Over the last year, I introduced the concept of Display 3.0 (Display 3.0: The Next Wave of Innovation in Display Advertising), and how it would all be about improving advertising effectiveness by leveraging advertiser/consumer/publisher data and algorithms. I also talked about the opportunity to build advertiser facing tools/platforms (Display 3.0: What is it ?) ranging from dynamic creative construction and optimization to landing page optimization. Furthermore, I discussed the emergence of advertising exchanges, and how the liquidity of inventory and the ability to buy inventory in a fine grained way will create a host of new opportunities for advertisers (Follow up to Ad Networks: Dead or Alive ? ).
One trend that I have not talked about to date (a miss on my part) is the increasing liquidity/portability of data, ranging from advertiser data to consumer data. The liquidity of data is critical to the success of Display 3.0 and will create a host of opportunities for both publishers and advertisers.
Historically, large and sophisticated publishers (like Yahoo) have always valued their data and leveraged it to enhance the value of their inventory. Subsequently, targeting vendors like Tacoda and Revenue Sciences offered out-sourced targeting solutions to other premium publishers who lacked the technical capabilities in-house (but in a similar proprietary data model).
What has emerged over the last 2-3 years is a range of ad targeting solutions that aggregate consumer data across publishers to create targeting products (based on behaviors, purchase intent, psychographics, demographics, etc.). Most of these offerings provide publishers with a free service in return for which they collect audience data which they then leverage for ad targeting (not all of these have launched ad targeting products to date). Examples include:
- Free site analytics providers, e.g. Quantcast, Compete.com, Hitwise
- Web services (e.g. rating, comments) providers, e.g. JS-Kit
- Yield optimization platforms, e.g. Pubmatic, Admeld, Rubicon
- Personalization/recommendation service providers, e.g. ChoiceStream, Aggregate Knowledge
- Context extraction services, e.g. Opinmind (which extracts purchase intent from social communication)
In addition, advertisers are beginning to leverage their proprietary data to improve advertising effectiveness. The most obvious example is re-targeting where advertisers leverage behaviors exhibited when you visit their site to target you around the web. But there is more. Advertisers are beginning to think about how to link off-line data and segmentation models to users on-line. One approach is to send users e-mails with embedded cookies to associate their off-line behavior with their on-line presence and then to subsequently track them (anonymously off-course). Another approach is to drop cookies when users sign in or complete a transaction (this is especially applicable to e-tailers).
Furthermore, large data aggregators are beginning to explore ways to monetize their data. Imagine if E-bay or Amazon or Experian were to leverage their years of collected insight/data about you to enable advertisers to serve you targeted ads ? Key to enabling all this are the emerging category of providers called data exchanges like Blue Kai.
In summary, 2 things are happening:
- Data and inventory are both becoming liquid and in the near future will be traded independently vs. being bundled by large publishers like Yahoo and MSN. This should level the playing field for small publishers and enable them to take fully capture the value of their audience. On the flip side, it reduces the relative value of large publishers that bundled inventory and data like Yahoo and MSN. One more reason that Jerry should have sold to Microsoft:-)
- The myth of data driven adverting is slowly becoming a reality, creating a host of opportunities for advertisers ? More about this in my next post!
If you have an interesting idea or company in this space, do drop me a mail to tell me about it at agarg(at)foundationcapital.com