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April 26, 2007

Letter to a Friend from ad|tech San Francisco

So I find myself in San Francisco on a warm mid-spring night. I am attending yet another internet marketing conference (YAIMC), the second major event I’ve atteneded in two weeks. Like New York City, San Francisco feels like a whole world away from my sleepy little west coast town. In the case of this conference, the differences are even more pronounced. My background is primarily in search engine optimization and marketing and that makes me feel somewhat different than the other attendees, sort of less relevant. This show isn’t about search marketing per se. ad|tech San Francisco is primarily about media buying.
It feels like search is being a recognized but only as minor component with just two sessions directly relating to search. Back in November at the NYC ad|tech conference, search seemed far more important. Here, not so much. In New York, several sessions were dedicated to search optimization and search marketing. I feel like seismic shifts are happening all around me and that isn’t because I’m in San Francisco.
Perhaps it’s all the Google they put in the water around here but everyone seems to be talking about display advertising. As you know, Google is likely going to acquire a large advertising network called DoubleClick for $3.1billion. The announcement was made almost two weeks ago and now everyone who isn&rsquooogle is thinking deeply about the potential and/or the consequences. For hundreds of companies represented here, the deal could cause critical problems in the mid to long-term future. Many meetings of minds have converged here to talk about it.
A rumor has been circulating saying Yahoo! was going to fully acquire online advertising exchange Right Media for $600 – $800mm. Yahoo! currently holds a 20% stake in Right Media. I briefly met VP of Sales and Business Development Ramsay McGrory at Right Media’s cocktail party on Tuesday night. When I later asked him about the rumor, he suggested the media would know before he did but was adamant in saying he had no knowledge of a pending sale. Nevertheless the rumors persist with several people either asking me what I know, or telling me what confidential sources told them. That’s the problem with rumors. Nobody wants to be the one to substantiate them.
The business strategy for medium to large ad or content networks seems to be to merge, acquire, conglomerate or cooperate as partners in order to build larger content provision and distribution networks. Yesterday, Pixsy.com announced a strategic partnership with one of Europe’s leading advertising networks, ad pepper.
Earlier this week I met with the management team from media search platform Pixsy.com in their Bryant St. offices. CEO Chase Norlin and VP (corporate communications) Lauren Karp also spoke about the need to grow distribution networks through cooperation and partnerships, partially in reaction to Google’s growth. Under the agreement, ad pepper will use Pixsy’s technology to introduce a number of private-label customized video and image search engines. Contextual performance based ads from ad pepper will provide monetization opportunities.
ad pepper is both older and larger than Pixsy. It has been around since 1999 and serves over five billion transnational advertising contacts each month. Pixsy, which has been in business since 2005 is one of the best media search engines on the web.
The partnership between the two firms stems from the realization that the only way to compete with Google is to go full throttle, pushing your content to as many eyeballs as possible. While very few companies can cover the same sort of ground Google does, an immediate growth strategy for other media companies is akin to a survival strategy. Since Google virtually owns the house, smaller companies in similar markets feel the need to be bigger. In the case of Pixsy, bigger means far wider distribution of their media search technology and the integration of a network monetization method.
ad|tech is billed as “The Event for Interactive Marketers”. Interactive is an understatement and a half. Between the chaotic networking on the trade show floor, the scheduled speeches and sessions, the face to face power meetings with long-term partners and the packed-room parties, there are literally thousands of conferences happening at the same time.
Meetings are an important aspect of ad|tech shows. The conference hall the trade show is being held in has several balcony areas and a central café/meeting area. I have had the opportunity to meet hundreds of new people and actually speak with dozens of them. I have a pocket full of business cards, pages of interview notes and have given hundreds of my own business cards to others. ad|tech, like all major marketing conferences is the place to meet a good cross-section of the web publishing and advertising sectors.
I spent most of my day on the trade show floor exploring the booths and interviewing some pretty interesting people. I didn’t get into many of the sessions, and whenever I did, I was only able to hang around for a few minutes before running off somewhere else. Luckily, Lisa Barone, Sr. Writer at Bruce Clay Inc. is here and has been publishing excellent stream-of-consciousness coverage of the sessions she’s been to. We’re republishing a few of them in the coming editions.
There are a lot of start-up social networks here. Everyone’s building a better social network and I think I spoke with at least six of them. The online marketing industry is changing, at least as most search marketers knew it. Now that richer, more robust media files can be created and distributed by pretty much anybody, new methods of storing, classifying and finding information are necessary, hence the advent of the social network. What started as a way to represent user-specific communities is quickly becoming a dominant model for building communication platforms.
There is not a lot of pure search in social networking. While there are several components that can be affected by effective SEO or SMO, social networking, by and large, is driven by the members of the various social communities themselves. Display advertising works well in social networks, as do other revenue models such as auctions, paid-subscriptions and expanded paid features.

A number of attendees I spoke with are giving up on the traditional search engines, especially the PPC engines. With rapidly rising costs per click and a subsequent decline in ROI, many advertisers are looking for other ways to spread their ad-spends. Purveyors of rich media content, display and banner advertising are seeing, (for lack of a better pun), banner years.
This week, talk of PPC or CPC is replaced with speculation on effective CPA (cost per action), CPM (cost per thousand), and the virtual commoditization of CTR (click through rates). The most serious ad-buyers here can tell you exactly where the best click trough returns will be found at any given time. Some have the ability to instantly shift enormous ad-spends on a minute-by-minute basis to eek the maximum margin on their (or their clients’) investments.
During the trade show, I stopped by the ISEDN.org booth to give one of the two reps a break. The activity in and around the booth was so heavy two people had to be present at any given time. During the two hours I spent in the booth, I probed people about their experiences with traditional PPC programs. I found far more interest for the flat-fee contextual ads offered by the ISEDN.org at this show than any previous SES or ad|tech conference. Advertisers are looking for a solution to the rapidly rising costs of their campaigns and the flat-fee method struck them as fairest (and safest) of all.
Many writers in the search marketing community have been predicting changes to the market in the coming years. Much like the warnings of the dire future circumstances to come due to global warming, these changes are often not apparent until they are actually happening. After the second day of ad|tech San Francisco, I get the sense that those changes are starting to happen.
Perhaps the biggest thing I have learned since being here is there is a lot for me (and likely many other search marketers) to learn about another side of the online marketing sector. There is a renewed interest in display ads in the greater marketing space. Despite the obvious differences there are serious synergies between search and display advertising. As the online marketing industry matures, those synergies are likely going to cause greater conglomeration in the industry, much like the one undertaken (for good or for ill) by THNK inc. two years ago. That’s a lot to think about going into Day 3.
Tomorrow is the last day of the conference and the trade show. At 5, the lights go out on ad|tech and nearly ten thousand weary attendees will make their ways home. I will be home on Friday around noonish. Hope the cat’s not too ticked at me for being away so long again.
Auhtor:  Jim Hedger is the Executive Editor of SiteProNews.com.

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