Thinking Out Loud: Adsdaq - New Age of Predictive Modeling
What We’re Seeing: We’ve seen a pay-per-click revolution. We’ve seen Bill Gross, Google, and Yahoo! moving rapidly into the next frontier – pay for performance. That’s clearly where the sellers of goods and services want to go – paying a commission on actual sale or trial, not for exposure or for a mere lead. It reduces advertising risk to cost-of-goods, and that’s a powerful draw for merchants of every kind.
But, there’s more, reminding us all how much we are still at the beginning of the digital age, and how the revolution to come will continue to astound and amaze us as it overturns long-held ways of doing business. To respond, publishers will have to quickly revolutionize every aspect of their advertising sales strategy and execution.
Ellen Siminoff is a Yahoo! alumnus who started her own search engine marketing (SEM) company, Efficient Frontier. As CEO, she’s becoming one of the most listened-to observers of the advertising revolution.
In a MediaPost blog, she makes a good case for how this advertising revolution is really about intelligence. She compares the advertising world to the stock trading world and says it is all based on what you know that the other guy doesn’t, and how well you can model and gain from the new information.
"This predictive modeling starts with massive data collection and mining. Applied to search, it’s terabytes of data such as bids, popular keywords, obscure and inexpensive keywords, match types, time of day/week/month, seasonality, demographics, brand awareness, linguistics and copy, landing pages, geography, etc., etc. "
As in much of the advancing Internet business, she points out that there are two critical actions here: collecting the data in a scientific way – and putting the time and effort into actionable analysis.
Her two phases to the analysis: "first, the mathematical and statistical formulas including probability and regression analysis and so forth; second, the analysis of how all these multiple variables form connections and simulate outcomes."
Siminoff believes all this will get systematized, much as company markets have. She sees an "Adsdaq" in the making:
"Media buyers beware. An ‘Adsdaq’ system is on the way. Take it from mutual fund managers and SEMers, there’s more to buying in a biddable marketplace than meets the eye. It’s about being able to see into the future."
That Adsdaq view tells us a lot, and adds to our knowledge that advertising buying – and selling – will never be the same as they were pre-Internet. The selling of advertising is in a sea change. The era of the order-taker is vanishing. On the higher end, it is no longer primarily about hiring those super-salesmen who can sell brands, where relationship and old-fashioned interpersonal technique is everything. Sales skills will never go out of style. But measurable, trackable, and yes, biddable, ad systems are here to stay. That means a total rethinking of ad sales from product to person to technology. It means getting smarter to meet the demands of the buyers, who increasingly have a world of choice at their fingertips.
In Outsell’s Opinion: Traditional sellers of advertising had better pay close attention to how fast this new revolution catches hold, a real challenge given that many are only now digesting pay-per-click ads. Exposure, or impression-based advertising – the mainstay of most publishers – will always have a place, but that place has already yielded share to pay-per-click ads and will also face growing pay-for-performance or cost-per-action (CPA) ads. APIs are already available that permit direct programmatic interaction with Google’s and Yahoo!’s keyword bidding systems. When an "Adsdaq" open electronic market for keywords begins to gain critical mass, these APIs will be the gateways for electronic bidding or "trading" analogous to NASDAQ trading. As Dave Morgan, CEO of Tacoda Systems wrote last week in a provocative piece titled "The End of Advertising and Media as We Have Known It," most traditional media buying is an anachronism and an isolated bastion of low transparency and low accountability. Siminoff’s "Adsdaq" turn of phrase spotlights another of the big trends rewriting how advertising will continue to do in the future what it has always done, just minus the three-martini lunches and golf.