Dan Salmon is an equity research analyst at BMO Capital Markets and covers advertising and marketing services. With earnings season beginning to wane, Salmon shared a few thoughts with AdExchanger on the latest machinations in the data-driven ecosystem including today's announcement regarding Aol selling remnant display inventory through Yahoo!'s Right Media Exchange.
AdExchanger.com: You suggested in your comments to investors recently that Yahoo! CEO Scott Thompson could be a good fit for unlocking the value of Right Media Exchange in that he's a product guy. Why?
DAN SALMON: Many investors and industry executives have been skeptical of Thompson's hiring due to his lack of background in advertising and media. While that is understandable, I'd argue that as technology is tied more closely to advertising via IP communications networks, Thompson's background actually brings complementary expertise to Yahoo's "ad people" like Ross Levinsohn and Wayne Powers. As exchange-based, real-time bidding becomes increasingly prevalent – not just in display, but also mobile and online video, and eventually, DOOH and IPTV – Yahoo! should be well served by a leader that understands the nature of product development and someone who speaks the language of the engineering community. Content deals and the hiring of strong salespeople is a constantly fluid element of Yahoo!'s business, but the technology must be a consistent foundation.
When you look at Aol, what are some of the key things you're looking at regarding the success of its display advertising strategy?
When I speak with industry executives I hear a steady stream of positive feedback for the Project Devil ads, especially from members of the agency community. Like Yahoo, AOL is being forced to make the evolution to audience-based buying to go alongside context-based ad sales and today's announcement (Aol will be offering inventory on Yahoo!'s Right Media Exchange) is a major piece of that. What will be interesting to see is the relative success/revenue growth rate of the three alliance members as it gets up and running with two exchange platforms, neither of which is owned by Aol. Will that be a disadvantage to Aol? Or will the opportunity to better scale Project Devil ads be a boost to their overall role in the display ecosystem?
How do you differentiate between the increasing "Facebook display" share and the more common, often IAB-standard, graphical display share? Are they one in the same thing?
From an advertiser or media planning view, they aren't exactly one in the same, but they aren't on completely different islands either. Clearly buyers of Facebook display advertising are often doing so as part of a broader "social marketing" strategy, which also normally includes the brand pages they set up on Facebook for free. At the same time, trying to delineate the "social" world and the "display" world as separate "channels" is a fool's errand. I increasingly feel the same way about "mobile" and "online video." These so-called channels are all underpinned by the same IP communication networks and so they are inherently related. This was much less the case in traditional media where "channels" were so defined because their distribution technologies were distinct (e.g. printing presses and early-morning truck deliveries for newspapers vs. broadcast towers and rabbit ears, satellites, cable systems and set-top boxes for TV).
How do you see interclick working within the cogs of Yahoo! ad strategy?
It is vital. First, interclick brings data management and audience targeting technology that will enhance the Yahoo platform. But as importantly, the acquisition brings a salesforce that is orientated around selling audience, whereas advertising has typically been sold based on the media property and its context. Selling an audience-based campaign is very different than what Yahoo's premium sales people are focused on doing, which starts with finding tent-pole advertisers for tent-pole Yahoo properties, particularly around major events. The addition of interclick has also seemed to usher in the concept of "Class 1.5" inventory at Yahoo!. Before, we had "guaranteed/premium/class 1" inventory and "non-guaranteed/remnant/class 2" inventory. Now we're hearing a story about "non-guaranteed, premium" inventory, or so-called Class 1.5. Sure, some of that may just be "marketing speak" to help attract advertisers worried about the perils of remnant display ("I saw my ad on a brand-inappropriate site!"), but it's also an acknowledgement that two black and white buckets are not enough.
What are the next steps - say 12-24 month - of the audience buying display business?
I think we'll continue to see more focus on the publisher/sell-side in 2012. AdMeld's integration into Google/DoubleClick is a key event and I think we'll be seeing many more new features from DoubleClick for Publishers. And obviously, there's the Aol-Microsoft-Yahoo consortium, which presents a different option for publishers. While a triumvirate-style partner may not be ideal in many publishers' minds, it would be foolish to think that there aren't those out there looking for "anything but Google" as that company becomes more powerful in display. Facebook's IPO will bring more attention to display and it's a fascinating company for audience-based buying because the media property itself is delineated by….audience! Namely, users, brands and other individual presences on the property, as opposed to the "news" section, the "sports" section or the "politics" section. And finally – and perhaps still a ways out – I think (hope?) we'll hear more about the breakdown of channel-specific distinctions like "display," "mobile" and "online video" and increasingly see advertisers and agencies thinking about their spending in holistic manner across all IP-enabled impressions. The rise of the agency trading desks from Publicis, Omnicom, WPP, Interpublic, MDC Partners, etc. seems to be a positive step in this direction as the technologists within them are some of the most forward-thinking in moving towards a holistic view of their clients' consumers and prospects across the entire IP-enabled ecosystem.
By John Ebbert