Creative Optimization In Demand as Teracent Revenues Double Each Quarter Says SVP Hall

Chip Hall is SVP of Sales and Marketing at Teracent, an advertising creative solutions provider.

AdExchanger.com: What trends have you seen at Teracent in 2009?  Can you characterize trends in revenue momentum, deal size, client verticals, consumer audience targets, etc.?

CH: Teracent has seen very positive growth and revenue in 2009 and so far has been more than doubling revenue growth quarter over quarter. The demand for optimized display advertising is immense as the market has fully realized that only a data-driven, algorithmic approach will meet the ROI goals necessary to make display “work.” Our growth is leading us to prepare to announce that we have expanded our sales team in two key markets – New York and Chicago – in response to growing demand for Teracent’s intelligent display ad platform.  We have also been running campaigns in Europe since last year and see growing interest in that market as well as Asia Pacific.

In 2009, we began an exclusive partnership with Yahoo to power their “SmartAds” across mobile platforms (in addition to the Web ads we have been powering for them for more than a year), opening up the intelligent display marketplace to new players.  This Yahoo! partnership makes Teracent the ONLY media delivery platform that is able to optimize and analyze media delivery to both Web and mobile campaigns from the same set of audience.

In regards to new clients, we have experienced growth in the retail, automotive and travel verticals.  Deal dynamics see clients testing the platform first on a small portion of their available inventory and then scaling programs when they see that Teracent exceeds their goals.

In terms of targeting, Teracent powered campaigns are guided by a concept called the Advertising Strategy which acts as the “brains” of each campaign. The Ad Strategy is a mix of business rules (e.g. “this call to action goes to this geography”) and learning (let the self-learning algo engine do the work!) that the advertiser/agency create in order to gain the best results. We typically see people start with a bias to rules as they come into each campaign with pre-conceived ideas of what targeting will work best. We find that this rules-based approach changes quickly to more learning-based as our customers get more comfortable with a real-time approach to matching messaging to audience targets. Teracent essentially does real-time focus group testing of customer segments and in the process creates mini real-time BT segments; this is a new concept that requires customers to build trust in the engine, which they do rather quickly.

How does Teracent differentiate from competitors like Tumri?

Teracent is one of the only companies in this space that has a self-learning optimization engine.  Of the few companies that do, including Tumri, Teracent differentiates itself by taking a very customer-centric approach by giving our advertising partners more control over the front end creative and insight into the optimization process.   Unlike some of our other competitors, who take more of a “black box” approach, we believe that advertisers have a right to know exactly how their customers are responding to their ads and why something is or isn’t working at any given time in the life of a campaign. 

This flexible approach is seen in the creative process and the way we manage data. Teracent is the only player in the dynamic ad optimization space with a development tool (Darwin) that allows advertisers/agencies the ability to control their creative design from concept to testing. We will still “dynamicize” ads for our customers, but we know they would rather ultimately do the work themselves, so we empower them to control their own workflow. Unlike Tumri’s Adpod approach which forces clients to work with a pre-defined template framework, Teracent is agnostic to any presentation layer constraints and can be designed using full Flash rich media or even HTML or Ajax if required.

Teracent also has superior flexibility in terms of how it manages data. Teracent was the first company in its category to offer dynamic re-targeting and helped several network partners develop and bring that product to market through its unique and industry-leading SmartPixel technology. The Teracent SmartPixel is a universal pixel that only requires one set of code to manage multiple pages and also employs conditional logic to help best turn the data the SmartPixel tracks into the most relevant (e.g. the most valuable) advertising possible.

Teracent’s flexibility is probably best represented by our recent mobile launch. We ported our Intelligent Display platform to Yahoo! mobile in about 10 working days. We were able to do this because our core engine is agnostic to the presentation layer and the type of data it manages; instead our Intelligent Display platform is focused on optimizing the most relevant message regardless of where that message is delivered. We are doing Web and Mobile today and could easily go to TV if there was a good business case.  The future of advertising will be digital and will be viewed through LCD screens of all kinds, and Teracent has built an optimization and media delivery engine to serve that future.

Any traction yet with Teracent’s integration into Yahoo!’s SmartAds?  Why is SmartAds a good fit for Teracent?

Many of Teracent’s executives have come from former roles at Yahoo!, and in fact, were responsible for bringing SmartAds to market during their tenure at Yahoo!.  Also, as mentioned previously, Teracent is exclusively bringing Yahoo! SmartAds to the mobile Web.  In regard to specific examples of traction, in partnership with Yahoo!, Teracent developed a Smart Ad online campaign on behalf of Travelocity, which led to a 79% decrease in cost per transaction, a 230% increase in transaction volume, and a 651% increase in click-throughs compared to previous campaigns. 

SmartAds are a good fit for Teracent because Yahoo!’s core differentiation in the marketplace is its superior audience insights. Those insights power Yahoo!’s audience-based sales approach, but can only be monetized effectively if matched with very precise messaging. Teracent’s data-driven optimization approach is the best in the business in terms of monetizing advertising variables like audience data.

Teracent is also a great fit for Yahoo! because Yahoo! has a strong vision of multi-screen digital advertising, and Teracent is the only partner Yahoo! has who is capable of delivering that vision.

Given Yahoo!’s strong business as a content publisher and an ad exchange, Teracent also adds a tremendous amount of value in terms of data management through its SmartPixel. Yahoo! is leveraging the Teracent SmartPixel in many unique ways that is helping to further monetize Yahoo! inventory.

What is your revenue model? Do you charge per impression, per creative, etc.?

Teracent is flexible in its revenue model, but the most popular model in the market continues to be CPM pricing. We also have relationships where we share revenue based on the total media spend, and we are open to CPA pricing if the advertising model supports that approach.

Is placement important anymore? Or is it all about audience?

Ultimately, advertising is most effective when it appears to the customer as a service rather than an ad. This happens when you have the most relevant message at the right time in the right place. Teracent makes this bit of alchemy work because we are able to take the relevant puzzle pieces of an ad (creative, audience insights, product info, etc.) and optimize them using ALL existing parameters, like page context, and externalities, like time of day. In this way, placement will continue to be very important, but not in a stand-alone fashion; placement matters given the audience and also as a predictive bit of data insight, especially for top-of-the-funnel campaigns where you don’t have much user intent. Teracent makes better use of placement than other existing media delivery system because we actually merchandize ads in real-time using the contextual data of placement as an optimization parameter.

How does Teracent offer the ability to optimize for audience?

Teracent offers the ability to manage the delivery of dynamic ads to audiences while managing relevant sequential messages on an impression basis.  This allows us to manage an advertiser’s customers as they move through the sales funnel, from the research phase through consideration through actual purchase.  With our self learning engine and dynamic retargeting, we can identify what phase an individual customer happens to be in and deliver the precise message that will encourage them to click through.   Our approach to optimization essentially does real-time focus group testing where the old weeks-to-months long process of design, build, traffic, analyze, and tweaking ads now happens in milliseconds. We use rapid A/B testing and massive multivariate learning to make every wave of impressions smarter than those that came before. By building the ads in real-time, our Intelligent Display campaigns REACT to the needs of the audience rather try to merchandize a message based solely on historical research.

How is Teracent helping to solve attribution for the advertisers?

Most agree that today’s attribution models are insufficient and disproportionately favor search over display.  New platforms like Teracent’s are in a position to evolve these models and present a more nuanced and complete view of the events that lead up to a user action.  The granularity of reporting provided by Teracent is certainly consistent with this trend. 

How do publishers benefit from optimized creative?

Publishers benefit by making better use of their site-side data to create more relevant ads and thus better monetize their inventory. By using optimized creative they create more relevant ads with higher engagement and click-through and thus create a virtuous cycle of performance where they generate even more audience insight data, so their ads get better and better and they can increase the value of the inventory (or at least protect price erosion!).

Publishers can also use optimized creative for content units on their site and effectively ad serve merchandized content for more relevant, compelling and engaging content on their sites.

Teracent’s Intelligent Display platform also creates a new dynamic in the market where publisher can offer “always on” campaigns that are much more search-like in their campaign management as well as their performance. This new model means that publishers don’t have to always be taking down campaigns and waiting for the new creative for the next campaign to start; instead the ad tags are always running and the creative is swapped out on the server-side so campaigns can run without disruption.

What is your view on ad exchanges?

The ad exchanges represent an important trend in display advertising by allowing ad impressions and targeting data to become more liquid and setting the stage for a far more efficient market.  There is still a lot of evolution yet to take place that will make the exchanges better places for advertisers (versus arbitragers), but their role in the ecosystem will only 
grow with time.

Will real-time bidding (RTB) and demand-side optimization be an important new feature of exchanges? Or is it hype? Will Teracent be able to deliver through RTB auctions?

Much of the aforementioned evolution will occur via entities that transact on the exchanges.  RTB represents an important change to the exchanges themselves that will give the most sophisticated buyers an advantage and allow more complex user segmentation models to drive bid prices.  Current bids are predefined and as result are rarely taken to the level of granularity that is made possible via RTB exchanges.  It will take a while for the majority of impressions to be real-time biddable and even longer for the majority of buyers to leverage the capability, but the trend is more than hype. RTB is very consistent with the Teracent approach because creative optimization technology analyzes impression inputs (Behavioral, Contextual, Geo, etc) at the time of each impression, effectively valuing that impression and making the creative decisions based on predicted performance.

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