Oliver Thylmann

It’s been over 2 months since my last post and this is inexcussable. But if you check the right side of this blog you will see some posts from stuff.thylmann.net and twitter.com/olivert and delicious.com/othylmann which are no deep thoughts, but might give you an overview of what I am reading and thinking about.
For the most part this thinking revolves around Adcloud, a second project we just started at Ormigo which is currently generating a lot of buzz and is leading to some very interesting discussions. In very short terms, we are extracting the performance advertising ad server system from Ormigo and making it into it’s own product, creating, through a few more features, an open performance advertising exchange.
Sounds a bit abstract for now, but I will try to get into it a bit more deeply as things go on. We are truely leveraging our experience with agile development to get new releases out quickly and are working very closely with our customers to get the right stuff in there first.
But these are busy times so please excuse me for a bit more lighter blogging at this time.

As sad as it is, Yahoo! has given up and Google is now running ads within Yahoo!. Check Michael’s post here entitled Massive Destruction of Shareholder Value for some good thoughts and links. The thing is that this is actually bad for almost everyone. For example, Google is monetizing better than others because they have more inventory, and more advertisers and more inventory advertisers invent. advert. i.a. …. As Steve Balmer said, the Flywheel is just bigger. So the advertisers are paying more to buy ads within Google. So now for a search result within Yahoo! for the term “Insurance” you can either buy it cheap on Yahoo! or expensive on Google and in the end, it will be the same click, with Yahoo! probably opting to choosing the expensive one.
Of course, Yahoo! will make more money in the short term, but in the long term that money will move to Google, and their Flywheel will get a size that is just too big to replace. We are almost there, but I still believe there are options to build something truely open that leverages the power of the internet. With the deal being non-exclusive, and Yahoo! being able to mix and match as they choose, the deal is a bit more open but the internet can go bigger than that. There is a nice thing that Eric Schmidt said:
If there were an issue, it’s perfectly possible that you can do commercial deals that look like outsourcing deals which are not exclusive and where industry structures allow everybody to win. If you look in the automobile industry and lots and lots of industries like that, you have suppliers who supply other people. So if there were a deal, it would be based on those sorts of principles.
The thing is that the example just does not hold under analysis. I know somebody working in the part-supplier industry, and yes, by now some car manufacturers are actually buying from different providers just so there will still be 3 different ones at least. That alone would be like Yahoo! buying from Google and X and Y to make sure competition remains high. They don’t, but help create a monopoly, something that automobile industry would make sure to not have happen. But there is another difference. This is more like Mercedes outsourcing the sales of their cars to a 3rd party. Above that, these cars cannot be stored, but fall of a cliff and die if not sold when created, and with each car your sell (not produce) you gain a bit of knowledge how to sell better. Your short term goal is to let the best seller sell your cars, but your long term goal would be to become the best seller of your cars. Otherwise, sooner or later in that model you become the parts provider where the seller knows your exact cost structure and will make sure you produce content the cheapest possible. Because if you can’t sell your cars yourselves, you depend on Google to do it for you … or ads in this respect.
Of course we can presume that giving it all to Google will result in highest prices and best system for all, but that’s just not have this economic model of ours works. Believe me, I do believe in Google’s performance marketing model and actually believe even CPM ads should be performance based, but that’s another subject. The problem is this moves us more into a monopoly and somebody needs to start thinking strategy please, and long term, because short term strategy will default to Google at this point, or to someobdy else that will ultimately be there to market your site for you.
Google actually has something to say about all of this. Of course this is a not a merger, which is a good thing, but if it results in Google becoming the sole provider of search advertising, then emm… who cares. Google says this does not remove a player from the field, but this is untrue if the investors and management in Yahoo! are thinking short term, because then they do not have an incentive to keep improving and innovating in search advertising (and content advertising which is really what Google is moving to next, all performance based). Yes, Yahoo! can do similar arrangements with others, but who would those others be? If Yahoo! is not doing all of this to make more money, then I am lost, and there is nobody else that would allow Yahoo! to make more money, because there is nobody yet who has applied performance based advertising to an entire property, even though Yahoo! is close to that. But as said, there are no others. And yes, this does not let Google raise prices for advertisers, … but as detailed above, again, who cares.
So this is a lot more dangerous then some make it out to be. We need a real strategy, we need some bold steps, we need a Linux of Advertising actually.

Two blog posts got me back on a certain subject I thought I’d write about again. First of all, Mark Cuban posted “I couldn’t resist … Youtube vs. Broadcast.com 10 years ago” in which he compares YouTube and Broadcast.com. Yes it is not a 100% comparison, but interesting none the less. Then I found “Ad Networks: Inventory vs. the brand” by Mathew Ingram (via Simon). From that post just see this part from the end:

Maybe it’s just the spillover from the sub-prime mortgage meltdown, but in some cases packaging remnant inventory and selling it through an ad network reminds me of the Wall Street practice of bundling underperforming or questionable mortgages together, and “securitizing” them in order to unload them onto outside investors. That kind of strategy works really well — right up until it doesn’t.

Back in the first bubble I was running a statistics service for webmasters and we were using Flycast, which very soon folded because that network kind of did not work. Next up for us was Tribalfusion, and they survived. One of the features I really liked about them was that I could put ads into their system on my site myself for free. Very cool indeed. Seems a bit like Google’s AdManager today. Then there was Doubleclick for the big sites, which was not just a service to use and pay for as a publisher or agency, but a real network selling your inventory, until they stopped doing it when the marketing money ran out. So we had networks, and we had targeting, and we had lots of reach and bundling over different bigger sites.
I do believe that we are running down a similar road and we’ll see if lots of those networks out there will survive today. There is a lot more reach out there of course but one of the biggest differences we have is that the cost side has really really changed. You can have more server power and reach for stuff like behavioral targeting and costs for ad servers has gone way down, as has bandwidth. This allows both better targeting and and created networks that can run on the unsold inventory, because even with several cents CPM you can still run profitably. Also there are more real marketing dollars out there obviously.
Sadly the latter gave rise to ads that are not something you want on your site. The thing is that often times, cheesy ads that have higher click throughs to worse conversion but yield higher ecpms in the end. That is why you have these weird flashing banners, or texts that are totally unreasonable like “You are the 1.000.000th Visitor and you Won!”
As always these are interesting times, and I 100% believe in networks with a clear focus, as I wouldn’t run one otherwise. But we are focusing on filling inventory with marketing budgets from small local players in a performance marketing manner, making you other money. Others allow for exploiting your inventory through behavioral targeting techniques, making you more money. Still others are bundling smaller sites, who are allowing them to make money at all. All have to watch out what they stand for and that they are really providing value over and beyond the other solutions out there. And all have to make sure they can compete with Google, on which ever level that is.

Google has released the Google Ad Manager. It’s interesting to see that they are announcing it just after their Doubleclick Acquisition closed, because in a sense, they are competing with Doubleclick for Publishers (dfp). Of course, Google’s offering is free and based on the feature list, it is very powerful for a first release. I am currently running OpenX here and just submitted a request for access, which I double I will get for blog.thylmann.net as I wasn’t able to tell them more about me. The New York Times has a nice article about what the Ad Manager is about for those not fully aware to what the ad serving market looks like.

I’d like to add one very important thing though. This is really a way to get to see more pages users view. Each page the Ad Manager is on, independent of whether Google is serving AdSense ads or not, will ping Google about the user information based on Cookies. That is a very important thing because you need to know as much as possible about surfing behaviour of people, and at the moment Yahoo!, and sepecially Microhoo, see people more often. It is not only about how  many people you see, but how often you see them. Do I see 3% of their surfing behaviour or 20%. HUGE difference for targeting systems.

The interesting thing is that the system will automatically try to make you most money. So if you do not book an ad with a fixed amount of Ad Impressions to be served, Google will optimize everything. I currently don’t know, and rather don’t believe, if this will include CPL/CPO ads, in which case the system would be amazing for publishers, also bigger ones, which are missing a solution like that.

This will become one of the biggest if not the biggest ad server in a short time frame. It will be interesting to see what OpenX does with their hosted version once it is out.