HookLogic's Jonathan Opdyke And Michael Barrett On The Ecommerce Ad Exchange

Jonathan Opdyke and Michael BarrettWith HookLogic’s purview in the ecommerce media arena, one might not think that former Yahoo CRO and AdMeld CEO Michael Barrett would be a logical fit for the company’s board, which was announced last month. But according to HookLogic CEO Jonathan Opdyke, the fit was “natural,” given Opdyke’s own thoughts on the future of exchanges, let alone the imprimatur that Barrett brings.

AdExchanger spoke to Opdyke and Barrett earlier this week about HookLogic, industry trends and the company’s new Retail Search Exchange, which Hooklogic positions as a solution for ecommerce publishers to tap search engine marketing and programmatic budgets. Read more.

AdExchanger: Michael, why connect with HookLogic in particular?

MICHAEL BARRETT:  After the Admeld experience, my short stint at Yahoo helped solidify my thinking. Although SSPs definitely work well for publishers and are their ally, going back to the publisher hammered home some of the macro trends that have occurred in the last five years since the advent of exchanges and programmatic buying.

The CPM story wasn't getting any more attractive for publishers. As a matter of fact, one could argue that it was getting less attractive. Overall in the market, the revenue picture wasn't terribly damaged because you're probably selling more at a higher rate on the lower levels, but it was having a drag on your premium pricing.

Post-Yahoo, I was thinking about opportunities to help the publisher. The idea of staying with programmatic alone doesn't make sense; it takes a lot of inefficiencies out of the system and it's certainly where it's heading, but how can you use programmatic to a publisher's advantage? What type of ad units would be both more effective and provide a higher CPM than traditional standard units?

With this broad thesis I was introduced to the HookLogic guys and quickly understood what they were trying to accomplish for ecommerce publishers: provide a programmatic opportunity that is deeply integrated into the user experience by catching users right at the point of product decision and tracking the performance of the ad not just from where it was served, and so on. It also provides a full circle for the [ad] buyer to see the impact of the ad, which can inform their bidding going forward. I thought it was a perfect solution for that set of publishers.

Jonathan, in your estimation, how is your Retail Search Exchange a next step for publishers in the programmatic world?

JONATHAN OPDYKE:  Exchanges are centered around creating an exchange of “need” for advertising. On an ecommerce site, the most needed ad format is the product itself. That's what people are looking for. But most native formats live within a walled garden – Facebook, Twitter or Yelp ads are built around that garden – whereas retailers all share a common native format. We’re creating an exchange of native formats. In fact, when the advertisers use our system, they don't build the creative; all they do is click to bid on specific products, and then they are able to automatically generate ad units without having to upload and create parameters.

Retailers are a new form of publisher, and  up until a couple of years ago many were not participating in exchanges and other similar systems including display media selling. Many retailers still don't have display advertising even though it's becoming more of a trend. A lot of retailers have Google Adsense on their sites, but now we're creating what I think is an ideal programmatic method for retailers to tap into brand funds – the people who are most interested in reaching customers in their environments. If you're Toys "R" Us, the people most interested in advertising with you are Hasbro, Fisher Price, Graco and similar brands that care about the shopper on Toys "R" Us. We're now enabling something like that at scale.

Google has its Product Listing Ads (PLA). It seems like they could do a very similar product. How do you defend against that and differentiate?

JONATHAN OPDYKE:  A couple of ways. One, Google's product listing ads is more of a comparison shopping engine product. What they're doing is tapping retailer dollars for pay-per-clicks to retailers. The kind of companies that spend a lot of money on PLAs are sites likes Target and Staples and whatnot. The companies that spend with HookLogic are the brands that sell on the retailers. Sometimes those brands play in PLA – like Toshiba sells its laptops direct and also sells through Staples and WalMart. We offer an alternative product, where Toshiba can promote in its channel in addition to promoting its own channel.

In terms of  "Could Google move into our space?" – it's possible. Right now, they don't have a brand-focused format for PLAs. The PLA format also sits in a very different spot in the purchase funnel. When you shop using Google PLAs, it's possible most people have already decided what product they want to buy. They're there to comparison-shop and decide what the cheapest channel is, and then they click on an ad that sends them to that channel. In the retail environment, that's where customers are making the decision on which product to buy and which brand to favor.

Our value proposition is much closer to the decision process of which product to choose. We’d argue that we're more important to brands than Google in this type of scenario.

What if Google comes after us? Well, we're doing the best we can to lock up all the inventory in the retail environment so that we're able to offer a true alternative to Google for product brands.

Michael, back to you. If yield optimization is a three-legged stool between commerce, content and advertising, how do you see commerce speaking to more traditional publishers – news publishers – in the future?

MICHAEL BARRETT:  One of the challenges is always the mindset of the person who comes to the publisher's site; if you're not in shopping mode, I don't think it's enormously successful to link to items for sale next to a sports-related article, for example.

Some companies are still looking at that in terms of syndicating with software the ability to match goods with articles. More bottom-of-the-funnel-type publications like fashion and beauty seem to be ahead of general interest, which only stands to reason. I don't see what we’re doing [at HookLogic] as being the tip of the spear and that we will be able to help all publishers successfully grow that ecommerce stream of revenue. I think it's more about helping commerce publishers compete with the likes of an Amazon.

What are you expecting from Amazon in the years ahead?

MICHAEL BARRETT: I've seen them grow and we've had many talks with them when I was with Admeld. Amazon looks more like a media company than a commerce company. I think based upon the big themes that we see in play, which are data and automation, [Amazon is] at the forefront and it will be a big business for them. It already is. I think their estimate out there is that they're doing a billion plus a year. It's already a bigger business than most ad-supported [publishers] and I think it's going to be even more substantial as the years go on.

JONATHAN OPDYKE: I think Amazon has really risen to the fore of looking at audiences and monetizing them in any shape or form, whether it be selling a product, selling somebody else's product, selling advertising to reach them. They really, truly look at every customer as an opportunity to monetize one way or another. Where Amazon has gotten very aggressive as an ad business, it remains to be seen whether they truly become a platform outside of that or whether they remain a walled garden.

Also, retailers view Amazon as a constant threat, and so whether Amazon could be a media platform in the way Google is a media platform on and off its own properties is a significant question mark.

Can you give me a use case for your platform?

JONATHAN OPDYKE: Let's take an advertiser like Graco which sells strollers, cribs and that kind of stuff. Basically, when Graco logs in to our interface they see all of the products sold across all of the sites in our network. They see the strollers that are sold on Toys "R" Us, on Sears and on other ecommerce websites in the network.

What they're then able to do is place a bid on their products, and then anywhere that we have preferred placement with the retailers we're able to put Graco products. Every time somebody clicks on those Graco products, it generates direct interaction with the customer and  we track it down to the sale. We see all the sales on the ecommerce sites we work with.

Besides that, there's also the halo effect on sites like Amazon and even physical stores where we don't necessarily see all the transactions. Every online interaction can lead to offline influence, and in fact over half of offline purchases are now influenced by online research.

Also, when Graco places their bid, their product actually moves up to the top of the search results on the retailer. There's a featured product or sponsored product location on the site of every retailer we work with that makes it a highly engaging and clickable experience, where we get high click-through rates and interaction with our ad units, unlike the standard display unit off to the side of a screen.

On the supply side we integrate with each of the retailers to create those ad placements, but because our technology is native to retail we're able to make those ad placements extremely relevant. We always follow what consumers are doing and shopping for on the site, showing ads in context and in real-time. Our ad format is not disruptive and that makes retailers happy. Also, the ad actually links into their site so it doesn't take people away to convert somewhere else. So it drives revenue for them. In fact, our RPMs for our retailer page views can be as high as $20 to $30.

How do you think mobile will impact a product like Retail Search Exchange?

JONATHAN OPDYKE: Mobile is a huge connection point between the online and offline worlds. A lot of people now shop in physical stores with their mobile phone, looking up product reviews, checking out details of products. Because our API enables a very neutral ad format, we can share  product-based advertising in any mobile environment pretty much seamlessly.

For example, when people are browsing and clicking on things in stores, it actually presents a huge real-time opportunity to influence people at the store shelf.

Using mobile is a big part of our business. We see it becoming an even bigger part of our future. We'll see a lot more activity online on phones, where people are browsing through their stores on apps and whatnot.

There would seem to be lots of data floating here within your Retail Search Exchange, and you could potentially use that data for retargeting by using keyword inputs. Any plans there?

JONATHAN OPDYKE: No plans that we're ready to talk about yet, but the conclusions you jumped to are sound ones.

What are the budgets over on the buy side that are going to use your product? Is it trade dollars? I heard you say share-of-voice. That's a brand awareness success metric, for example.

JONATHAN OPDYKE: Interestingly, it's a mix. The biggest budgets are brands’ search engine marketing budgets. One of the things that we've done is to actually temper “trade” because trade interferes with retailers. Retailers view the trade funding as their allocated funds and theirs alone. They're not so happy about that because it's already part of their margins.

When you bid on the exchange, you're actually only able to bid across the entire network itself. You're not able to bid one retailer at a time. By doing that, we prevent the brands from using single retailer trade funds. It seems a little counter-intuitive, but it's one of those facets that makes the program palatable to every retailer because it's not interfering with their trade funds flow. In fact, it seems to be creating a new augmented budget either through search budgets or shopper marketing budgets. The only side of the trade that we tend to touch are the ones good for spending across any channel but not necessarily allocated to one retail channel.

 

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