The data game: Live from Ad Revenue 2009

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adrev_small.jpgADOTAS – “Normally when the data regulation guy shows up, the crowd flees,” said Alan Chapell of Chapell & Associates as took the podium as the afternoon speaker of Ad Revenue 2009. “However, this room is pretty full, which means you know how serious the guys in Washington are.”

After eight years of a very laissez faire government attitude toward the online advertising industry, the government’s attitude toward privacy concerns has taken a dramatic turn in the last nine months. New Federal Trade Commission Chairman Jon Leibowitz isn’t the biggest fan of behavioral targeting and tends to side with privacy advocates; he’s publicly said that the advertising industry has one last chance to self-regulate before the government crashes the party.

In addition, Rep. Rick Boucher (D-Va.), chair of the House Subcommittee on Communications, Technology and the Internet, is drafting a privacy legislation bill that he hopes to finish before Congress’ winter holiday break. Under the proposed legislation, websites would be obligated to disclose every bit of detail it collects from their visitors and how that information is used.

But don’t start pulling your hair out in anxiety just yet. “Support for this bill will be inversely related to how the industry responds,” he said.

And that response is beginning to take form. Chapell noted that industry associations such as Interactive Advertising Bureau are discussing data retention standards and methods for consumer education. Opt-out choice protection programs are being developed and many websites are including a notice apart from the advertisements that explains how data is collected and used as well as an option to be excluded from the information gathering.

Chapell noted that there tends to be a knowledge lag in Washington — he referenced former Senator Ted Steven’s infamous “tubes” description of the Internet. Most important in these uncertain regulatory times is for the industry to keep a united front in educating legislators and not beat each other up to no advantage.

This was a smooth segue into the final panel of the day — a discussion on who owns data and what is it worth.

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“The consumer owns the data, but the publisher has the right to use it and gain revenue,” eXelate CRO Mark Zagorski said. He noted that some publishers are making seven figures annually just off of moving data.

While it may seem intuitive that the publisher would set the price, it’s not unusual now for media buyers to tag the data themselves. However, panelists noted that more often the market was setting the value — seasonal factors, demographics and position in the purchase funnel all shift price on an ongoing basis. In addition, the most valuable publishers were deemed one that had constraints on inventory — the constriction of supply greatly ups the ante.

The importance of data is clearer than ever and may outweigh that of inventory. “Inventory without data is worthless,” Huffington Post CEO Eric Hippeau noted.

In fact, publishers could use their own data to grow inventory. Bill Wise, vice president and general manager of advertising platforms for Yahoo!, mentioned that Facebook’s data was far more valuable than its meager inventory.

“Data is the differentiator,” he concluded. “If you don’t have a data strategy, you better get one.”

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Ad Revenue 2009 signed off on a statistical note, with comScore Executive Vice President Jack Flanagan said noting that the American public spends 33% of its time online, but only 14% of its dollars. After noting that 99.9% of banner ads are not clicked on, he said that 35% of marketers still use click-through rates as a determining metric. The percentage of clickers has dropped by half since 2007.

“Marketers are too fixated on the click,” Flanagan said, suggesting view-thru metrics as a superior alternative.

But possibly his most controversial section was titled, “Ad Networks: Friend or Foe” — some wary glances were exchanged in the crowd as a good percentage of attendees were from ad networks. Instead of demonizing the sector, Flanagan was more interested in its growth to 300 or more companies from a few dozen a couple years ago and why. The highly profitable nature of the business with its strong margins as well as the seemingly endless supply have made ad networks a growth haven.

Certainly this was a strong theme at Ad Revenue 2009. The second channel ecosystem is developing at a near ruthless pace and the map is ever-fluctuating. As much as companies are anxious about the future, they are also concerned with determining the current shape.

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