San Francisco, CA- Investment analysts, agency media buyers, and executives speaking here this week all agree on one thing: The resurgence of online display ads is real, and will proceed apace for the next several years. But they disagreed about nearly everything else. For instance: What’s the future of CPM pricing? To what extent will media agencies be disintermediated in coming years? And just how important is Google in this space?
On a Connected Marketing Week panel featuring investment analysts, all four participants said they were bullish on display – predicting overall demand and pricing will rise. However the specific outcomes they described were very distinct.
Doug Anmuth of Barclays Capital said discussions with advertisers have convinced him large consumer goods sellers will make it rain this year and next.
Researchers and agencies anticipated such an influx of brand ad budgets way back in 2007, but that was before the bottom fell out of the economy. Now Anmuth believes the time is ripe again. “At CPG companies, [we’re seeing] reinvestment in their brands,” he said.
But not all will benefit. For instance, it’s unclear whether the rise of exchange-traded display ads on Yahoo’s Right Media and Google’s DoubleClick Ad Exchange will suit large brands. Two of four analysts lauded Google’s strategy of automating display ads, while the other two offered weak or qualified support.
One of those was Robert Coolbrith, an analyst with ThinkEquity. He said, “We’re positive on Google’s display ad strategy, assuming that automation of display will serve the interest of brand advertisers. The jury’s still out on that.”
What’s the Future of CPM Pricing?
Meanwhile Brian Pitz, who handles equity research at UBS, is bullish overall on performance-based display media but not on CPM-priced ads. For that reason, he argues, two prominent Web giants are in a weak position, despite its large pool of inventory. “AOL and Yahoo are not necessarily in the best position,” he said.
Don’t tell that to Yahoo, which continues to make the case for its premium inventory. In a session across the hall, general manager of display advertising Dave Zinman claimed Yahoo’s huge “login takeover” ads reach 10 percent of the U.S. online audience. He noted you can’t click the full-page ad, so the usual metrics don’t apply. To prove effectiveness, Zinman claimed the number of searches for “Jeep” hit a three-year-high on the day the ad ran.
Is “number of searches” a useful metric for brand ad effectiveness? Mike Baker, CEO of DataXu, a demand-side platform (DSP), thinks so. He told the story of a financial services client, previously focused completely on search advertising, that briefly pulled all display advertising after an ad popped up next to adult content. In the period following the shut-off, Baker said the company’s search traffic declined 28 percent.
Too Many Vendors?
Earlier this year, at the Interactive Advertising Bureau’s Networks & Exchanges conference in New York, investment banker Terence Kawaja showed a slide detailing the sheer volume of start-ups in the display ad arena. That graphic was very much on the lips of speakers at the IAB’s “Future of Display” panel, and was referred to by several as “Terry’s slide” (view it here).
Several speakers here reiterated the need for consolidation among DSPs, ad networks, data aggregators, verification companies, exchanges, and publisher-side yield optimizers.
“Too many people are taking too many slices of the pie as it goes through,” said Michael Brunick, VP partnerships and platform technology at IPG-owned Cadreon. “There needs to be less stops.” A panel of six DSPs agreed, with one dissenting vote, that near-term consolidation is inevitable.
There’s also a crisis of vocabulary going on, as ad networks try to morph into DSPs, and DSPs refer to themselves by other names in order to differentiate from rivals. “For us it isn’t a help when networks try to be DSPs,” said Mediasmith media director Eliot Kent-Uritam. “It confuses the issue.”
Brunick concurred. “From our perspective, if you are a true tech company, not a tech offering, that qualifies you. There has to be something there we can touch and use if you’re branding yourself that way.”
The 800 LB Goo-rilla
The company creating the most angst and confusion is of course Google, which is blurring categories and definitions like no one else. Google is simultaneously attempting to fill the role of ad exchange, ad network, DSP (through its Invite Media acquisition), and media agency.
However, many no longer see Google as infallible, perhaps because of its recent high-profile failures. On the question of agency disintermediation, Kent-Uritam gave a shrug.
“Google does some of the basic things very well, but a lot of their analytics are just based on clicks,” he said. “They don’t generally have the media people that can compete [with us].”
Brunick added, “Advertisers want someone to maintain responsibility for spending media dollars, managing a portfolio. We need to offer higher value services, true analytics, and technology integration.”
As for the technology vendors, they now see Google as both competitor and deep-pocketed suitor. Michael Rubenstein, president of AppNexus and the former head of Google’s ad exchange efforts, said Google has been admirably fair and transparent. But he said that could change.
“Google is putting together the pieces to form a dynasty,” he said. “So far they’re behaving pretty well as far as keeping the ecosystem open to everybody, probably because they need to. But we’ll see what happens over time as they accumulate more market power.”