Google Makes Renewed Grab for the Rest of Online Advertising

New DoubleClick ad system heats up battle to create an operating system for digital marketing

Cross-posted from my blog The New Persuaders:

It wasn’t supposed to be this way. Hundreds of well-funded online ad technology companies have sprouted up in recent years, each aiming to make it easier and more efficient for marketers to reach just the target audience they want.

Terence Kawaja, CEO of boutique investment bank Luma Partners, created this now-famous Display Lumascape to show how complex the online ad tech industry has become.

Yet the result is a crazy quilt of companies–graphically illustrated in that mess of a chart on the right–that drives marketers and agencies crazy. The very existence of so many competing products, in fact, has made placing ads online and measuring their impact more complicated and cumbersome than ever. “Venture capital has supported and financed a bunch of chaos,” advertising veteran Randall Rothenberg, CEO of the trade group Interactive Advertising Bureaugriped at a recent ad conference.

The result: Most ad dollars, nearly $200 billion a year, still get spent on television because it’s so much easier.

That’s the problem Google aims to solve with a revamped ad buying system it will announce today at a private Future of Advertising event hosted by its DoubleClick display-ad management and technology unit. (Part of the event will be livestreamed here.) The company, which already dominates 60% of the online ad business–those little text ads that appear on the right and top of the page when you do a search–now has its sights set on the remaining 40% of the industry. That would be the $25 billion worldwide market for display ads, the graphical and video banners familiar on virtually every commercial website.

Google’s goal: Provide the leading one-stop shop for advertisers and publishers to buy ads on websites, mobile phones, social networks, apps, and whatever other new media the Internet spawns. Essentially, it’s building an operating system for ads much like Microsoft did with its Windows for PCs–with much the same appeal to marketers and agencies as Windows has for PC users. “When you’re putting together a campaign, you want everything connected vs. trying to piece it all together,” says Kurt Unkel, president of the online ad buying operation at Publicis Groupe’s VivaKi digital ad agency, a Google partner.

Google’s announcement is the latest salvo in a war to control the next era of digital marketing. After a decade in which Google’s search ads overtook display ads with an unmatched ability to turn clicks directly into sales, many advertisers and publishers expect–or at least hope for–a resurgence of new kinds of display ads that could woo brand advertising dollars from TV. Neal Mohan, Google’s vice president of display advertising products, has predicted that display will be a $200 billion industry in a few years.

Read the rest of the story at The New Persuaders.

Facebook Ad Chief David Fischer: Making Ads ‘the Best Thing on the Page’

In March of last year, just as market watchers Hitwise and comScore reported that Facebook overtook Google as the most visited website for the first time, Facebook also stole one of Google’s top ad executives: David Fischer. The former deputy of Facebook COO Sheryl Sandberg at Google and a onetime editor at U.S. News & World Report, the 37-year-old Fischer left a job spearheading the search giant’s local ad effort to become Facebook’s vice president of advertising and global operations.

Despite his sales background, insiders say Fischer was a good fit with Facebook’s geek culture. At Google, “he made (sales) people in an engineering culture feel that they were valued,” says David Scacco, Google’s first ad salesman and now chief revenue officer at MyLikes, which pays celebrities and other online influencers to promote ads on social sites. And despite a modest demeanor in public, he was known for sometimes cutting loose, dressing up as Ozzy Osbourne and singing ‘80s songs at sales conferences. That said, he’s clearly a sales guy: In a 50-minute interview, he used the word “opportunity” or its plural 58 times.

In this edited interview for my story on Facebook’s advertising strategy in the latest issue of MIT’s Technology Review magazine, Fischer talks about how Facebook hopes to transform marketing into “the most useful thing on the page.”

Q: What’s your vision of advertising, and how can Facebook make that happen?

A: The Web is being rewritten around people. There’s this transformation that’s happening from an information Web to a social Web. Once the Internet was great for answering questions like “What is the weather going to be like in Cambridge tomorrow?” and “What flights can I get from Boston to San Francisco?” It wasn’t so good at aggregating information about the way we actually live our lives, which is people.

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You Are the Ad: Digging Into Facebook’s Advertising Strategy

When I first  started looking closely at Facebook’s booming advertising business for an article that just appeared in MIT’s Technology Review, I was soon struck by an apparent disconnect. The social networking juggernaut clearly is gunning for big brand advertisers, hoping they will view its 600 million-plus audience as the next big ad opportunity beyond television.

Yet it appears that most of the ads on Facebook are actually from either small businesses or no-longer-small businesses (but not traditional brands) such as social games maker Zynga and daily deal service Groupon. What’s more, those ads seem more aimed at eliciting a direct response such as an email registration or a purchase on another Web site than they are aimed at branding, which is intended to implant a brand into consumers’ minds that might get triggered later when they’re ready to buy something. And between Google’s search ads and a gazillion display ad networks, online direct-response advertising is already a wee bit crowded–even if Facebook’s massive database of personal info holds a lot of appeal for targeting likely prospects.

In other words, it looks like most advertisers on Facebook aren’t yet using its ad platform for the very purpose it’s designed for: branding. Of course, it’s tough to complain about a company whose ad revenues are doubling, to an estimated $4 billion this year. But if Facebook is to fulfill the huge expectations of its investors, who are valuing Facebook at around $65 billion (give or take $10 billion or $15 billion depending on who’s counting), it needs to do more than provide just another way to drive a direct sale. It needs to capture–or create–a market out of the vast majority of ad spending overall that’s aimed at branding.

One way to do that is providing what Facebook has been doggedly pitching to Madison Avenue for years: ads with a social component, such as its recently introduced Sponsored Stories, in which people’s stated “likes” for a product or brand are turned into ads. These essentially are word-of-mouth marketing on steroids. David Fischer, Facebook’s vice president of advertising and global operations, lays out this possibility in detail in an interview I’ll post here shortly. Suffice to say, there’s certainly potential for brands to divert a significant portion of their television and print ad budgets–and a few are starting–but for a lot of brands and their agencies, that’s still on the come. For now, they seem more enamored of Facebook marketing tools such as Likes and Pages–which are free.

Another strategy is to create a new advertising market, as Google did with its search advertising. Search ads enabled very small businesses, as well as those with just an online presence, to place effective direct-response ads for a global audience for the first time. Likewise, Facebook could open up brand advertising to the business masses in a way no medium has yet done. That’s something Facebook COO Sheryl Sandberg makes a good case for in my interview with her. Depending on how you define branding vs. direct-response, this may already constitute a good bit of Facebook’s advertising.

Either way, I came away understanding why investors seem so enamored of the company’s potential–but also why many people in the advertising business aren’t yet ready to place all their chips on Facebook.

Fighting the Scourge of Malvertising

Some 1.3 million malicious online ads are viewed every day, even on high-profile sites such as the New York Times and TechCrunch. This so-called malvertising–pop-up fake antivirus ads and seemingly standard ads that have malicious software code embedded in them in an attempt to steal data such as passwords or credit-card numbers–is often very difficult for Web publishers and ad networks, let alone consumers, to detect. Indeed, because these ads must be found manually, usually thanks to a user complaint, the average life of a malvertisement before it’s detected and taken down is more than seven days, according to the Web anti-malware service Dasient. That’s more than long enough to infect thousands of computers.

Including my wife’s PC a few months ago. That infection took more than a week to eradicate, and even then, the PC was never the same and she was forced to reinstall just about everything on it. So I have a personal interest in Dasient’s newest service, introduced this morning: what it claims is the first automated anti-malvertising service. It’s an addition, using some of the same technologies, to the 18-month-old startup’s anti-drive-by malware service. Some background from Dasient’s release:

Malicious advertising, also referred to as “malvertising,” is a relatively new attack vector for cyber criminals that is quickly on the rise. With malvertising, fake malicious ads are delivered (often via advertising networks) to well-known websites as a way to reach millions of users at once on websites they normally trust. Unlike typical spam or virus attacks, which rely on victims to click on a link in an email or accidentally download an infected program, malvertising attacks are presented on popular websites and can download malicious code directly onto a user’s computer when the victim views the compromised ad. By infiltrating an entire ad network, the criminal gains access to a broad number of syndicated websites that can spread malicious code even further.

Dasient cofounders Ameet Ranadive and Neil Daswani told me that the reason malvertising is on the rise is twofold. For one, ad networks are becoming more efficient at syndicating ads to and from each other, instantaneously, so malvertisements can spread fast. For another, advertisers increasingly are hosting their own ads, and they often don’t have the technical expertise or staff to handle bad ads–which is why you’re twice as likely to get served a bad ad on a weekend, when the creators know IT staffing is light.

Although malvertising is hardly a secret, most efforts to prevent it have focused on education and prevention. Dasient works with ad networks and publishers to analyze each ad in real time, detect changes that may mean a bad ad has been substituted for a regular one, and provide forensic trails to trace the source of the ads.

Dasient, which was founded by former Googlers Daswani and Shariq Rizvi and former McKinsey consultant Ranadive in October 2008, has raised about $2 million from investors including former Verisign CEO Stratton Sclavos, Twitter investor Mike Maples Jr. of Maples Investments, and former 3Com CEO Eric Benhamou, now CEO of Benhamou Global Ventures.