Behavioral Insider: Quick take. Do ad sales look grim?

Apprendi: I think it is going to be a hard first quarter for a lot of people in the industry.

BI: How would you compare this downturn to the great bust earlier in this century?

Apprendi: Let me give you more of a platform view that we have here and I think is indicative of the industry overall. When I was running ad sales at 24/7 in 2000, the rug was really pulled out from under us relatively quickly when the bubble burst. But there is a major difference between end of 2001 vs. 2008 going into 2009. Display media in aggregate is a core component of every marketer's strategy, including Fortune 1000 brand advertisers, not just the low-hanging fruit of direct marketers. So instead of it being the first to get cut as experimental media as it was back then, today it is the core measurable media.

In fact, we still believe that even though there will be a downturn in the ad economy, when people rebudget they are going to rebudget towards measurable media. There is a big difference from eight years ago in terms of the mindset of marketers who now have a tried and true media channel that works.

BI: How about the health of behavioral targeting within that display business?

Apprendi: Let's talk about overall targeting. It used to be people bought media with a site-centric mentality. It was a legacy of the print planning and buying business. You looked at what sites indexed or reached your target. Today that site-centric mentality probably represents about 70% of the overall display media spending. But there really is a shift going towards this audience-centric buying methodology. Marketers and largely brand advertisers are recognizing that there are alternative ways to reach target audiences.

We believe that no matter what the overall demand for display media, there is a shift happening from site-centric buying, which is usually more expensive and the softest area of the display market. It is going from 70% to 50% very fast. A lot of that is reliable behavioral targeting, not absolutely dependent on what site you are running on.

BI: Do major media brands have the most to lose, then?

Apprendi: That demand is never going to go away. There is always a role and important component because people value not just buying site-specific but associating their advertiser brand with that particular publisher brand and audience. It is extremely valuable and deserves a premium.

We just believe it won't represent the bulk. And unfortunately that growth will be a lot slower for site-centric display. I think they need to rethink how they capture that shift.

We recently made a deal with LinkedIn. This is what I think is a strategy that more premium brands need to start doing. We are not only an ad network but we also have a platform called Amp that powers other ad networks. LinkedIn is leveraging it to create target audiences, 40 plus different behavioral segments, and they now launched the Linked In Audience Networks powered by Collective. So they say to buyers we are going to give you two opportunities to do business with LinkedIn. The site-centric way is where you can reach the targeted audience within the LinkedIn owned and operated sites. Or I can send you the LinkedIn Audience Networks reaching that user you want to target in greater frequency across my expanded targeting and distribution network. They are now positioning themselves to capture both components of this display demand versus just only getting that 50% of the pie. They now have just created a solution at a price point with this audience-centric approach that is going to allow them to sell both and package it successfully. I think that's the direction more premium brands need to go to start diversifying their display media offering.

BI: But some premium publishers like ESPN claim to be running in the other direction, rejecting networks.

Apprendi: It's a threat versus an opportunity. If ad demand overall is shifting in this direction, just turning off a particular media partner that addresses that demand is probably not going to help your case. How do you embrace this and leverage your brand and your sales channel in a way to capture it successfully? You have to look beyond, how do I just monetize my unsold inventory on my own site to how do I leverage my brand and capture demand at a price point that makes sense for this audience targeting approach maybe outside my own inventory?

Demand for audience targeting grows overall through whoever is selling it -- and that is going to help companies like ESPN and others increase the value of that unsold beyond what they just sell directly and beyond the dollar. Brand advertisers pay much higher CPMs on a BT ad versus a run of network optimized ad by a factor of five to one on our network, for example.

How do I now reach that ESPN audience outside of just ESPN as a complement to what I do directly with ESPN? If ESPN were partnering with Collective to execute against it, they could sell that ESPN audience - let's call it the golf enthusiast -- on this extended network in personal finance contextual segments. That financial services advertiser would love to marry that ESPN enthusiast behaviorally with an appropriate contextual category that maybe ESPN does not have within its own site. Marrying behavioral with contextual, that is a power.

BI: What is your prognosis for ad spending and what you are seeing in the channel right now, where media buyers are spending -- and what we are looking at in the next three to six months.

Apprendi: You have to break it up into pieces. Fourth quarter is fourth quarter. Right now probably fourth quarter is not as robust as it would have been with the economic downturn. Companies have to spend in fourth quarter. They have the budgets. They have inventory they need to move. So bottom line is, budgets are going to be a little more inflated through fourth quarter just because of the season. Right now we're not seeing any significant dips in overall display demand relative to what we do. In the first quarter, most likely there will be a lot of expectations missed. As a result there is going to be a massive rebudgeting going on post fourth quarter. Not just for online but every dollar they spend. Marketers will revisit whatever 2009 plan they had in pencil and rethink everything and try to plan the most effective and efficient plan possible across all media.

Normally January is not that big of a month, but I think it will be even slower because there will be a delay from massive rebudgeting. So we are expecting a lighter January than normal and a little less visibility into first quarter into probably mid-February. But I do believe once they go through this rebudgeting process, my sense is that spending in aggregate on display will be strong. But this audience-centric piece will become stronger because it is a little bit more efficient. It is a good complement to the traditional site-centric approach.