nToggle: A Hot Product but No Customer

Yesterday’s acquisition of nToggle by Rubicon was a big surprise.

nToggle offers technology in big need right now. All programmatic platforms saw massive spike in impression volume, resulting from the combined effect of Header Bidding and Reselling.

In order to protect their infrastructure, DSPs and SSPs need to eliminate bid requests that have a low probability of converting, including duplicated impressions. This filtering mechanism is often referred to as “intelligent throttling” or “supply path optimization” (SPO).

A few startups lined up to solve this industry-wide problem. nToggle became the best known of them.

You would think nToggle had customers lining up to license their technology. So why selling?

SPO is too important to outsource

From what I heard, most platforms are developing SPO in-house. SPO is mission critical for platforms, who must offer scale without spending a fortune on hardware.

There is also strategic value in SPO.

Most SSPs want to do reselling. Reselling AdX inventory, for example, means double bid requests even for the largest platforms. Fill rate on resold inventory is tiny, so SPO is a must.

For DSP, the strategic impetus is more about scale for highly targeted campaigns, and in effective campaign optimization.

SPO must identify and eliminate intermediaries who take the higher margins. In particular, DSPs will start integrating directly to the header bidder or ad servers of the largest publishers, and they will need to de-dupe impressions they can buy directly.

Rubicon Was Getting Desperate

Officially, Rubicon is buying nToggle to offer clean, de-duped inventory to their DSP clients as a differentiation move. I don’t buy that one minute.

Rubicon was simply slow at developing SPO in-house, reminiscent of how they missed the boat on header bidding in 2015.

As Rubicon realized their competitors were filling up their pockets with reselling impressions, they needed a jump start on SPO. Buying nToggle gave them the technology and manpower to catch up with the widespread practice.

A $38MM mistake.

Art-driven or Data-driven Creatives?

“Should ad creatives be driven by art or by data?”, asked Rob Rasko to a panel he was moderating yesterday on advertising, before calling for a show of hands.

Both panel and audience were split. Half thought UX and visual appeal should be top of mind for creative agencies, the other half believed data-driven optimization shall guide ad content creation.

“Scale is an addictive drug” trumped Warren Zenna from Havas, “and we’ve gotten to a point where monetization is getting in the way of good user experiences.”

Really?

Better high performing than “artsy”

Programmatic is all data driven. Marketers are getting more comfortable with targeting directly specific audiences, and focus less on which publications their ads show into.

More importantly, offering non-standard creatives does not scale. These “high impact” creatives look awesome on paper, but brands just don’t have the assiduity to build non-standard creatives. Too many operational issues.

IAB did invest in standardizing native creatives over the last year, but adoption has been slow and there is little appetite for exotic format standardization any time soon.

“Is anybody involved in programmatic advertising?” I asked around, perplexed.

Nobody was but me.

AppNexus/Index Partnership: What’s in it for Index?

AppNexus and Index announced a broad partnership on server-side header bidding at the IAB leadership meeting last week. On stage, Brian O’Kelley also mentioned full interoperability between Index, AppNexus and PubMatic header bidding wrappers.

Such a partnership, if executed, would ultimately doom Index.

Google and Facebook in Focus

AppNexus seems to be the main benefactor here, particularly AOS, the company’s Ad Server.

Google benefited greatly from its ad server monopoly. DFP has first look on the world’s best ad placements, and Google successfully sneaked in an “AdX tax” within DFP dynamic optimization, an early attempt at allowing programmatic demand to compete with direct demand.

But in 2017, AppNexus has a unique opportunity to strike. Premium publishers are switching to a programmatic-first model, and must rethink their monetization stack. At the same time, Google seems confused over its programmatic strategy, or fails to grasp the importance of DFP for its ad business.

The server-side header bidding deal with Index will enable AppNexus to cross-sell its publisher suite, including AOS for managing direct campaigns. One SaaS platform to fully unify direct and indirect demand.

Brillant move by AppNexus.

End-to-End Monetization Stack

AppNexus also gets access to Index’ valuable supply.

Somehow, Index’ black-box Header Bidder solution proved more popular with Comscore 100 pubs than AppNexus’ own open source offering, PreBid. Publishers were not ready to embrace the self-service open source solution, and instead favored Index’ out-of-the-box and well supported header bidding offering.

AppNexus must secure direct access to the best ad inventory as it builds an end-to-end monetization stack with the scale and feature set to compete with Google and Facebook

Pure-Play SSPs in a Weak Spot

You would think Index came to the negotiation table with in strong position. They surfed the wave of header bidding beautifully and wholeheartedly, and scooped up many top publishers as they switched to header bidding. Quite impressive for a network that used to specialize in annoying pop-unders back in the days.

Yet, with this partnership, these same publishers will be stirred toward AppNexus if they want to move their monetization capabilities back to the server. And most publishers will do just that.

Puzzling move by Index.

Index must believe its options are limited. With header bidding moving back server-side, the deck is being reshuffled once more, and this time the giants of AdTech will not be caught napping.

Publishers are hiring programmatic expertise as fast as they can, and are ready to bring their monetization stack fully in-house at last.

Index Will Have Regrets

No doubt Index was lured by AppNexus’ extensive unique demand.

But owning the demand means AppNexus will ultimately call the shots.

With header bidding, DSPs see the same impressions from multiple SSPs simultaneously, making it easy to prioritize one source over another. This practice, known as Supply Path Optimization, will gain traction in 2017.

AppNexus will find it easy to “punish” or favor some SSPs without hurting its own business, giving it great bargaining power, and ultimately control over Index’ supply.

And if AppNexus must torpedo this partnership to catch up with Google, so be it.

M&A’16: Data plays, Telco Power, Enterprise Software Vendors, Dentsu

Telcos dream of becoming media companies. AT&T $85Bn acquisition of Time Warner bested Verizon shopping spree.

AT&T splashed a mere $4.8Bn for Yahoo in July to boost up its AOL eclectic publishing empire with its myriad of AdTech platforms. Why are pipe providers so obsessed with content is a bit of a mystery. Leveraging their user’s data to boost advertising yield on their acquired properties, we’re told. Herd mentality I’d say.

Microsoft acquisition strategy? Let’s throw everything at the wall and see what sticks. LinkedIn, acquired for $26Bn in June, is actually a rising star in publishing. And yes, there is first party data as well…

The other deep-pocketed enterprise software vendors continued building up their programmatic stack. Adobe acquired video DSP TubeMogul for $540MM. Oracle gobbled up AddThis in January and Crosswise in April, a lesser-known cross-device mapping vendor.

TapAd, the leading cross-device vendor, was scooped by a small European mobile carrier. No obvious synergy. Independent cross-device vendors have no future, with the like of Facebook and Liveramp pretty much giving away their cross-device graphs.

IBM deserves a special mention for gobbling up 4 digital consultancies & marketing agencies in Q2. Ressource/Ammirati, Ecx.io, Aperto and Bluewolf will be folded into iX, IBM’s in-house agency, with the aim of expanding its footprint beyond IBM core offering.

Media love to talk about Chinese buying premium assets. Yet this is more of a trickle than an onslaught. Some unknown Chinese consortiums bought Mobile SSP Smaato for $148MM in June, Media.net for $900MM in August, and, mysteriously and expensively, AppLovin for $1.42Bn in September.

Rovi, the leading content guide channel, bought TiVo for $1.1Bn in April, mostly for its patents and technological assets. The combined company, called TiVo, hope to become a leader in addressable programmatic TV, possibly the hottest segment in digital advertising going forward.

The Private Equity firm who bought Mediaocean last year also bought Marketo for $1.8Bn in May. I have no idea what they are trying to achieve.

Forensiq, a minor fraud detection vendor rooted in domain spoofing detection, was acquired by Impact Radius in June. Expect a lot more acquisitions in the inane fraud detection space next year, as industry-wide initiatives emerge at last to tackle NHT and viewability standards.

Vector finally put Sizmek out of its misery in August, buying the topsy-turvy mobile AdTech platform for a mere $122MM. Sizmek is a great example of how difficult it is to grow by acquisition in the fast moving AdTech sector.

Last, but not least, Dentsu bought 2 US digital companies: Email marketer Merkel in august for $1.5Bn, then trading desk Accordant one month later.

2017 Native Predictions

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I and the other members of the IAB Native Standardization committee wrote our predictions for native advertising in 2017.

My notes:

Native standardization by the IAB has bridged the gap between social marketing and the programmatic display ecosystem.

At PulsePoint, our social marketing & sponsored content distribution platform used to be siloed from our programmatic offering.

Native standardization enabled us to distribute native-style display ads across hundreds of publishers, leveraging existing OpenRTB integrations.

Similarly, our DSP partners started scaling up native campaigns without worrying about the how their ads would blend within publisher content, enjoying far greater engagement and reach than with banner.

In 2017, we anticipate native advertising to be our fastest growing channel, slightly ahead of pre-roll video.

In-feed will still make up the bulk of native ad revenue, as many of PulsePoint traditional publishers focus on text-heavy or user-generated content.

We have big ambition for native video for next year. Constraints are mostly demand-side, but both publishers and advertisers are getting more comfortable with embedding video content within in-feed ads, at a substantial CPM premium over static media.”

This said, and as a few of my co-members noted, adoption of native has been below expectations in 2016.

Video is the main reason, as Kayla Wilson noted: “DSPs de-prioritized [native buys] when they realized this year was actually all about in-app video”.

Facebook exited the OpenRTB ecosystem

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Once upon a time, Facebook had grand ambitions for becoming an end-to-end programmatic advertising platform, capable of rivaling Google. It bought Atlas – a display ad server -, LiveRail – the leading video ad server -, launched its FBX exchange, and was planning DSP capabilities.

No more. Facebook spent the better part of this year scaling down its advertising stack to 2 key areas: selling media on its O&O properties, and leveraging its “social graph” to sell third-party media.

OpenRTB no more

In less than a year, Facebook has mostly exited the OpenRTB-based programmatic ecosystem to focus on selling direct instead.

First to get the boot was FBX. Facebook’s exchange has been moribund for years, once it became clear that Facebook would not onboard its mobile inventory. The ax finally came in January 2016.

LiveRail video platform followed shortly. Facebook terminated its third party publishers. “Too many bots to police”, the company said. Welcome to my world.

In march, Facebook abandoned plans to add DSP features to its Atlas platform, for buying media across third-party publishers, leveraging Facebook’s deep targeting capabilities.

Facebook is still mulling about programmatic native and video, where supply is cleaner and yield higher. But no more challenge to Google’s DoubleClick in the open market.

Insights into insights

So Facebook Audience Network (“FAN”) is what’s left of the company’s grandiose ambitions. The old-school network is rumored to gross $2Bn this year from 3 million advertisers, yet is no pinnacle of innovation.

Atlas will survive as an analytics and attribution platform, leveraging its social graph for better audience and cross-device insights.

Facebook  will be alright. The social network controls 20% of display inventory in the internet, and the most extensive trove of user data.

It should do more with it.

Addressing iOS users is getting harder

Today Apple announced that iOS 10 users can blank entirely their Device IDs (“IDFA”) to advertising SDKs and mobile browsers.

No short term impact

Not a big news in itself, as few users have opted in to blank their device IDs  – 17% according to a recent study, much less in our network -. iOS 9 already had a similar block feature, that still allowed advertisers to use opted-out Device IDs for cross device targeting, reporting and conversion tracking.

After today’s change, advertisers will simply rely more on device fingerprinting to uniquely identify iOS users that opted out of sharing their Device IDs.

But once more Apple is tightening the screw on programmatic advertisers.

A worrying long term trend

Safari has long been a cookieless environment, and the iOS app ecosystem it taking that direction.

Clearly, advertising platforms should start looking seriously into fingerprinting technology and location-based profiling, to ensure iOS users can be addressed in the long run.

Device fingerprinting to the rescue

AdTruth, and BlueCava offer technology to probabilistically identify a device based on its physical characteristics, IP patterns and other behavioral factors.

These vendors claim to be a reliable substitute for the hardware’s Device ID in 94% of cases. Our internal tests have shown a lower but still acceptable match rate within our network.

Alternatively, Augur.js in an open source library to do device fingerprinting. We haven’t tried it, but worth considering.

 

 

 

 

 

 

The Mobile Browser is dying

Comscore’s latest report confirmed what everybody already knew: consumers mostly use mobile apps, desktop is becoming a niche play and mobile browsers will soon be a thing of the past.

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For ad platforms, this has profound implications. Selling monetization services to app developers is a totally different ballgame than convincing media folks to throw a new ad tag in their ad server.

Also, apps developers have historically favored more “native” advertising units over low-CPMs banners.

MoPub, Smaato and other pioneers in the programmatic native app space gained prominence by distributing broadly their advertising SDKs in the early 2010s.

SDK no more

The business is changing, however.

No developers want to add “yet another SDK” to their app. As networks become more sophisticated, and HTML5 gain traction, calling an ad network endpoint become a viable options for developers to retrieve ads.

In parallel, video and native video advertising is opening new opportunities. For example, Video CPMs and higher fill rate are high enough to entice game developers to offer watching ad as an alternative to in-game purchases.

 

 

 

 

 

 

 

VPAID is doomed

IAB kick-off meeting for VPAID 3.0 standard took place today.

How VPAID interact with the playerVPAID was designed to offer rich interaction with a video ad, but in practice is mostly used for verification & viewability.

Hence most discussions today were centered around bringing back VPAID to its original purpose, and standardizing verification as VAST events.

I am not convinced VPAID has much of a future.

Custom scripting technology within the video templates always sounded an awkward idea, and doesn’t jibe with standard media creation workflows within agencies. Controlling player behavior from javascript within the page is just cleaner and simpler.

Publishers will be particularly happy to see the back of VPAID, along with its security and performance issues. Trying to restrict access of the entire DOM to VPAID script is just a patch. As are attempts at controlling VPAID scripting language to limit, say, latency-inducing ad server calls.

Scripting capabilities within the VAST payload is simply a doomed idea.