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SearchTHIS: SEMPO's Take on Search

Kevin M. Ryan
SearchTHIS: SEMPO's Take on Search Kevin M. Ryan

Here’s another reason to join the Search Engine Marketing Professional Organization (SEMPO) -- the recent "State of Search Engine Marketing" report prepared by Executive Summary Consulting, Inc. that snuck out last month during the notorious holiday lull.

Search spending is up, but how do marketers really feel about SEM costs? Advertisers plan to dole out more cash for search this year, but will they get any more bang for their buck? Where will said additional budgets come from? Will SEM specialist firms die a slow painful death by advertisers bringing the task in-house?

The report places our beloved search industry at just over 4 billion dollars. Ordinarily, releasing a document like this mid-December is a recipe for disaster, but this bad boy is definitely worth a look with more than 100 pages of “wicked smaht” search insights and a few ah-has we haven’t seen elsewhere.

The view from 30,000 feet

The report’s information was based on SEMPO survey data that included 288 respondents. About 70 percent of survey takers came from the United States, while the remaining firms called Canada, United Kingdom, and a smattering of other countries from Australia to the United Arab Emirates home.

What’s really special about the bulk of respondents is that 38 percent were advertisers. People always love to hear from advertisers, as opposed to agencies -- a thought process which may or may not apply to SEM. Sure, advertisers control budgets and one could argue that agencies live in a reactive world, so the source of information should be the ones who control the budgets.

In search however, the agency model often takes a slightly different route. While the prototypical agency lives off a few key clients, search agencies often have many clients. The knowledge set is very specific, and best practices can often be applied to the entire client base.

100 percent organic, no additives or preservatives

Above all, the information presented speaks to the importance of natural or organic search. Nearly 90 percent of those surveyed indicated that they engaged in organic search marketing programs. There was only a slight trail off in the paid placement number at 77 percent and the participation percentage takes a nosedive with paid inclusion at only 44 percent.

There are a couple of reasons for this. One, organic search has been around longer than paid placement, as far as pop advertising is concerned. Two, paid placement has seen incredible growth and can certainly be credited with “bringing online advertising back from the dead,” while paid inclusion is losing its charm with special interest groups complaining that paid inclusion is unfair unlabeled advertising. Inclusion is also fairly complicated compared to other forms of search.

Another interesting note on the subject of organic: Only 40 percent of firms expected to pay more for organic search in 2005, which indicates that not only are natural search costs perceived as fixed, but also that the services associated with natural search do not justify an increase.

There is also the search engine optimization abuse situation. A big chunk of respondents thought search abuse, (search spamming to you and me) is a “big problem,” but thought that legislation was not the solution.

Add all of this up and regulations or best practices would seem like a banner idea, short of organizing a C.O.L.O.N. action committee.

Spend a lot to get a little more

Although search engine marketing is a), often held to a higher standard than other forms of online marketing and b), was unfairly frescoed into the direct response chapel ceiling, about 61 percent of those surveyed said they used search for “enhancing brand awareness,” while only 58 percent said they used search to sell products. Of course, marketers could have many requirements for search since it is so gosh darn versatile.

The defining characteristics of multiple use items often dictate higher costs. Paid search has cost increase built in with the dynamic bidding environment, and marketers have responded with a solid intention to spend more on paid placement in 2005.

The dominant portion (83 percent) said they would increase search spending, while 66 percent of firms said they expected to pay up to 90 percent more on search this year. Also, large firms planned bigger increases in search spending than smaller firms.

How much more will that search dollar really buy?

Increased spending is a good news/bad news scenario in that advertisers also felt that paid placement costs increased about 26 percent. So, by extension, if one increases one’s spending by 52 percent and media costs continue to increase, said advertiser won’t quite get 52 percent more search bang. This sounds like a perfect excuse to triple the 2005 search budget, yes? Or, maybe we spend a few bucks on SEM education to slow those cost increases.

And now, the budget separation

Given the sharp budget increases along with a sharper increase in costs, it’s also worth mentioning that 23 percent of respondents said they were “maxed out,” meaning they couldn’t afford any more cost increases, while over 60 percent said they could tolerate more costs.

Where is this money going to come from? The report indicates money is being taken from several other online areas. Shopping engines proved to be the biggest losers in the budget fight with 13 percent of respondents shifting money away from paid listings there. Closely behind the shopping engines were Web display and email ads at 9 percent.

Before I go off on another rant about the categorically stupid practice of taking money from the already small online budget and dropping it into search, marketers also indicated (9 percent of them) that money was taken from print magazine and newspaper budgets. Of course, the 9 percent of spending on Web ads would be about .09 percent of the print “anything” budget, so that’s encouraging.

The in-house threat

Although the line between the two is beginning to blur, you can still draw a line between SEM firms and agencies. Speaking of encouraging information, advertisers still plan to outsource some of their search engine marketing budget in 2005.

The only thing that bothers me in my last sentence is the word “some.”

Why are 96 percent of marketers planning to have at least 10 percent of their organic optimization budgets in house? Also, according to the survey results, 92 percent of marketers are planning to absorb the costs by at least 10 percent as well.

Some of the in-house organic can be attributed to the negativity associated with search abuse and the lack of best practices, but given the complexities and nature of the bid environment, that number seems rather high for paid placement.

I think we need “some” more cross-comparative analysis on the effects of in-house efforts compared to the efforts of specialized search agencies if these firms are to get more than $400 million of a $4 billion industry.

SEMPO has get up and go

Search is well on its way to finding a seat at the grown-up’s table. The objectives are defined, the needs have been assessed, and we now know a little bit more about the industry thanks to SEMPO.

The SEMPO naysayers cried out on message boards and the occasional published article for something earth shattering or at least some evidence of effort on behalf of its constituency. While it would be easy to argue that SEMPO has been working hard on multiple initiatives, this report will no doubt provide a roadmap for efforts to come.

The key understandings are quite plainly a message to members -- we came to play and we are going to have a plan. All the more interesting will be the comparison of 2004 data to 2005 as a measure of successful industry efforts.

Additional resources:

Read about search and your brand here.

Visit the SEMPO Web site here.

iMedia Search Editor Kevin Ryan’s current and former client roster reads like a “who’s who” in big brands; Rolex Watch, USA, State Farm Insurance, Farmers Insurance, Minolta Corporation, Samsung Electronics America, Toyota Motor Sales, USA, Panasonic Services, and the Hilton Hotels brands, to name a few. Ryan believes in sound guidance, creative thought, accountable actions and collaborative execution as applied to search, or any form of marketing. His principled approach and staunch commitment to the industry have made him one of the most sought after personalities in online marketing. Ryan volunteers his time with the Interactive Advertising Bureau, Search Engine Marketing Professional Organization, and several regional non-profit organizations.

Ryan serves as Executive Vice Amphibian (be the frog) at the search engine marketing specialist agency, Did-it.Com.

The Super CMO 
Social media versus complexity 
Think "web first" 
The IAB's challenge to Nielsen and comScore 
Making online safe for digital immigrants 

Berens: Not to mention that the CMO -- at the moment that he or she woke up and realized this -- also probably looked at the calendar and thought, “Of the average 23 month tenure of a CMO, how much longer do I have?”

Rothenberg: As one of the generators of the research that helped popularize that figure, I think I need to get people to step back from it.

The 23 month number is attributable to Spencer Stuart, which is an executive recruiting firm, and it has a superb marketing and media practice. But, what we found at Booz Allen, in the work that we did with the Association of National Advertisers, is that this short tenure issue derives mostly from good news. I know that sounds contradictory, so let me explain.

I ran Booz Allen’s relationship with the ANA between 2004 and the end of 2006. We did quite a lot of research with them and for them; and, the ANA came to us in 2004 with a request. They said, “A lot of our members feel that they are moving further and further from the seat of influence in their companies, and they are worried that marketing is becoming irrelevant, because of the globalization of finance, the globalization of communications. So, we (the ANA) want to know, is that true? And, if so, what are the capabilities that marketing needs, to be better prepared for the future?”

So, we started doing some research: surveys and some deep dives with ANA members. And, we found that exactly the opposite was true. Across several hundred companies, when we talked to both marketers and non-marketers alike, and asked the question, “Is marketing more or less important today than five years ago?” Overwhelmingly, in all industries, they said marketing had grown in importance over the five-year period. And in some industries, such as financial services, more than eighty percent of respondents -- again marketers and non-marketers alike -- said that marketing had grown in importance.

We hypothesized that the reason for the short tenure findings by Spencer Stewart were based on the mismatch between the desires of the CEOs and the senior leadership team, as well as between the capabilities of marketing teams and the competencies of marketers themselves.

To be more specific, we absolutely found evidence that there is a rising class of senior marketer: we borrowed the phrase “Super CMO” from John Quelch at Harvard Business School to describe this senior CMO. And, we developed the term “Growth Champion Marketers” to define their teams.

These were marketers who were in charge of the strategic growth agenda in their firms. In many cases, they actually owned the strategy agenda, and sometimes the innovation agenda -- within the marketing portfolio -- and, they were a part of the senior leadership of their firms. This was a minority, but it was a rising group.

What we concluded was that more and more CEOs were looking for that kind of advanced marketing leadership, and advanced capabilities. But, what they got too frequently were the older sets of capabilities, which were really much more service provider oriented: marketers who were primarily accustomed to using third party vendors to create advertising and PR. The mismatch between the desire for an advanced growth of leadership and the reality of tactical service provider was what led to the short tenures.

Berens: It sounds to me that you are saying that while the importance of marketing has grown astonishingly, the capabilities of the marketers to execute on that significance has not grown correspondingly.

Rothenberg: It is slower because the recognition was probably not as widespread in the marketplace. And, to segue into the media industry and into interactivity, it is a lesson and an opportunity for media companies and for agencies, as well.

If you are a marketer -- it does not matter whether you are working for a retail bank, or a downstream oil and gas company, or an automotive manufacturer, or a national retail chain -- the need is to grow your business. So, you are looking for a CMO who knows how to grow businesses. You are looking for a marketing team that knows how to grow businesses. And, you are looking for agencies and media companies that can help you solve your growth problem. And, this is much more advanced, much more complex, and much more vibrant than just creating advertisements that fit into predefined spaces and places.

Berens: So, it is a bigger job.

Rothenberg: Yep.

Berens: Any examples of the “Super CMO” that you can share with the iMedia audience?

Rothenberg: Whether any one really fits, or not, others can decide. I can give you examples of people or positions who seem to fit.

Procter & Gamble has always had the chief marketing officer at the heart of the company’s growth agenda. And, it is no surprise that Jim Stengel certainly fits the profile. Somebody else who would fit the profile also, and a company that has had marketing at the heart of its agenda for a very, very long time is Pepsi's: Cie Nicholson, and before her, Dave Burwick.

When IBM made its change in CMOs -- when Abby Kohnstamm retired, and when Bruce Herrald became chief marketing officer -- it was telling. Herrald had been the head of strategy for IBM, and in becoming CMO, he kept Strategy as part of his portfolio.

Another example, Cathy Lyons, went from heading the Printing and Imaging Division, which is one of the most important operating divisions at HP, to becoming EVP and CMO. So, we are seeing more operating competencies moving into the CMO office. Cathy, I believe, just recently shifted back yet again to an operating position.

Booz Allen and the ANA are publishing a book that I had the privilege of writing an introduction for that is coming out in a couple of months, called "CMO Thought Leaders." It consists of interviews with fifteen or sixteen of these “Super CMOs.” It was a lot of fun to work on.

Next: Social media versus complexity

The Super CMO 
Social media versus complexity 
Think "web first" 
The IAB's challenge to Nielsen and comScore 
Making online safe for digital immigrants 

Berens: Let’s dive into interactive as a bridge question, because one of the things that a lot of people on the interactive marketing side are saying, and have been saying for a while, is that the part of the conversations that marketers miss is the large conversation that is happening outside of the brand offices altogether.

Berens: So, Don E. Schultz, of Northwestern University and Agora, talks about how there is a whole conversation where people are talking about products. The marketers, who have been very well trained to talk, are proving themselves largely incapable of listening. It is the consumer-to-consumer question.

In fact, I was at an event recently where a marketer was talking about their digital endeavors, and I said, “Well, what about community? Are you doing anything with social media?” And the response of this person was to say that, “Yes, there is a place for comments on the website.”

That seemed to me to entirely miss the point. What about the things that are happening outside of the marketer’s website that are probably more important to the brand than the things that are happening within their control? So, given all the things that you are saying, is social media -- which is important to the interactive marketing side of the business -- as crucial to the overall marketing enterprise?

Rothenberg: I think it is a tactical question, actually a small question. The big question, again, is how do you end up growing the marketer’s business? How do you solve the marketer’s problem?

It is clear that there are many, many, many, many kinds of platforms -- technological platforms, as well as non-technological platforms -- that can do that. So, I think getting caught up in a question of, “Are you using social media?” begs too many other things. What kinds of social media? Where? Is it a live gathering at a concert a social medium? Or, are we just talking about Facebook or MySpace? So, it gets a little bit too small and a little too micro.

The larger sets of issues are: How are you identifying your consumers, or customers? How are you identifying your potential future consumers and customers? How are you engaging them? How are you informing them of your offerings and your value proposition? How are you able to improve your consideration once you find the right people? How can you then induce trial? Can you move from trial to repeat purchase? Can you move from repeat purchase to loyalty? How can you do all of these things and do them efficiently, as well as effectively and not get overwhelmed by the complexity of the media landscape?

And, it is complexity. Remember that is based on the fact that the cost-based barriers to entry, and creation, and distribution are plunging towards zero.

These are much larger questions. I think, the contemporary CMO is much more engaged and troubled by the problem of complexity -- and ought to be -- than whether he, or she, ought to be using social media, or not.

Berens: On the other side of that same coin, the consumers, or audiences, or customers, or just folks, are fairly overwhelmed by the complexity and the sheer breadth of media that is being flung at them every single day.

Rothenberg: There is a long history in all forms of marketing and communication that indicates that market and individuals reach equilibrium.

The equilibrium around individual choice shows through time that no matter what the category (and this could be a B-to-C category, or a B-to-B category), consumers tend to identify or settle on a consideration set of no more than seven to ten choices that they generally choose from, choose from promiscuously, with not an enormous amount of loyalty.

One of the interesting parts of this is that there are so many new and different choices every day that it is hard to settle down into these patterns.

Berens: That is also a generational issue, which is that older people settle into those patterns faster than younger people do. My children are six years old and two years old, and they are not even Millennials (the Frank Magid designation for people of about sixteen to twenty-five). My kids are going to have an entirely different set of media habits than I have, or even than some of my younger employees have, right now.

Rothenberg: But they may not, at least when it comes to the number of choices that they put into their considered sets.

There is not a lot of evidence to say that people are going to have portfolios of site choices that run into the thousands. History shows that if you are a magazine reader, you are going to have about seven magazines that you choose from. If you are a television watcher -- even with the increase from broadcast to cable -- seven to ten channels is still the considered set. So, I think we are all anticipating settling down into relatively conventional usage patterns, although it has not yet happened.

Next: Think "web first"

The Super CMO 
Social media versus complexity 
Think "web first" 
The IAB's challenge to Nielsen and comScore 
Making online safe for digital immigrants 

Berens: You started with the IAB in January. How's it going?

Rothenberg: Great. I think that is the short report, but it is a wonderful place. Obviously it is a strong trade association, beginning with what Rich LeFurgy did now more than a decade ago, then, with Greg Stuart’s stewardship during the last five years.

There is an enormous amount of goodwill generally in the media industry and in the agency community for the work of the IAB. So, it is very nice and invigorating to inherit something that is in such a strong position at exactly the time when the market is asking for more integrated activity.

Berens: It is certainly a time of great change. So, let’s talk about that change for a minute. If you were to isolate what you think the two or three biggest challenges facing the interactive advertising industry are, right now; and then concurrently how those challenges facing the industry are challenges for the IAB, what would they be?

Rothenberg: It is the challenge of abundance that is facing the interactive media industry, and more broadly the interactive media and marketing enterprise.

Serious large marketers have effectively “come out of the closet” over the last eighteen to twenty-four months and said, “This is it. Interactive is the fulcrum on which all marketing efforts balance.” That raises the bar for interactive media companies, interactive units in diversified media companies, and raises the bar as well for interactive agencies, or interactive units in large marketing services companies; and also for the interactive teams at consumer marketers and B-to-B marketers.

For most of the past decade, senior marketers were content to say, “You know, I have got it covered. I have got it covered. I got a team working it, and they are working with the interactive agency, and they are working with some interactive media companies.” It was almost more like R&D preparing for a future that would happen at some point unknown.

And now the future has happened.

I have been dragging around a David Workman quote. David, who, as you know, is one of the most respected, best known, most experienced media agency leaders said, just two weeks ago, in his Keynote address at the AAAAs Management Conference, “I believe the future of our business is to think web first.” That raises the bar for everyone in terms of process, systems, recruitment and retention.

Then there is the whole talent challenge. And, I think probably more seriously than anything else, relationships and operations across the entire value chain.

Then the issue of how marketers relate to agencies --  how agencies relate to media companies on questions large and small -- really looms as a serious challenge, underneath that umbrella challenge that we have of abundance.

Next: The IAB's challenge to Nielsen and comScore

The Super CMO 
Social media versus complexity 
Think "web first" 
The IAB's challenge to Nielsen and comScore 
Making online safe for digital immigrants 

Berens: For all of the measurements that we have with interactive advertising, this is an ever-changing ground. Just look at the emergence of YouTube and of video, and two-minute videos and now long format videos on ABC.com, NBC.com, Veoh, Joost… all of these companies. 

The basic metric of impressions is somewhat imperiled because we have so many different kinds of engagement, and the impression-based models are not necessarily reflective of that, because if someone is sitting on one page, watching something for five minutes, and that is one impression, that is getting measured the same way as somebody clicking on something and staying there for a moment. So, I am interested in your take both on how the behavior -- and therefore the ability to measure behavior online -- is changing, and what the IAB is going to be doing about that. Let's take that as our way into the Nielsen//NetRatings and comScore issue.

Rothenberg: The problem is, it is too big a question. You can only give a broad, general answer to something like that. We are going through an ongoing revolution. It is a revolution of continual new innovation in the way ideas, concepts, images, news, sounds and stories are communicated. Every new innovation calls up new opportunities for thinking about how persuasion works, and thus calls up a need for new kinds of measurements, and it also challenges existing measurements. I think that is just kind of a pure, fairly simple statement of fact. 

What can anybody do about it? You try and create, across industry, understanding and processes at the highest level, some agreement based on science and field research about the metrics that matter. How are we going to get them? And, how are we going to make sure they are as accurate as we can make them? That is really, that is really the challenge now. 

We all have to work together to avoid a complete free-for-all, a complete breakdown in the system, whereby each individual company -- whichever side it is on, buy-side/demand-side, buy-side/sell-side -- comes up with its own idea and tries to use market force, or market power, to ram its idea down everybody else’s throats.

The way it ought to work (and, the way it has historically worked in other media), is to bring to bear laboratory science, field research, and practicality from all of the various sides of the issue, and then to try to reach rational agreement on what matters.

Berens: And where, is this happening at the IAB inside the say, Todd Teresi’s Measurement Council?

Rothenberg: We have a Measurement Council, we have an Ad Operations Council, and we have a Research Council that are all involved in this. What we are doing -- and what we need to do -- is to make sure that those groups are fully integrated. So if they are touching different pieces of the elephant, then they are doing it not with blinders on but with great, great foresight.

So, that we have the Research Council picking up one thing that is important, working with the Measurement Council that is picking up on another thing that is important, and then working with the Ad Ops Council to make sure that it all makes practical sense in the supply chain. They have all come together, and are coming together in this current work with comScore and Nielsen//NetRatings.

Berens: We had a version of this panel measurement controversy back in October when AdWeek challenged the panels. What's the difference?

Rothenberg: AdWeek is not a trade association. AdWeek is not a representative body. And, I think what journalists do is very important, obviously, and very, very useful. But, it can be easy to ignore because there is no representative basis for it. So, you kind of cannot compare it. That is like saying, you know, “What is the difference between what the New York Post writes and what the Bush administration does?” They are in different businesses.

The better comparison is this: What is the difference between what the IAB did over the past month compared to what the IAB did in past years? In that sense, it is not all that different.

I am somewhat surprised at all of the attention that got paid to this. IAB has been pushing the major measurement companies to get audited and accredited by the Media Rating Council for years, and years, and years. So, we did not say, and have not said anything differently than what we have said almost since the origins of IAB. I do not think it is what we did that has changed. I think it is the market context that has changed.

This is now serious. This is not a game anymore. This is not a sectarian cult among, you know, digital natives dealing with each other. This is not something that one company or another company can ignore because the big money just is not taking it seriously.

We are talking about massive shifts of budget by the world’s largest marketers, and they are going to demand exactly the same standards, exactly the same underlying principles, in terms of expectations for audience measurement as they demanded for television, for radio, for newspapers, and for magazines.

And there is an additional, an additional set of pressures on top of it, because for most of the history -- certainly of broadcast audience ratings -- there was an acceptance of the fact that these were estimates, that these were, you know, raw, and in some cases flawed, that you are basically doing the best you can with the resources that you have in an environment that is technologically constrained.

With interactive, the expectations here are for true accountability. So, it is a shock to the system to marketers who come from outside the digital native realm to discover, “Well, wait a minute. We are using the same methodologies? We have got the same problems? We have got the same, you know, junk we have been dealing with in the broadcast ratings for several generations? That does not make any sense.”

So, that is what has changed. That context has changed.

When you have the major marketers and the major agencies saying things like, “We believe the future of marketing is to think web first.” Then, you have just got to get up to speed. The line I keep using is, “This is the major leagues now. You cannot continue to play by playground rules.”

Berens: There are a lot of old timers in the industry, who have had as a trope, or a catch phrase, that “interactive is waiting to get a seat at the big kids’ table.” And, it sounds to me like you are very firmly saying that not only is there a seat at the big kids’ table, but that people are turning to the new grown-up at the table for some kind of leadership.

Rothenberg: They are. And, I think it is incumbent on everyone to step up to the plate and offer that leadership. There is a lot of good news here, too. You should not think for a minute that the major audience ratings companies do not have a fair share of very brilliant people in them. They have attracted some terrific scientists, some terrific technologists, some terrific sociologists, and they do know what they are doing.

But, I think they, and many of us, have had the luxury for a couple of years of operating outside the scrutiny of the senior marketers at the major marketing companies. Now the scrutiny is turning up. It is happening because the commitments of budget and the assumption of results is so strong and so high. That means that we have to collaborate in a very different way, and make sure that the bedrock principles of how an extended enterprise operates be adhered to.

Berens: And is the IAB working with, say, the Media Rating Council (MRC) and the OPA? Who are your partners for all of this?

Rothenberg: Yes, absolutely. The core group includes the AAAA, the AMA, the MRC, the OPA and the ARF: all will be represented at the summit meeting that we are having with the audience measurement companies on May 16th.

And, there is also a lot of real interest and support form many of the other media trade associations; they are all facing the same thing, because all of their members -- it does not matter what the medium is -- are developing interactive operations. All of them are vitally concerned about integrating those major operations into their existing businesses. All of them are facing the same challenges with audience measurement and impressions measurement.

So, I do not expect that there is much disagreement at all out there among the major trade associations and the media and marketing world about the importance of MRC auditing and accreditation. It really is kind of a first obligation for measurement companies -- especially those that aspire to seriousness and to greatness -- to have their technologies, processes and systems open to independent scrutiny so the market can be assured that they actually are delivering what they say they are delivering.

Berens: I do not think either comScore or Nielsen is resistant to this. I think it has just been a matter of getting there.

Rothenberg: I cannot speak to the past. I do know from George Ivie at the MRC, for example, that a typical MRC pre-audit (that is, as you might guess, the first phase of an audit) takes about two months, and in the case of some these companies, pre-audits have taken up to two years. I believe both of them have actually been done, but, you will need to check on that, because I cannot swear to it.

Berens: Well, according to Magid Abraham of comScore, the audit itself can take quite a bit of time. Although I think the pre-audit has been done for both Nielsen and comScore. I would have to check on that.

Rothenberg: George Ivie will tell you that in the case of both companies, the length of time that this has been going on is somewhere between “extremely unusual” and “unique.” It diverges vastly from the norm. The MRC and IAB’s request to Nielsen for interactive audits date back at least to 1999. And to comScore, they date back at least to 2004.

It has been this cycle of frustration that boils into anger, and “yeah, yeah, we will do something.” And, then it goes silent; and then frustration, and then anger, and it boils over. It is like a bad marriage.

This time we just said, “We are out there serving the marketing industry. They are going to demand it, even if they are not demanding it now. So, this is serious, and we are not going to let up. It is for your own good as well, because if you do not play by the established principles, ultimately you will not be taken seriously by the largest marketers in the United States and in the world.”

We are very, very serious about sticking with it, absolutely not dropping it, continuing to use the bully pulpit, and at the same time we are really committed to working across the industry openly and collaboratively to create the processes and the relationships that can help evolve the future of media in market and accountability processes.

Next: Making online safe for digital immigrants

The Super CMO 
Social media versus complexity 
Think "web first" 
The IAB's challenge to Nielsen and comScore 
Making online safe for digital immigrants 

Berens: It certainly is a great time of growth within interactive. The IAB’s numbers released for Q4 of 2006 had a thirty-four percent increase over the previous record, which is just amazing. Starting from the smallest piece of the pie, to begin with, it is easy, I think, to see some great increases. Even network TV had a four point two percent increase (this is according to Nielsen, where the overall growth average is four point six). But still, you know, it is a tremendous amount of budget that is moving towards interactive, and it sounds to me like the budget -- in your mind -- is now becoming significant enough that we also need to be treating ourselves with grown-up measurements.

Rothenberg: Yes, it is grown-up measurements, grown-up processes, grown-up relationships that need to come out of the shadows.

The best line that I have heard -- and, I quote it a lot because I think it really says it all -- is when I was being recruited. I was seriously contemplating whether this was the right thing to do, and I called David Bell (who is one of the great advertising leaders of the past couple of decades as former Chairman and CEO of Interpublic and of True North, and Bozell).

I had breakfast with him and I said, “Well David, what do you think?” And he was wildly enthusiastic. But, he put his arm around me and pointed at me and said, “Here is your challenge. You are in an industry that is owned and operated by digital natives. You have to make it safe for the digital immigrants.”

The digital immigrants really include all senior marketers, and all the major consumer and B-to-B marketing companies in the world, the people who were raised with different opportunities, different technologies, different delivery systems, different notions of entertainment and different kinds of instruments.

But, they happen to be very educated, very senior, and very experienced. And, they are now asking a lot of hard questions and seeking real guidance on how to use interactive media to grow their businesses. And, you have got to respond to them in the right way, in the appropriate way. And, one of those responses is, “You have got to get serious. You have got to get collaborative. You have got to get transparent around the metrics that we use.”

The media companies have been there. The media companies have opened the kimono. We need the vendors, the suppliers and the others to do exactly the same thing.

Berens: I concur. And, it sounds like it can only lead to more business for interactive in advertising, and perhaps to have the level of budget start to resemble the level of attention that is happening on the consumer side, where I think we see a disproportionate level of attention compared to the level of advertising budget. So, anything that is going to get those things more in sync sounds like a good idea to me. You mentioned the ARF. Have you seen their Online Advertising Playbook? I just got a copy in the mail today. It is going to be on my nightstand.

Rothenberg: I certainly have. It is a wonderful work. They pulled a lot of things together, and they deserve all of the credit that they are getting. IAB is actively helping them market it. We are going to do what we can with our resources to kind of get the word out that this is a great handbook. It is a great introduction for people who want the introduction, but it has also got lots and lots of tidbits even for really skilled people in the interactive space.

Berens: I was just thinking it might be sort of the voter’s guide for the digital immigrants that you were mentioning before.

Rothenberg: That would be great. Tell Taddy Hall, because he would love to hear that.

Berens: Let’s wrap it up with a couple of your predictions and plans for the future. I think you have given us a good sense of how busy you have been since January, but, what is happening for the next couple of quarters over at the IAB. If you could sum up your ambition for the next year, what would it be?

Rothenberg: Part of what you will see is more exposure of the senior team at the IAB, because they are capable of solving a lot of problems and enhancing opportunities. Jonathan Moore and his team are the people behind our events. The person who has brought in all of the new members is Andrew Kraft and his team. Sheryl Draizen is helping to run the entire show. Jeremy Fain is doing a lot of hard supply chain work through the Ops Council.

One thing that we are dedicated to that has not really been high on the agenda in the past is just plain outward communication around the growth story, and the growth opportunities represented by interactive media. IAB, for most of its history, has been focused -- appropriately -- on the development of standards and guidelines to help create and facilitate the operations of markets. We are going to continue to do that, but we want to build this growth story on top of it.

We are in the process of reinventing media and marketing, and we have an enormous number of courageous people out there who leapt into this big unknown. Sure, we talk about all of the money that has been made by some, but people took flying leaps out of magazine jobs, radio jobs, and cable television jobs and started selling interactive banners. And it was pretty dark there for a long period of time. These were not the easiest jobs in the world.

So we want to start celebrating what people have managed to accomplish, and what companies have managed to accomplish, through innovation and dynamism.

That really is the mission of IAB: to grow the size of the interactive advertising marketplace, and to grow interactive share of total marketing spent. So, what people will see from the IAB, I hope, is a continued focus on that mission through everything from events, to industry blocking and tackling, to working out supply chain dilemmas, to working collaboratively with the AMA, the AAAA and other media associations, and just to make the marketing and media world better.

Berens: Well, we share a similar mission here at iMedia, so congratulations on the new gig, and thank you for the time.

Rothenberg: Thank you.

Randall Rothenberg is the president and CEO of the Interactive Advertising Bureau, the trade association for interactive marketing in the United States. Read full bio.

Brad Berens is editor in chief and chief content office for iMedia Communications. Read full bio.

What is "intelligence" and what defines "artificial"

Intelligent entities have specific traits that make them so. Things like perception, reason, choice, action, reflection, communication, organization -- as well as the ability to set, achieve, and learn goals.

Algorithms are already the audience

We are spending more and more time in a blend of synthetic and real reality. On some days algorithms can make up 70 percent of the trades on our stock exchanges. We need machines to make sense of the chaos. We create innovative algorithms because we have the data to inform them. The question is no longer how much will we allow the algorithms to take over? Rather, it's when will we realize how much they have already taken over? Words are data. And data is the new development environment.

Think about the evolution of email. Before we receive email it's been processed by a myriad of machine intelligence. SPAM filters, personalization and priority filters, corporate routers, etc. In reality, an email has been read several times by machines before it appears as unread in our Inbox.

Similarly, the word is no longer the defining object in computing. Your mouse isn't busy clicking on hyperlinks any more. The tablet and the smartphone have you touching images. With raging ease we can share these images and with the popularity of social utilities like Instagram, Pinterest, and Vine, these very visual communications are being managed by a similar intelligence.

You're writing for machines -- and have been for some time

Agencies have been forced to learn -- without ever intending to -- how to write for the machines and this is just the beginning. Machines are getting smarter, and we trust them to do more on our behalf. DVRs, SMS, email, calendars, and personal digital assistants are all interacting with algorithms that process messaging for us, while also filtering and parsing out data we don't want to see (if our minds are the club, think of technology as the no-nonsense bouncer). As a function of the pervasiveness of the technology, our preference for information is managed more and more by the machines (and algorithms) that do our bidding.

As marketers, we already comprehend the value of a well-strategized SEM program. Or said another way, if you don't understand the algorithm, you get lost in the sea of data that is "search," which is less about you getting lost, than customers being able to find you. The next logical step is for the algorithms to begin generating original ideas for the machines.

I'm not talking about banner ads, or WordPress or Tumblr sites getting turned out formulaically. I'm talking about "the big idea" (I'm looking at you, Donny Deutsch). This means a new offering of the agency will be the crafting of algorithms -- creating original conversations with artificial intelligence. Readiness on the part of the agencies may vary, and some will naturally shy away from this evolution. Is your agency ready to recruit a group director of algorithms?

So, you've processed all these concepts and how they relate to your world, which brings me to the original question: Are agencies ready? Is your agency ready? Not having a group director of algorithms already on the payroll isn't a sign of certain doom, but there are three simple things you should do today to account for these new realities.

  • The people who think about influencing behavior with algorithms aren't traditionally found in the creative department. But really that's where they need to live. Many organizations are not ready nor are they prepared for this critical idea. 

  • Invite people who are already agents for this change into your agency and allow them to affect change operationally, organizationally, creatively, technologically -- now. Get them involved with the creative ideation early and often. Give them the latitude to influence the work.

  • Measure success through integration. Today, this work isn't going to be immediately billable. It's an investment in your future. But what you will see is the work the agency produces changing in many positive ways including enthusiasm for the work itself and the way clients consider your capabilities.

Just like advertising, you can't spell reality without A.I. There are steps you can take today not only to understand your reality, but to shape your reality for the future.

Jason Alan Snyder is VP, director of technology for North America at Momentum Worldwide.

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