional ad click behavior that we expect. Of course, this still doesn’t mean that search should get 100% of the credit for a conversion in this kind of scenario – in fact, it makes a stronger case for “view-through” attribution of display campaigns – something that ad networks (like, er, our own Microsoft Media Network) are keen to encourage people to do, to make performance-based campaigns look better.

All this really means that, of course, it’s not a case of display vs. search, but display and search (and a whole lot of other ways of reaching consumers). Whether you take the view that it’s your display campaign that helps your search to be more effective, or your search keywords that help your display campaign to drive more response, multi-channel online marketing – and the complexity that goes with measuring it – looks set for the big time. And by “big time”, I mean the army of small advertisers currently using systems like Google’s AdWords, or our own adCenter. So maybe we’ll see multi-channel conversion attribution in Google Analytics before long.

What would you like to ask Avinash Kaushik?

The gloves will be tied tight. Brightly colored silk dressing gowns will be shrugged to the floor; gum-shields inserted. In the blue corner: yours truly. In the red (and blue, yellow and green) corner, web analytics heavyweight, Avinash Kaushik. As the crowd bays for blood, battle will be joined. The Garden never saw anything like this.

Well, ok, it’ll probably be a bit more civilized (well, a lot more civilized) than that. But at next week’s E-metrics Summit in San Jose, Avinash and I will indeed be going head to head in the “Rules for Analytics Revolutionaries” session on Wednesday May 6 at 3.25. In that session, I’ll be asking Avinash some genuinely tricky questions to really get to the heart of some of the thorniest issues around web analytics today, such as campaign attribution, free versus paid tools, and what, really, the point of all this electronic navel-gazing really is.

But I could use your help. In my comments box below, or via e-mail, suggest the question(s) you’d most like me to ask Avinash next week. This is your big chance to ask Avinash the question you’re too embarrassed/polite/nervous to ask him in person. If you’re going to be at the Summit, then be sure to come to the session to see if your question gets asked; if not, I’ll post a follow-up post here after the event and shall be sure to include Avinash’s answers to any questions from the blog.

So come on – what have you got to lose? It’s not like it’s you who’s going to be picking a fight with one of the industry’s most revered and respected advocates, is it? Leave that to old numb-knuckles here.

Google adds rank information to referral URLs

An interesting post on the official Google Analytics blog from Brett Crosby appeared last week, in which he announced that Google is to start introducing a new URL format in its referring click-through URLs for organic (i.e. non-paid) results. From Brett’s post:

Starting this week, you may start seeing a new referring URL format for visitors coming from Google search result pages. Up to now, the usual referrer for clicks on search results for the term "flowers", for example, would be something like this:

http://www.google.com/search?hl=en&q=flowers&btnG=Google+Search

Now you will start seeing some referrer strings that look like this:

http://www.google.com/url?sa=t&source=web&ct=res&cd=7&url=http%3A%2F%2Fwww.example.com%2Fmypage.htm&ei=0SjdSa-1N5O8M_qW8dQN&rct=j&q=flowers&usg=AFQjCNHJXSUh7Vw7oubPaO3tZOzz-F-u_w&sig2=X8uCFh6IoPtnwmvGMULQfw

Brett points out that the referring URL now starts with /url? rather than /search? (which is interesting in itself in its implication for the way Google is starting to think about its search engine as a dynamic content generation engine); but the really interesting thing, which Brett doesn’t call out but which was confirmed by Jason Burby in his ClickZ column today, is the appearance of the cd parameter in the revised URL, which indicates the position of the result in the search results page (SRP). So in the example above, where cd=7, the link that was clicked was 7th in the list.

As Jason points out, this new information is highly useful for SEO companies, who can use it to analyze where in the SRPs their clients’ sites are appearing for given terms. Assuming, of course, that web analytics vendors make the necessary changes to their software to extract the new parameter and make it available for reporting (or, alternatively, you use a web analytics package that is flexible enough to enable you to make this configuration change yourself).

As you can see from the example above, there are various other new parameters that are included in the new referring URL, which may prove useful from an analytics perspective (such as the source parameter). It’s also worth noting that whereas the old referring URL is the URL of the search results page itself, the new URL is inserted by some kind of redirection (this must be the case, since it includes the URL of the click destination page).

Using a redirect in this way means that as well as providing more information to you, Google is now also capturing more information about user click behavior, since the redirect can be logged and analyzed. Crafty, huh?