www.gregstuart.com

Why Why AdvertisersAdvertisers

(& their agencies) (& their agencies) Will Destroy Will Destroy

UsUsTiger Global 2008 Internet Conference

New York City • October 2, 2008

Greg StuartGreg StuartFormer CEO, Interactive Advertising BureauFormer CEO, Interactive Advertising BureauCo-author: What SticksCo-author: What Sticks

…And What We (Online Publishers) Can Do to Stop Them

www.gregstuart.com

2

Problem Is That They Don’t Know What Works, Nor Do

They CareDonny Deutsch speaking to 500 Marketers…

“We did a wonderful spot…on the Superbowl… for Mitsubishi Gallant...that stops at the end and

[says] go to “seewhathappens.com.” We got about 600,000 clicks.

Was that great or that not great? We told the client it was great, so it was great.”

[nervous laughter] Deutsch is the 14 largest agency in the US

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Today’s Intent

1.Review of the Research & Topline Insights

2.To What Degree Can Online Garner Branding Dollars?

3.Review of Best Practices For At Least Trying to Capture Brand Dollars

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$1 Billion Ad Spending Researched

1.1 million consumers surveyed

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Media

What Did Learn From the Research?

Motivations Messaging

36%36%

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ING’s 4 Year Campaign

Fresh Thinking

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Today’s Ads for ING

Simplifies a Complicated Financial World

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Media

More, What Do We Know?

Motivations Messaging

36%36% 31%31%

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How Big A Difference Can Creative Make?

BB

AA

Source: IAB Cross Media Study

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Creative Makes a BIG Difference

Ad B, 2%

Ad A, 20%

0% 5% 10% 15% 20% 25%

PurchaseIntent

Percent that Intend to Buy Colgate

Better creative can make the difference

between success and absolute failure

Ad AAd A

Source: IAB Cross Media Study

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And Just to See It Again

BB

AA

Source: IAB Cross Media Study

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Media

Yes, It’s That Bad, and Worse

Motivations Messaging

36%36% 31%31% 83%83%

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Why Were Marketers So Slow… When the Data is

So Compelling?Online CPM was lowest in

50% of studies

Online “Cost Effectiveness” was lowest in changing

brand metrics for 75% of studies

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The Truth Is…Marketing is Hard

Suppose you have 5 options: 5 Brand Positionings 5 Customer Segmentations 5 Ad Creative Approaches 5 Magazine Schedules/Plans 5 Online Plans

3,125 combinations

10 to 10th = 1 billionbillion combinations combinations

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What Sticks was Written to Be…

A Clarion Call* to MarketersMarketers for Change

* A clarion call is a powerful request for action or an irresistible mandate. Frequently used in a religious context, or in a political context, in that a politician issues a challenge for action from the public.

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But What If They Don’t Take the Call?

Used with permission Cartoonbank.com

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What is Online What is Online Media’s Destiny Media’s Destiny

for Getting for Getting Brand Dollars?Brand Dollars?

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Let’s Examine One Model for Online Advertising

Success

What did they do right?

Focused on

effectiveness!

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What is That Worth to Google?

$68 eCPM$68 eCPM

$0.54 CPC x 17% click thru x 74% sell thru

Source: Jordan Rohan, Analyst at RBC

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Some of What Google Figured Out

(& the other Media still don’t get)1. Know thy Customer(‘s needs)

2. If Consumer Wins, So Does Media

3. Algorithms beat Humans4. Effectiveness (& mostly cost

effectiveness) matters

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So Why Bother? 2 Data Points

What Sticks research suggests that U.S. online would be at $40 to $50 billion, if there was rational decision-making

Another data point…

If Internet matched overall ad spending’s Brand vs. direct response mix, then U.S. Online Brand spending would be $12 billion

or 50% of the $25 billion (U.S.), And not the current paltry +/- $5 billion

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What Will Be Our Future?

Destiny...is not a matter of chance, it is a matter of choice;

it is not a thing to be waited for, it is a thing to be achieved

William Jennings Bryan (1860 - 1925)US lawyer, orator, & politician

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If Advertisers Don’t If Advertisers Don’t Take Take

Responsibility, Responsibility, What Should We What Should We

Do?Do?

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What Sticks 3 Step Action Plan Publishers & Ad

Sellers1.Get Your Own House In

Order

2.Help Them…Help Themselves

3.Package it Well

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Can publishers

impact brand

effectiveness

themselves?

Own House in Order..

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Stop Selling International Impressions to Domestic

Advertisers1. International

users comprise 15% to 30% of a site’s ad inventory

2. Removing International increases effectiveness by 18% to 43%

0%

20%

40%

60%

80%

100%

KC ING McDonald's Verisgn

US Non-US

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Respect Diminishing Returns

It’s a Law of Physics in Media

% o

f Bra

nd Im

pact

Aw

aren

ess,

Imag

e or

Pur

chas

e In

tent

0

10

20

30

40

50

60

70

80

90

100

0 1 2 3 4 5 6 7 8 9 10

Frequency

Diminishing returns

1

2

34 5

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Heaviest Online Quintile Garners Half the Ad Imps

5% 6%11%

19%

58%

0%

10%

20%

30%

40%

50%

60%

70%

Per

cent

of

Tot

al I

mpr

essi

ons

Light Users All other quintiles Heavy Users

Avg Freq: 1.0 2.1 3.2 5.5 25.0

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One Solution: Website Frequency Caps Can Really

Help

10%12%

21%

29% 29%

0%

5%

10%

15%

20%

25%

30%

35%

Frequency of 3 Per Week per Site Dramatically Increases Reach & Thus Performance

Light Users All other quintiles Heavy Users

Increased Increased reach by reach by

72%72%

Increased Increased reach by reach by

72%72%

+50% to 70% +50% to 70% in Adin Ad

EffectivenessEffectiveness

+50% to 70% +50% to 70% in Adin Ad

EffectivenessEffectiveness

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Many Things can Affect Effectiveness (e.g., Time of

Day)

30%

35%

40%

45%

50%

3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23

Top 2

LunchLunch

+10% to 15% +10% to 15% in Ad in Ad

Effective-Effective-nessness

+10% to 15% +10% to 15% in Ad in Ad

Effective-Effective-nessness

Average

If Marketer had focused impressions on the 6hours around lunch time, impact would have been significantly better

% P

urc

hase

In

ten

t

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Impact of Ad Size 1

56%40%

64%

86%

0%

20%

40%

60%

80%

100%

468x60 120x240 120x600 336x280

Percent Change in Brand Index

banner small rectangle small skyscraper larger rectangle

Results: Size Matters

1 Aggregated results for three brands tested2 The average of four brand measures tested

The 336x280 resulted in an average +54%

increase in brand impact vs. 468 x 60

2

+20% to +20% to 54% in Ad54% in AdEffective-Effective-

nessness

+20% to +20% to 54% in Ad54% in AdEffective-Effective-

nessness

IAB, DoubleClick Ad Effectiveness Research 2001

Banner Small Rectangle Small Skyscraper Large Rectangle

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Improving Publisher Ad Effectiveness

Insights from the What Sticks ResearchLow High1. Cut out International impressions18% to

43%

2. Manage Frequency 50% to 70%

3. Capitalize on Time of Day/DoW10% to 15%

4. Ad Size matters 20% to 54%

5. Page Placement really matters 6% to 350%

6. Creative is “mission critical” 0% to 400%

Total Gain Possible: 0% 2910%

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Some Companies That Can Help

Double VerifyAdGent007VizuDynamic Logic Insight ExpressAnchor Intelligence

Ad Servers:DoubleClick / GoogleAtlas / Microsoft

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There is so much that

marketers don’t know and we

could help them

Help Them…

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Of Course, Context Matters

+~10 Pts

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But Behavior Targeting Is Better

Brand: Panasonic Plasma TV

Target: Interested in high-end Consumer Electronics

Performance: +12.2 % pts, or

+75% ROI on CPM =

+192%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

Contextual Behavioral

ControlTest

Purchase Intent

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Next Generation Targeting

But what if Cookies continue to go away? Current estimate IS 50% cookies deleted monthly

Semantic targeting is likely next gen Scans page and categorizes contextual potentials

That is matched to consumer intent Weeds out negative places to advertise

Waiting in the wings-DPI based targeting Sits on the ISP “pipe” collecting insights on

consumer interests

DPI = Deep Packet Inspection technology

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Optimizing Each Campaign Is High Value

Same Media Budget Same Media Budget 310% Increase 310% IncreaseSource: InsightExpress

Imps (M)Brand

PerformanceContri-bution

Creative 1 10.0 -15.9% (1.59) Creative 2 10.0 13.8% 1.38 Creative 3 10.0 11.3% 1.13

Total 30.0 0.92

Imps (M)Brand

PerformanceContri-bution

Creative 1 -- -- --Creative 2 15.0 13.8% 2.07 Creative 3 15.0 11.3% 1.70

Total 30.0 3.77

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Optimizing Online Ad Inventory Yield is Becoming

Critical TodayManaging publisher inventory complexity is impossible on Excel: Est. TV Ad Units Annually by Network: 220,000 Est. Yahoo Ad Units Annually: 3,500,000,000,000

Publisher Inventory Optimization tools are becoming critical: Manage / direct sales team performance Predict ad inventory avails Maximize yield and price to market demand

Reported revenue increases of 10%-20% immediately

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10.0%10.0%

20.0%20.0%

30.0%30.0%

40.0%40.0%

50.0%50.0%

60.0%60.0%

0.0%0.0%

However, Biggest Gains Where In The Marketing

MixIntroducing New Menu Item: Grilled Chicken Flatbread Sandwich

Ad Frequency

(or Budget)

% A

ided

Aw

aren

ess

20% of Broadcast Budget

Reinvested 13.6%

in Online

Po

int

of

Dim

inis

hed

Ret

urn

s

5pt Gain!

Cut6.4%

TV & Radio

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Tacoda (AOL)Revenue SciencePeer 39Rapt, Inc. (Microsoft)PubmaticMedia GeeksMedia6ºKindSightSolbrightNetworked InsightsEyeblaster / Other RM

Some Companies That Can Help

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1.Forbes.com Brand Effectiveness Guarantee

2.Yahoo! Consumer Direct

Package It Well

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Forbes.com Brand Effectiveness

Guarantee

Minimum of $150,000 campaign - Over 60 days

No statistically significant increase in

brand metrics, advertiser gets their money back

Aided Awareness, Message Assoc, Brand Favorability, Purchase Consideration

Alternatively, Forbes.com Challenge Guarantee ad dollars on Forbes.com work harder than WSJ

Increase Brand Ad Effectiveness,

Or your money back!

Increase Brand Ad Effectiveness,

Or your money back!

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Yahoo!’s Consumer Direct

Maps Online Users/activity to their buying habits Using Nielsen Homescan (tracks all product buying) 50% - 80% probability Yahoo can match Online User

activity to their brand preferences using algorithms Categories: CPG, Pharma, Retail, Finance

Brands can: Buy ads against their loyal consumers Buy ads against competitors’ users

Reportedly, sales lifts of +/- 20% ROI reported to be +100% to +300%

Greatly increased Yahoo Ad share of market

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In Summary, Unlike the Other Media, Online Has Many

Effectiveness LeversCreative Message, Format, Tactics

Targeting Audience, Content, Historical

Message Management/Frequency ControlPricing ArbitrageAttentiveness / IntrusivenessOptimization systems…and more

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So, Why Bother?

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“Most Important Launch In History Of Ford”

- Bill Ford

F150 Truck is #1 selling vehicle in U.S.

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The F-150 Online Ads

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Roadblock

How Big a Difference Can Little Changes Make?

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Cost Effectiveness of Each Medium

Cost to Increase Purchase Consideration

Brand Metric:Purchase Consideration (top 2 box)

Relative

Cost Index

Relative Cost

TV 1104$11.0

4

Magazine 456 $4.56

Roadblock 100 $1.00

Online 135 $1.35Interpretation: If it cost Roadblock $1 (indexed at 100) to increase purchase consideration, then it cost $1.35 for Online, $4.56 for magazine and $11.04 to TV to achieve the same increase.

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What’s the CPM for This!?

0%

20%

40%

60%

80%

100%

BasePlan

2.5%Online

6%Online

Cost of Portal Home Page Take- Over ad in study: $500,000

Cost of Portal Home Page Take-Overad today: $2,500,000

Priceless!

Equal to $750,000,000 in U.S. Truck sales

Equal to +$1,350,000,000

in U.S. Truck sales

Ford Media Mix *Tra

dit

ion

al M

ed

ia(T

V,

Mag

azi

nes)

* Approx. $200 Million Budget

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Ford Put It Best

It isn't the incompetent who destroy an organization.

It is those who have achieved something and want to rest upon their achievements who are

forever clogging things up.

Charles SorensonFord Motor Car

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So What Is Your Destiny?

I cannot say whether things will get better if we change;

what I can say is they must change if they are to get better.

Georg Christoph Lichtenberg18th-century German scientist, satirist and Anglophile

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Greg Stuart+1.631.702.0682New York Citygreg@gregstuart.com

Want a copy? email me.

Thank You

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If You Don’t Like The Way Things are NOW…

"Efficiency is doing things right; effectiveness is doing the right

things."

Peter F Ducker