Why Display Ads are Cool Again

Matt Marshall and the VentureBeat team graciously allowed me to write a guest post on display advertising.

Copied below is my post and the core reasons why I believe we will be a huge company.

Thank you, Matt and team.

Brand marketers spend $20 billion a year on display advertising. The goal? Drive brand recall and purchase intent. The medium? Pictures, text, and call-to-action buttons.

The first banner ad, for AT&T as seen below, hit the web in 1994:

The web has changed a lot since 1994, growing exponentially richer via broadband, APIs, YouTube, Twitter and Facebook, but, in an odd disconnect, display ads stayed virtually unchanged over the years. Until recently, that is.

We’re now seeing brands, agencies, and technology vendors working hard to remedy the failings of the display industry, enabling advertisers to invest in ad units that result in deeper engagement experiences by embedding the Web’s richness and social interactivity within ads themselves.

Three specific developments are finally allowing brands to run ads that reflect the best of today’s web and the brand’s content investments:

1. The Real-Time Web: The rise of the real-time Webhas impacted our day-to-day lives as well as the way business is conducted. Because of these live conversations, companies are no longer investing in “snap shots” of their brand, but rather in two-way conversations with their target audience. This requires a shift in regarding creative as something that is fixed for a one-time campaign, to something that is fluid, real-time and responsive. This is achieved by embedding these social elements – videos, Twitter feeds, surveys, blog posts, games – directly in the ad itself.

2. The Dynamic Ad Experience: Each time an ad loads, it can be programmed and adjusted based on observed behavior over the life of a campaign and consumers’ interaction with the unit, information known about a consumer, and other variables. In this way, ads become a set of programmable, adjustable configuration options that marketers can adjust in real-time based on performance, retargeting and analytic optimizations.

3. New Means for Measurement: There is also a shift in the conversation around what determines the success of an ad or entire campaign. While click-through rates have been regarded as the Holy Grail in gauging the success of display ad campaigns, engagement levels and time spent interacting with an ad now promise metrics that are richer, deeper and far more tangible assessments.

With all this change occurring, the Web’s leading publishers and brands are racing to define new ad formats that combine the best of the brand, publisher, and social content. This means moving from selling media and audience to selling differentiated marketing solutions.

My own company, Widgetbox, recently partnered with tech publisher IDG, for example, to develop IDG’s Nanosite Ad Unit, which leverages existing content from IDG sites and social content from the Web to provide readers with a content-rich ad experience. The Nanosite allows readers to access additional information within the ad unit so that they never have to leave the webpage they are on. In this way, advertisers can provide interactive experiences for readers from the Nanosite through whitepapers, videos, real-time content updates, social media and lead-generation forms all within the unit.

Launched in September, AOL’s Project Devil is another example of the display ad evolution. This new format offers a large ad space segmented into interactive panels that include video, slideshows, quizzes, polls, text messaging and other options, allowing advertisers to customize different streams of functionality within one interactive interface. With launch partners including companies such as, Lexus, Spring, and Macy’s (pictured), it’s clear that AOL has tapped into an important market need. AOL recently acquired Pictela to scale the roll out of Project Devil.

On the technological innovation side, Spongecell is another company providing publishers and advertisers with the tools and strategy to reach customers on a deeper level (that Volvo ad up top is from Spongecell). Big believers in shifting the conversation from clicks to actual engagement, Spongecell is helping brandssuch as Office Depot, Whole Foods and Delta Airlines make this a reality.

These are just a few examples of the many ways publishers are getting creative when it comes to giving readers the content they want in new ways. And for advertisers, these formats enable deeper reader engagement with the ad itself, while giving readers an easy way to access and interact with additional content without navigating away from the current webpage. In acknowledging the shift from episodic to real-time banner ad marketing and the reality that a “perfect” creative is in fact evolutionary, we are learning to look beyond the traditional display ad and unlocking the value that today’s online experience can lend to ad campaigns.

Start-up Forecasting

"Forecasting is difficult, especially if it's about the future."

Forecasting start-up revenue is not easy. I write with a few thoughts on how best to handle the need to present financial forecasts vs. the uncertainty inherent in any model.

In general, two forecasting methods exist. The first, tops down, seeks to identify an addressable market and revenue becomes a function of market share. The second, bottoms up, is often best captured by detailed assumptions regarding how to get to revenue. For example, I am partial to the productive sales rep model: W# of sales reps * X rep maturity ramp * Y quota per rep * Z productivity per rep.

In my experience, both models are straightforward to develop. The art lies, however, in the skillful blending of the two approaches to satisfy a board, prospective investor, sales team, etc.

Forecast errors compound across time. Therefore, it pays to focus on three to six month bottoms up plans. A near-term bottoms up plan requires thoughtful detail and projections based on specific variables - how many sales heads, quota, ASP, etc. Operating history then turns the assumed variables into actuals and the model begins to solidify.

Beyond six months, the bottoms up approach is simply an exercise in guess work. How then should a management team think about the long-term?  I have found two useful models. The first is to examine historical comparables - for analog companies, what was the revenue ramp rate?  A model can be focus on projections that assume either the average, median, or top decile growth rates for comprable companies. Ie - it happened before and history looked like $xm, $ym, and $zm over three years.

Another model is to set strategic market share goals. In essence, the long term plan focuses more on clearly defining an addressable market and a strategic goal of capturing x% of the market.  Again, the art lies in defining the market, the market's growth rates, and a strategy for competing for 20-30% of the market at large.

It pays to invest in both near-term detail and longer term aspirations. The former assuages board members and investors and provides them confidence in your operating bona fides. The latter fires the imagination and helps paint the picture of how a very large, venture return company can be built.

The Power of Frameworks - Respect the Process

After winning the Orange Bowl, Jim Harbaugh saluted his team for "respecting the process." 

Stanford's Carol Dweck (must read book MindSet) argues that growth-mindset people focus on the "process and not the outcome."

With an outcome in their sights (lose weight, sell more, pick new year's resolutions, rebrand), most people jump right in.

However, outcomes are derivative of commitment to a sound process. Without a clear process, most people fail or practice random acts of violence that may or may not work.

Since becoming a CEO, I have come to appreciate the wisdom of frameworks and processes.  Whenever I think about an outcome, I must catch my enthusiasm to reach it and instead, step back, and define a process for how to realize the goal.  The universal application of "process vs outcomes" is very real. In fact, I find that any process is better than no process at all and the specific process matters far less than committing to one.

For example, how did you pick your New Year's Resolutions?  How are you planning to lose weight?  How will you develop a strategic development plan? Forecast sales....Develop software?

To take one example - New Year's Resolutions - the American Association of Happiness happens to have a very handy framework with which to develop a sound list.  MAPS - pursue personal resolutions that will result in MEANING - AUTHENTICITY - PURPOSE - STRENGTHS.

I would argue that the power of frameworks compounds across the # of team members - ie the more people that you have working to a goal, the more value you will derive from a joint commitment to a process. Why? Frameworks provide a common mental model, semantics, structure that help overcome individual idiosyncrasies and biases. The shared model provides a vocabulary for common action, dialog, and progress. Without a framework, individual biases will make communication challenging - leading to frustration and failed missions.

Little in the world is truly new. For any particular goal - running a marathon, swimming a mile, to brand positioning - there are sound frameworks. The value of frameworks helps teams focus on the "upstream" work that will lead to the outcome rather than the outcome itself. Moreover, the value of a process compounds with the # of team members - the larger the team the greater the value.