Network Gut Check
Just when we thought (hoped) that the "pork bellies" controversy over commoditized ad inventory had eased, the Interactive Advertising Bureau stirred the pot again this week. Its report on the selling habits of major online publishers showed substantially increased reliance on ad networks in 2007 over 2006. This study comes after a season of publishers complaining about CPM erosion caused by horizontal networks. What better time to check in with some of the ad networks focusing on behavioral targeting -- and what they are seeing take place on the buy and sell side? This week it's InterCLICK, which sees demand growing on both sides, according to the company's President/Founder Michael Katz. Some of the big media brands may protest too much, he suggests.
Behavioral Insider: What is the growth rate and current coverage for InterCLICK?
Michael Katz: Our network has grown by 400% since 2006. We built out our technology, and our value proposition has been the key driver to our growth. We are the only network that is fully transparent. working with top-tier publishers and offering behavioral targeting technology. We work with all the major portals and we try to work with the top five to 10 in each of the major verticals. We are currently the tenth largest ad network. We reach 63% percent of the population, 119 million unique visitors.
BI: Other than transparency, what differentiates your BT engine and segmentation?
Katz: We look at a few major variables. We look at frequency and recency. So, combining those two, we look at what is the user interested in for the short terms, the mid-term and the long term. And we combine that with quantifying how interested are they.
BI: What share of your clients are using BT? And what place does the technology have in their overall plans?
Katz: Probably 30% to 40% of the advertisers we work with are doing behavioral. A lot of them are still doing loose demographic targeting. They are looking at BT as a component of the overall campaign. So there's a run of network component, there may be a custom component and behavioral as well. The role of the behavioral is to measure the ROI at a higher CPM to get a very targeted core audience.
BI: Are there segments coming on strong in BT?
Katz: Not coming on strong so much as the ones that are clearly benefiting from BT: automotive and the retail shoppers where there is transactional data involved. Financial services is probably the other main one. We get some demand from other types of clients, entertainment-related.
BI: What is the importance of transparency to the advertiser?
Katz: The role of networks has evolved. In the early days, when networks were brokers essentially, they weren't transparent. Now networks are delivering specific audiences and you still want to keep the advertiser out of trouble. The advertiser needs to know where they are running so there are no issues with their clients and no user complaints. We take that a step further and we provide full post-buy transparency. We show the advertiser and the agency exactly where their ads run, exactly the amount of delivery, the performance and the obvious compositions per site per creative.
BI What benefits do publishers get from the transparency?
Katz: We are able to sell their inventory at higher rates than a blind network would. A blind network is all about reach and scale, whereas we are about transparency and creating a brand-friendly environment across the major publishers.
BI: How does the consolidation elsewhere in the industry affect you? Does it enhance your standing or pressure you to sell out yourself?
Katz: I think if anything it has helped from a few different standpoints. Any time there is consolidation and the headlines are flooded with stories about companies being bought for hundreds of millions of dollars, it brings attention to the industry and the value that networks like InterCLICK provide. As we have seen so far, with Ad.com taking out Tacoda and Yahoo taking out BlueLithium, the consolidation has reduced the number of competitors. It is very uncommon to see any single advertiser just spend all their money with one networks. They are still going to spend with four or five networks -- and if anything, it really has helped us.
BI: How about the issue of commoditized inventory and the controversy over ads being sold as pork bellies.
Katz: I think the pork belly analogy has been beaten into oblivion. I think that it's a relationship-based industry and, regardless whether or not you can automate some of the buying and the selling, you are never going to be able to automate that aspect of this. And that is never going to change.
BI: But how about pressure from publishers to internalize their sales. Are you seeing publishers threatening to leave the networks?
Katz: No. I mean the whole ESPN thing was a total lie. I don't' recall any other time in my life where a company took out a press release that was completely bogus. You can go to ESPN and see ad networks all throughout the site. You go there and you get a pop-up from one of the major ad networks after being on the site within two minutes. The publishers are not shying away from ad networks. They need ad networks.