And none of this would be possible without numerous layers between advertisers and the sites on which they advertise. The infamous Luma Partners display ad infographic makes this point nicely: there are alot of tiny optimizations that determine which advertiser wins which inventory, and every single layer appears to be adding value.

But there’s a built-in risk to this entire system: every transaction has quantitative and qualitative guidelines, and while quantitative guidelines are easy to maintain, qualitative guidelines tend to get diluted at every stage. GM cares deeply about what kinds of sites run their ads. GM’s agency cares, too. The exchange GM’s agency uses to buy its ads probably doesn’t care too much about GM per se, but does care about its relationship with the agency. The ad network cares a little less than that, and the publisher is mostly happy for the revenue.

Which is why GM is so understandably upset that their ads are running next to porn. This is the almost inevitable result when someone drives hard bargain in terms of quantitative limits (i.e. buying a certain number of pageviews at a certain CPM), but can’t clearly delineate the qualitative guidelines (what’s a trustworthy site? What’s a classy site? What’s the boundary between a celebrity showing skin and a site showing softcore porn?). GM could whitelist some kinds of content—but if they created a whitelist, surely Yahoo-owned Flickr would be on it. And if they’re already picking where they want their ads displayed, how much do they really need outside help in the first place.

This is clearly demonstrated in this excellent Digiday piece on how a single advertiser with a large budget and a focus on CPMs was able to alter best practices in the video ad market to the point that quality was seriously threatened.

At no stage in these transactions do people need to think that they’re being dishonest. It’s not necessary; there are not sharp delineations between legitimate activity and running ads that hurt the company that pays for them. There’s just a drift as the transaction that places an ad gets further and further removed from the business interest that conceived the ad in the first place.

In some ways, this is a classic agency problem; another variant on the problem Groupon ran into with its superbowl ads. But in another sense, the fungibility of online ads makes them even harder to handle than traditional ads or other agency relationships. A few possibilities:

• As they’re already doing, larger companies may need to focus on trusted, non user-generated sites.
• There’s now greater economic demand for algorithms that can detect offensive content. Search engines surface offensive content comparatively rarely; perhaps DoubleClick will be the first ad network to offer an effective automated filter, since they can lean on Google’s search engineers and their existing corpus of data.
• There might be demand for an independent accreditation service, able to rank sites by some standard (e.g. sites that are an “A” for coastal twentysomethings with masters degrees may be a “C” for middle-aged midwestern evangelicals).

This isn’t catastrophic yet. It’s likely that more people noticed the incongruous ads on Flickr through the press coverage they got than through browsing Flickr. But few CMOs want to face even a tiny risk that they’ll run their ads against offensive content. Right now, the economics of display advertising make it very expensive or very dicey to avoid.

(This is probably why Facebook only recently launched their ad API. Facebook has focused on brands for strategic reasons: if they can own branded advertising online while Google gets direct response, Facebook will be a far bigger business. But this means they have more to lose from making brands look bad. A related problem: some of the highest-CPM ads don’t fit into the normal ad exchange format.)

Cross-published at Digital Due Diligence’s website.

Before I get into the scoring, let me first review a few of the major industry developments since my predictions:

Consolidation. The Invite Media acquisition was sadly not followed by a string of other overpriced DSP deals. This disappointed a number of bankers and all the DSPs.

Self-Service DSP. This became a hot commodity briefly. There was plenty of chatter about “trading” similar to a stock exchange environment. Many media planners of old surely cast themselves as the new “mad men” of media.

We all know now that this is just silly. Soon, everyone realized that a slim markup on media is viable only if you have massive scale. The real value is provided by driving outcomes – i.e., layering valuable optimization services on top of the platform.

Data Management Platforms (DMPs). Data drives performance right?  So the reasoning goes like this – if we could value data appropriately, then publishers can be compensated properly for the “true” value of their audience, instead of getting diluted in an ocean of inventory. And so DMPs became the next hot thing for while.  BlueKai and Exelate raised even more money.

Are they still hot? Did the revenues follow? Anyone care to comment on this?  The established data players like Axciom kicked a lot of tires and eventually picked partners or charted their own path.

RTB Changed Supply Dynamics. Massive scale is now available via RTB on exchanges and supply side optimizers (SSP). These are new sales channels for publishers. These channels were and continue to induce bouts of teeth-gnashing and sackcloth-wearing for publishers as they try to figure out how to leverage them without diluting their value.

On the other hand, the traditional ad network has to deal with a new challenge to maintain their captive publisher base. As their publisher based flirted with SSPs and exchanges, networks saw no other option but to take a seat on the exchanges.  They built or partnered to acquire this ability to buy on exchanges. (Congratulations AppNexus – you read this trend well!)

Against that backdrop I thought it would be fun to revisit some of my predictions and throw some bouquets and brickbats at myself. I’ll score them on a scale of 1 to 5 where 1 = “Crack Pipe” and 5 = “Savant.” Just for fun, you may want to revisit your own predictions from last year and score them as well. I will have a glass of wine for all the savants. The crack addicts can join me for a pub crawl.

Prediction #1: Agencies won’t be able to absorb true self-service.

The Thesis: Running display campaigns requires a lot of expertise.  No self-serve DSP provides all of this expertise in a usable fashion for the typical media buyer. It will require human expertise to deliver the outcomes. Agencies do not have this talent and won’t be able to attract this talent.

How it played out: Almost all of the smaller agencies run campaigns with DSPs in “managed service” mode. The DSP typically gets a CPM rate.  Some of the larger holding companies have made significant investments in people to build up internal expertise.

They still use a third-party platform. They still profess independence from any one vendor. And they continue to use up business development cycles in “evaluations” of other DSPs. The media planning groups within these holding companies use the services of the “trading desks” services grudgingly, and continue to RFP externally.

The Score: 3.5. It is too early to call the trading desk experiment a success or a failure.  I would say my prediction is mixed for big agencies, and right on for small agencies!

Prediction #2: The DSP is the next ad network

The Thesis: Building on the predictions that (a) SaaS for agencies will not work out and (b) the change in supply-side dynamics due to exchanges will profoundly impact networks; true value will continue to be delivered by driving desired outcomes for customers. In other words, you make more money by running campaigns well.

This is what an ad network does. (I use the words “ad network” as a placeholder for a marketing services company that runs mainly display campaigns.) If DSPs have to  run campaigns to survive, and networks need the technology of DSP to continue to be relevant, then surely they are one and the same?

How it played out: Lets compare business models.

Demand-Side Platform

• Offers a “managed service” to run campaigns
• May offer a self service backed by managed service
• Pricing is typically CPM, CPC, or CPA
• Client base – agencies and direct advertisers
• Lots of noise about their awesome technology!

“Traditional” ad networks

• The run campaigns – i.e.  – offer a “managed service”
• They are trying to differentiate themselves by offering exclusive inventory
• They build or license technology to buy exchange inventory.
• Pricing is typically CPM, CPC or CPA
• Client base – agencies and direct advertisers

It walks like a duck and quacks like a duck. So, it must be a duck right? Sort of, except that the duck with a DSP tattoo on its chest is a rocketship!

The common theme here is that both are in the business of delivering outcomes to their customers.  It is just that the inventory situation (supply side) has changed dramatically with exchanges and supply side optimizers.  The demand side has not changed all that much!

The Score – 4.5 Pretty much spot on.

What’s Next?

So what’s next for the evolving DSPs?  Emerging media is a likely wave to ride. Mobile, video, and social media perpetually sit somewhere on the slope of enlightenment. Social is probably the most exciting beach-head that DSPs are now wading into.

With DSP technology in-hand advertisers can quickly build a guaranteed fan base for new products, effectively engage and activate that audience, monetize it and then re-engage in a regular cycle. The DSP platforms with their massive reach and instant scale makes social media activation a solid bet.

Agree? Disagree? Have a visceral reaction? Let the fireworks begin.

Through AdSpam, a new machine-learning algorithm that examines multiple spam signals including page content, Blekko has labeled 1.1 million domains spam and banned them from the results of its social search engine. Last month Blekko booted the top 20 content farms determined by their slash-tag concocting user base — these included Expert Village, eHow and ChaCha.

The AdSpam technology will be used to evaluate page before it can appear in Blekko search results. Interestingly, Blekko notes that a solid sign that a page is junk is “aggressive participation in self-service online advertising networks” — pages with little content and a slew of self-service ads get the worst marks from AdSpam’s algorithm.

“With this update, we’re reaching much further down the long tail of spam to improve the quality of our index,” CEO Rich Skrenta said. “We’re combining algorithms with community to improve the future of web search.”

Since the launch of its slash-tag powered, human-curated social search engine last November, Blekko has introduced the Spam Clock – which led to the entertaining and pyro-rific Burning Spam celebration — a mobile app and publisher tools. The company also teamed up with programming Q&A resource Stack Overflow, which recently changed its name to Stack Exchange and garnered $12 million in funding.

These are truly impressive networks with extraordinary power, but what do these reach numbers really mean? If I buy ads on these networks, will I really get 70%, 80% or 90% of my target audience?

To answer that question, we have to first look at what is behind these reach numbers.

Question — When an ad network says that they have a reach of 75%, what does that number really represent?

Great question. Let’s first explain what “reach” means for a website, then we will focus on an ad network. When a website talks about having a certain reach, say 75%, it essentially represents the percentage of users (in this case, 75%) who come to the site. (That is, the number of unique users coming to the site divided that by the total number of unique users in the audience.)

For ad networks, however, things are slightly different. They do not own and operate the sites on which the ads appear. Instead, they may have ad placements on thousands – perhaps millions – of sites. We often never know how many sites are in the ad network, since ad networks do not typically disclose their site list.

(Why, you ask? Mostly, because the publishers themselves do not want it to be known that you can buy their inventory through an ad network due to their fear that media buyers might buy their inventory through the ad network instead of directly from them.)

As a result, when ad networks talk about reach, they are talking about the percentage of users who come to the sites on which they serve advertising. So if an ad networks says it has 75% reach in the U.S., it means that its ads appear on sites that collectively get 75% of the unique users in the U.S. to come there at least once per month.

That’s great. So, does that mean that if I buy ads on an ad network that says its reach is 75% that I will be able to reach 75% of the U.S. population?

Well, hold on there buckaroo. How much money do you have to spend? I mean, even assuming you could de-duplicate users so that you are only showing your ads against unique users, that is going to cost you a ton.

Work with me here – theoretically, if I bought out the entire inventory on that ad network for a day, would I reach 90% of the U.S. population?

Ok, I understand, Mr. Warbucks, welcome to Fantasy Budget. Even with your Super Bowl-sized budget, the answer is no. You have to remember that these reach numbers are monthly – on any given day you might only reach a fraction of the total possible number.

Ok, so if bought the entire inventory on that ad network for a month, would I reach 90% of the U.S. population?

No.

I don’t get it, why?

Unfortunately, unlike a website where you could theoretically buy out the entire site and therefore be guaranteed to have your ads in front of every user that comes to the site, you are buying an ad network here. Ad networks do not control 100% of the inventory of the underlying sites. As a result, there are pages on the underlying sites that do not have ad network ads on them.

Some publishers want to have certain pages reserved for their direct sales force. For example, they may want to sell their homepage ads themselves but let the ad network handle the other pages. The result is that an ad network cannot reach users that only come to the homepage of that website.

Ok, I get it, there are some pages on those websites where an ad network does not have coverage and cannot get my ads in front of those people. How much, then, of the theoretical reach do I lose there?

I don’t know, and nobody I’ve come across can put a real percentage on this. I estimate this loss to be greater than 1% but less than 99%.

Pretty big range there, buddy. Not terribly helpful.

Hey, I used to be a weatherman.

Ok, I get that I have to apply some discount here for reserved ad units, but that’s it right?

Not exactly, there is another factor. A lot of publishers will place ad network ads only when they have not sold those ad placements themselves. The ad network acts as filler in that case. So, if the site is doing well or their sales force has a good month, then those ad network ads could be replaced by their direct sales efforts. As a result, the reach may be diminished even further.

Ok, I get that as well. So much reach do I lose there?

Somewhere between 1% and less than 99%.

Geez, you are not married, are you? You have commitment issues. So let me get this straight. Even if I buy out all of that ad network which has a 75% reach for a month, I still won’t get 75% of my target audience?

That is correct.

Then a 75% reach does not really mean I get a 75% reach?

Precisely.

So what do I do if I want to get 75% of my potential audience?

You need to work with a company that works across all of the channels – ad networks, ad exchanges and direct publishers. That is still the only reliable way of getting your message out to the widest net possible.

Ever since then, every technology executive, VC, industry analyst and agency executive has been waving it around like a flag. It’s kind of like those illustrated town maps, where some guy paints Main Street, and every business with $300 gets a spot on the map, along with their logo and maybe even a cartoon depiction of the owner.

Our map, festooned with what I have been calling “logo vomit” contains several hundred microscopic logos, broken out into various categories that our industry has sub-egmented into, bracketed by the ever-powerful “advertisers” and “publishers” on each end. It’s not quite accurate.

If importance were the measure by which logos were sized in the “landscape” sandwich, then the bread would be 10 inches thick and the companies in between would be mere condiments, with a cornichon-sized AppNexus in the middle. The influence of Gorilla-sized agency holding companies like WPP and elephant-sized “publishers” like Google are not properly represented.

Little red dotted lines encircle those lucky enough to get gobbled up by the bread. Ad exchanges have been a popular acquisition target (after all, someone has to figure out how to sell commoditized inventory. Ad servers even more so (that’s where the data comes from and, looking at the map, data seems to be the glue that binds the murky middle of the ecosystem together).

So, how about all of those wonderful companies in the middle? Some of those companies are struggling. A few are doing pretty well. Most (at least those that have been VC funded) are looking forward to Gobble Day, when Google writes them a check at a valuation that ignores their upside-down cap table and lets their founders avoid the inevitable cram down from yet another round of venture funding.

Many of the companies in the middle will not survive. I’m not sure, but maybe there is a bubble in the ecosystem. Certainly, it is tough to see it growing any bigger.

Data: A healthy supply of good audience targeting data (Experian, TargusInfo) is the foundation of the Ecosystem. As you will note, most of the players have been around for a long time, and they are going to quickly assimilate any new players with interesting data sets.

What will slim down is the Data Aggregators category.Agencies don’t care who provides the data, as long as it works, and most players just spin the same data everyone else has. The company that can build the best hooks into inventory supplies wins, and they win by creating implementation “friendly” APIs. End of story.

Companies like Exelate and Bizo seem to be executing well.  Other companies are struggling to get integrated into next-generation systems such as AppNexus, and are starting to reconfigure their business models to align with the word of ubiquitous data usage. The winners are going to be the companies that are also configured to survive the coming legislative tsunami, and let companies bring their own data to the party (both publishers and advertisers). The work that Quantcast is doing in this area is very intriguing.

Creative Optimization: This area of the ecosystem is interesting for a few reasons. In a world of commoditized inventory and data, it is the stories that agencies can tell that become important. In other words, the creative.

Since not every agency can build viral ads on demand, a certain amount of technology is going to be necessary to wring performance from the most critical part of the value chain: the ad itself. People want targeted ads, and creative optimization can magically deliver me a coupon to my local Whole Foods since it knows I live in area code 11743, then I become a happier consumer.

The problem? Doing creative optimization correctly—and in a way that an agency is willing to dedicate the time to—is very hard. Not many of these smaller companies will survive, because doing it right needs very tight ad server integration. Look for companies like MediaMind to start dominating here. Tumri is another one that is starting to unlock the puzzle.

Media Management: Companies in my little corner of the Ecosystem map (I work for TRAFFIQ) were very proud recently to get a category upgrade (we were once lumped in with “Ad Operations”). This is another highly interesting area of the map. You have the big legacy companies like DDS trying to find relevance with their digital offerings, and smaller startups like Facilitate and TRAFFIQ providing disruption in the space, and media arbitrage companies like Centro pulling their technology forward with “self-serve” platforms.

Winners here will be the companies that can quickly centralize the cumbersome process of digital media workflow, create access to the systems that agencies depend on (data, serving, billing), and find a pricing model that continues to enable efficiency. These companies are in the business of using technology to try and lasso the disparate parts of the ecosystem together, so this is a fun space to watch. Success here will be time- and capital-intensive, but the winners will be a part of every media transaction—on both sides—so the potential spoils are large.

Media Buying Desks: This is another fascinating area. A lot of conversation in the space has been around the Cadreons, Vivakis and Adnetiks of the world. When you can leverage that much demand and tailor a technology platform just for your agency, that is the type of “start-up” build-out anyone would like to be a part of.

However, I wonder how sustainable it is. Whether the technology is proprietary or has been built on top of other DSPs, I am not sure closed systems can truly succeed in a world of open standards.

With AppNexus, suddenly the formerly closed world of exchange trading gets more democratized, and you’ll see other platforms adopt this type of technology—and start to create their own pipes into exchange streams. Big agency buying desks are not going away anytime soon—but more competition is on the way, which may lessen their ability to dominate the space.

Retargeting: This area has been hot, but do we really need 10 different companies that can serve an ad to someone who has been on your website before? The better companies (and those built specifically for seamless integration into existing media systems) will find themselves to be nice tuck-ins for larger technology players. The name “retargeting” alone suggests more of a capability, than a category onto itself.

Networks: The “Custom” and “Targeted” networks in the map are surrounded on all sides. Both loved and hated by our industry for so long, networks continue to give both sides of the aisle what we want, when we want it.

For the demand side, networks offer cheap, targeted inventory available in a variety of flavors (contextual, behavioral) and a one-stop shop for hundreds of publishers. For the supply side, networks were the magic money machine. Simply drop some javascript, and wait for your check. Networks basically enabled publishers in their never-ending quest to append every page on the Internet with a banner ad and devalue their entire inventory (but that’s another article).

These days, agencies are coming to the table with their own data, own way to measure performance, and a desire to bid on audience in real time, rather than have it packaged for them. The networks that survive must find a way to (profitably) plug into trading desks and DSPs—and offer a unique type of targeting ability. A tall order.

Here, quality counts. Companies that have exchange trading in their DNA (Contextweb) are poised to succeed in this new ecosystem, as well as vertical networks that have curated high quality content sources (Glam).

Some larger trends to look out for:

• Data. Legislation is going to be a fact of life, and it’s going to shrink available audience pools, and make data segmentation and targeting much harder and more expensive. As a publisher, you need to own the customer relationship and his data. As a technology enabler, you need to make sure you can let your advertiser bring his own data to the table, rather than relying on third parties. That’s what makes Facebook so powerful.
• Power and Control. It doesn’t seem fair, but the companies that use technology to give the “bread” of the ecosystem sandwich (advertisers and publishers) more power and control will win. You can’t “disintermediate” advertisers like P&G. They know more about their audience than we ever will. But we can partner with their agencies to let them leverage technology to be more successful. Same with publishers. How can you help the content players understand their audiences, and package them in a way that lets them value them properly? The technology companies that partner with publishers to do that (rather than encourage them to “monetize” more of their cheap content) are also going to win.

The Landscape is ever changing, and we should all thank Terence Kawaja for putting his map on Slideshare and updating it frequently. He’s going to be busy doing that for a while, it seems.

The affiliate community was out in force (more than 4,600 delegates), taking part in the mayhem that Vegas has now become renowned for – endless seminars, impromptu networking, crazy parties and casino games beyond your wildest dreams. Safe to say, you need a vacation after the show to fully recharge your batteries before you can get back to business, but it’s so worth it.

For affiliates who work independently or with a small team, a conference is paramount to maintaining their sanity and reigniting their zest for the career they have chosen. You could feel the buzz in the air during the entire show, and one can only sympathize with the other Wynn guests who weren’t part of ASW; there was a perpetual sea of bodies in every bar, restaurant, meeting area or hallway with those tell-tale Summit badges.

A quick scan of a badge and you’re instantly chatting with a super affiliate, a blogger, your affiliate manager, etc. Everyone is really approachable and down-to-earth, no superstars here.

For those of you spending your days pouring over performance metrics, having face time with your account manager is really important to be able to get a network-wide perspective of trends or opportunities you may see. Yes, much of this can be done by e-mail or IM, but we all know that sitting down with someone in front of data is a whole different experience than the sound-bites you might pick up when multi-tasking.

A Reciprocal Arrangement

Ad networks require truly effective listening skills to be able to deliver exactly what their affiliates need; is there a more efficient forum than a private meeting or dinner at a trade show?! If you’ve expended the time, energy and finances to attend, you should demand a positive return and assume the responsibility for achieving that.

Your physical presence will increase your recognition amongst the strategic partnerships you wish to develop and continue, which in turn may result in preferential treatment plus more regular attention from your AM.

Effective Time Management

Once you’ve made the decision to attend an industry event, don’t just leave it to chance to have a productive experience. Plan your time wisely to cover as much ground as possible and ensure that your interactions leave you with actionable take-aways, and you return home buzzing with fresh ideas to implement.

Some things to consider:

• Schedule meetings with your network AMs, and if possible get an introduction to their Department Head. Find out what’s hot on their network, successful campaigns with other affiliates working in your space, discuss your anxieties about testing new categories and get their opinions. Are there any product enhancements in the pipeline and how can you get advance notice of such developments? Identify some common ground, maybe a sporting interest, leisure pursuit – this will give you an edge and help put you on their radar of “memorable” clients.
• Attend relevant workshops. Identify key industry trends (blog monetization, the impact of social) or regulatory updates and see which sessions can make you more efficient and productive in the pursuit of your revenue goals.
• Networking. Whether you target some key super affiliates (maybe you’re looking for a mentor?) or just want to meet like-minded individuals to brainstorm and share ideas with, this is the real beauty of a trade show.

The next time an “Affiliate Dream Team” is assembled, use the opportunity to block out some time and consider it a worthwhile educational/networking expense; better still, include it in your personal ROI calculations and await the returns. If 2011 trumps last year’s online sales, you’ll want every tool possible to claim your slice of the pie.

Some networks, exchanges and publishers think they can protect their businesses from malware by purchasing a block list, which tracks sites that have served malware in the past. While a block list is better than nothing, it offers little beyond a false sense of security.

To begin with, lists work too slowly. Most malicious codes created by malware criminals are designed to become obsolete in 24 hours. By the time a site containing malware has been identified and added to the list, the damage has been done.

The other problem with block-lists is that they can identify sites that are not intentionally offering malware. Oftentimes, legitimate sites are victims in the cycle, prey to hackers or creative criminals looking to steal data. In fact, malware criminals are getting so creative that they’ve taken to creating fake agencies and then enlisting legitimate enterprises to help them serve the damaging ads. So while block lists prevent networks and exchanges from serving ads on these sites, the publishers themselves may be receiving unjust penalizations.

In a recent article in MediaPost, Julia Casale-Amorim did an excellent job documenting how malware criminals set up fake agencies to distribute ads embedded with code designed to steal site viewers’ personal information for financial gain. No block list can stop a fake agency from running such ads, and Casale-Amorim gives great advice for spotting potential scammers.

But identifying entities like this is a fairly labor-intensive process, and a good criminal can still slip by you. The only real solution for eliminating malware is the proactive testing of ads and applications for malware before they go live. This way networks, exchanges and sites can expose infected ads coming from any source.

Proactive testing looks for behaviors an online ad exhibits in a virtual environment. Each ad tag needs to be tested by simulating user and computer behavior in a safe, virtual environment to help mitigate infections. This virtual environment duplicates various IP, plug in, browser, ad server and OS configurations for testing purposes. This testing is done in a real-time setting and identifies actions that are key identifiers of infected ads, such as launching:

• PDF exploit files – Malicious ad banners redirect users to infected PDF documents. Upon opening the malicious PDF document, users would get infected by the embedded malware.

• Invisible pixels - Criminal hackers exploit users by building iFrames into pages that are one pixel by one pixel—invisible to the user. Inside that iFrame they can stash executable code stored at another site that infects the user’s computer.

• Keyloggers - Malware criminals can record personal information related to financial accounts by installing a program that tracks (or logs) the keys struck on a keyboard, typically in a covert manner so that the person using the keyboard is unaware.

• DLL hijacking – Malware criminals can exploit this by sending the target user a link to a network share containing a file they perceive as safe. The file actually contains malicious payloads for stealing information stored on the computer, without the person’s knowledge.

• DLL injections – Malware criminals can force a process to load a dynamic-link library. This can then influence the behavior of a program in a way its authors did not anticipate or intend. For example, it can run a password capture program.

Identifying these potential malware infections early in the process also prevents any suspect ads from ever publishing, which is another solid advantage over block lists. Again, block lists only identify malicious code once it is live, and the odds are that by the time the problem is located, the malware criminals have already moved on to the next target.

Real-time detection and prevention of malware isn’t just the right thing to do, it’s good business as well. A top ad network recently decided to fight back against malware criminals by proactively screening ads exhibiting suspicious behaviors. Dramatically reducing the amount of malware on their network contributed to helping this company grow from the 30th rated network to breaking into the Top 10 and being able to raise its CPMs significantly. The cost of ad screening was minimal and saved the network considerable time and effort by not having to deal with the potential malware attacks and allowing them to focus on selling ads.

Malware is an industry problem that hurts everyone in our business. We are all responsible for providing a safe environment for the loyal viewers who consider the web part of their daily lives. Until we can find a better solution, proactive screening for malware is the only way for our industry to maintain the trust of the people who pay the bills — our audience.

“Agencies and networks and publishers are all partners,” he added. “Creating friction and adversarial relationships is not in the long term interest of any players in the value chain, except certain verification companies.”

For a survey that aimed to “clarify the value proposition and promise of ad verification for all the major players in the online ad community,” Mpire polled 145 industry players to find that 80% believe ad verification is good for the industry as a whole.

While more than 70% of respondents paid for ad verification services this year, that percentage will drop to 56% as more publishers and networks integrate ad verification technology. About half of the respondents said that they would spend 2% or more of the their overall media budgets on verification and optimization in 2011, an 140% increase from this year.

Oh, and because Google is offering white-label technology to agencies that plug into the DoubleClick Ad Exchange (as well as others), he makes a lot of accusations about illegal kickbacks and rebates without showing the smallest shred of evidence. Google’s display business is drawing more revenue because they’ve resold their technology and partnered up with agencies to streamline media buying through various intermediaries — including across the AdSense network.

Somebody call the FTC! The FCC! The SEC! Run DMC!

An anonymous industry insider claims Google is offering incentives to agency DSPs not via its actual display revenue but funds brought over from the search side. In other words, Google is trying to buy display market share — a bold accusation with nothing but faceless whispers to back it up (Schonfeld even admits “there is no evidence other than anonymous hearsay”).

Later on Schonfeld writes: “Since Google controls a lot of the inventory through AdSense, it can make money at different points along the chain, from publishers as well as advertisers. And therefore it can ‘pay’ for a bigger share of ad agency’s display budgets in different ways.”

In other words, Google can offer agencies sweet deals as it does a lot of the gruntwork. It’s what’s known as an end-to-end solution. Sure, you can complain about a lack of transparency in the buying process, but do advertisers really care about all the nitty gritty details? If their campaigns aren’t showing results, advertisers will move on.

A large independent ad network (I can do anonymous sources too!) recently told me they had several agencies come back after forsaking the network for DSPs and trading desks. Why? The agencies simply weren’t getting the same results.

In fact, indie ad networks are increasingly reaching to advertisers themselves as agencies are notorious for their technological incompetence in the digital arena. Ad networks are branching out their services to offer holistic digital solutions for advertisers unimpressed with agencies’ digital performance.

It’s true that many ad networks can do everything a DSP can do, which is why struggling ad networks are increasingly rebranding themselves as DSPs. They’re called demand-side platforms because they’ve moved from the middle — where ad networks stand and ad exchanges stand — to the buyer side, in particular snuggling up with agencies, which are also struggling in the ever-evolving digital ad space.

And then there’s Google, which is has a vested interest in improving its display game, building “strategic partnerships” and facilitating media buying on its network (and others) by offering technology to agencies. The DoubleClick Ad Exchange is arguably an ad network since the transactions all go through Google, unlike the Yahoo Right Media Exchange, which simply serves as a marketplace for buyers and sellers to meet up. Filling in the technological gaps stymieing the agencies is proving a fruitful way to increase its display share

That great anonymous source comments: “Google’s growth in display and agencies profits are tied together.”

No kidding. That’s… not the least bit shocking. Once it gets enough of a stake in display, will Google eventually forgo agencies and reach out to advertisers directly? Yep, if the company is smart, which it’s shown time and time again.

Publicis’ Vivaki, which gets an awful lot of attention, buys through the DoubleClick Ad Exchange as well as the RMX — a good DSP or trading desk will have access to all the major exchanges. Vivaki’s big crime seems to be not informing clients that its Audience on Demand DSP tech is based on the stuff Google inherited in the Invite Media acquisition.

“The battleground is the client,” Vivaki SVP Kurt Unkel wisely intones. ”We used to have a reliance on intermediaries who gave the appearance of adding value. They were able to take on risk and remove complexity. I now can create that inhouse, and don’t have to pay as much.”

There is no scandal here — just more proof the display ecosystem is realigning.  DSPs won’t kill ad networks or vice versa, but the competition will continue to be fierce — and Google will continue its growth as a major display player.

ADOTAS: Is the mobile world ready for RTB? Why is is this a necessity for the expansion of the space?

SUBRAMANIAN: Mobile marketers were ready for real-time bidding (RTB) yesterday. The more control you give to demand partners, the more effective they can make their advertising buys. Our ad network partners have been constantly looking for more control to target specific audiences and change pricing on the fly — the only way to scale these requests was to automate the process and follow the supply side platforms of the online world by enabling RTB across our inventory.

Will online RTB pros be able to easily acclimate to mobile RTB? How can the two be employed together?

We have partnered with platforms in the online space that are already RTB enabled — now marketers can go through those platforms to access RTB supply on both the web and mobile.

How will using mobile RTB differ from online?

Marketers will have the same controls they are used to in the online space — the biggest difference will be targeting audiences across multiple inventory pools: iOS, Android and WP7. Publishers can now control which demand partners can access their inventory and how they monetize it. They’ll have the ability to set floor rates on inventory and run direct campaigns at certain price points. Additionally, they’ll also have control over the type of ad creatives that can run on their inventory: rich media, full screen interactive, text, banner, etc.

Are these in-app or browsing impressions?

Currently RTB is only available in-app impressions.

What’s the next big thing in mobile display?

1. Mobile Apps are the Future of Mobile Data — Mobile apps will be a much better source of data in the future because identities persist.
2. Website Publishers Will Become More Integrated With Advertising Providers — Because only 1st party cookies are available, ad providers will need to become more technically integrated with web publishers to gain access to that first party data.
3. Server Side Data Processing Will Become More Important — Because of data siloing between apps and websites, more processing and user targeting will have to be done on the server side. This means the majority of the data-share will be held by developer/publisher platforms such as publisher platforms, analytics companies, gaming networks, etc.

You mentioned Google’s estimate that at least 50% of all targeted online display will be bought through RTB platforms by 2015 — what’s your estimate for the mobile display game?

A recent Mobclix survey of marketers and ad networks revealed that early adoption for RTB on mobile will garner more traction due to the success seen online. We expect total mobile inventory bought with RTB to be 10 to 15 percent of total ad buys for 2011. The RTB system will give publishers complete control over every impression so they can maximize revenue, monetize relevant audiences beyond typical strategies and achieve eCPM lifts of 40 to 85 percent over non-bidded inventory.

So mobile display is kinda seen as an under-performer in the industry — it was definitely what Apple CEO Steve Jobs was referring to when he said mobile ads “suck.” How do you feel RTB will change that?

We do not see mobile display as an under-performer, but more of a green field for technology and innovation. It took 10 years in online display to see creative optimization companies like Teracent and Tumri as well as supply side platforms like Pubmatic and Ademld, whereas the mobile space has moved at a breakneck pace to offer publishers similar tools in a sliver of that time. Mobile marketers are also learning from their online counterparts much faster as the tools they need will start to flourish just as quick.

Steve Jobs and iAd have pushed marketers to leverage rich media and highly engaging ads that cater to the device. RTB will make sure marketers can reach the right audiences at the right times on mobile – this is the first time they have that much control over their mobile campaigns.

How much of mobile display’s trouble is from lack of targeting technology vs. ineffective creative?

A successful campaign needs both targeted audiences and engaging mobile-focused creatives. Mobile ad networks have had the ability to target across their own inventory but stepping back and allowing marketers to effectively target multiple pools of mobile supply has been difficult. Mobile ad campaigns need to be mobile optimized – i.e., trying to get a user to sign up for Netflix on their PC website is pointless and taking a user to a flash landing page just does not work.

So what’s changed at Mobclix since the acquisition by Velti? How is that working out for you folks?

Right now, we’re limited in the discussions we can have about it because Velti has filed to list its stock on NASDAQ and is in its SEC-mandated quiet period. After Velti’s IPO, we will be able to share in greater detail why both companies are so excited about the acquisition.