Alan Chapell: I remember reading an article you wrote last fall that discussed, in part, how far we in the online space are from delivering on the promise of giving consumers something they actually find of value. And I think to some extent, concepts such as "consumer in control" and "relevance" are way over-used in some circles. How does WhenU ensure that there's real value provided to the consumer?
Bill Day: Well, traditionally, value to consumers has been measured through clickthrough rate. The Google breakthrough in the search space was to look at clickthrough rate as an arbiter of success-- if the user is clicking, that's a vote of confidence. On one level, that works for us too. So we've been very focused on driving clickthrough, which is about showing fewer impressions and making each impression count.
When I'm speaking about fewer impressions, I'm talking specifically about the frequency caps we put in place in late '04, which was a novel concept back then. The idea that you had perishable inventory, and not unlimited inventory, was a new concept, but it forced you to think about how to treat the user right. And the second part of that was the TrueRelevance technology we rolled out really at the start of the fourth quarter last year, which has allowed us to offer a "push" approach that makes comparison shopping effortless for the consumer, resulting in tripling of clickthrough rate in some categories to above 15 percent with consistently high conversion rates-- that's proof-of-concept that consumers find real value in these ads.
But there's also an underlying value proposition for the consumer aside from receiving relevant, money-saving offers, because WhenU software comes "bundled" with content or software that the consumer is able to access for free because of WhenU's ad support. WhenU continually reminds consumers of this value exchange by putting the logo of the partner download right on the wrapper of the ads (for instance, "WhenU Save… in support of Radlight Media Player").
Chapell: When you talk about clickthrough rate, I think direct response. Do you see a branding component to what WhenU does, or are you strictly direct response?
Day: I do see a branding component. But I think the truism is that even when people say they're buying on a brand basis, they are still buying based on performance. So we always look at clickthrough rate across those campaigns and look for ways to optimize and balance what the marketer wants and what the consumer wants. WhenU's "Shaper" technology has been used for branding very effectively (we can "drive" an SUV across the screen, for instance) but we still want you to click.
WhenU has succeeded in creating an architecture that doesn't require the transfer or collection of any personally identifiable information. Similarly, it doesn't require a lot of other anonymous behavioral data that is typically collected to enable targeting. We don't use tracking cookies or PIE (Persistent Identification Elements); there is no server-side profiling, anonymous or otherwise-- which is a fundamentally different approach in our space. We're zealots about this, frankly. It can sometimes be much harder to do things this way. But it keeps us very clean. From a consumer standpoint, this leaves us very well positioned. That's what we mean by a privacy model: do you need to transfer, collect or track user information to target effectively? Can you give more while taking less? I don't think most people really start by asking these fundamental questions.
Chapell: I've always thought of WhenU as less of a BT company, and more in line with a real-time contextual targeting company. Do you agree with that assessment, or am I just splitting hairs here?
Day: We do both. I don't think you’re splitting hairs. I think the marketplace has latched onto the idea of 'behavioral targeting.' One can logically extend behavioral to include behavior at that moment. So contextual is a subset of behavioral. And it ranges up to behavior over the last 30 or 60 days.
What's interesting is that the half life of behavioral data online is very short. If you don't have a behavioral model where you can act upon the data in the first 24 hours, you lose a lot of potential clickthroughs. It isn't like the offline world where you can build a model and categorize people as 'frequent travelers' and have that be actionable over a three- to six-month time period.
So I'd argue that the behavioral model online, it may be 24, 48 hours max-- it's a relatively compressed model. It argues for having a real-time component to what you do, and how you update your scoring on the user-- because users change. A fair amount of our business right now is done contextually. But we also run behavioral campaigns, though all of this is done in a relatively compressed time frame. The longest we'll run something is about 30 days.
Chapell: A few companies in this space have started talking about the concept of providing the end user with some level of control over the profiles being built on them and/or the types of ads that they'll see. Is WhenU currently thinking about doing this? What are the challenges around providing this level of access to consumers?
Day: I'm not yet convinced that most people want to be that actively involved in managing their personal profiles or the types of ads they'll see. I think you can split this into two different things.
The first piece is allowing users to actively participate in improving the model. What TACODA and others are exploring is the idea of sharing the data. They're saying: here's what we have collected, or why you're seeing this ad.
On the first one, we're actively experimenting with it right now. I don't think the majority of users will actively get involved in fine-tuning their ad targeting. There's some that will, and there's an advantage for us and for them in doing that. We've been testing the ability for users to do very simple things, such as: "Even though it looks like I'm interested in travel, I'm not-- so don't show me any ads about travel." Those are things that are exciting to us. On the other hand, not every user is going to use this, and you have to have a very small, casual model.
The other thing is just sharing the information. We have the ability, but we don't do it right now, because it wasn't built in the model. It's not in a format right now that we could put in front of consumers -- the data is stored on the consumer's machine -- but a subset of this could be done pretty easily if it became something that consumers wanted. Consumers may be more interested in seeing data that is actually being harvested from their machines-- but since WhenU keeps the data on the user's machine rather than collecting it on our servers or sharing it with third parties, there may not be much value-add to the consumer in being able to view that data, since it's not being sent anywhere.
Alan Chapell: The more privacy concepts that anyone in this space incorporates -- things like providing consumers with some level of access and transparency into the data being collected -- it would really take the winds out of the sails of those who say that this space is consumer unfriendly.
Bill Day: Behavioral is still a new thing-- and new things tend to be controversial. We don't want to remain controversial forever. One way to do this is to educate consumers by just giving them access. Someone who understands how WhenU's privacy model works -- that the data remains on the user's machine -- will be a calmer person. Education is big part… one of our advantages is that we can communicate with the user both during installation and on an ongoing basis. I agree with you that the more transparency those in the space bring to the consumer experience, the better off everyone will be. There is a "Big Brother" aspect to BT that needs to be demystified.
Chapell: On the OMMA Hollywood panel recently, you mentioned that you guys are growing your user base significantly. What are the keys behind this growth, particularly in light of recent news that others in this space appear to be dealing with shrinking user bases or exiting the space altogether?
Day: As far as I know, everyone in the space -- other than us -- is dealing with shrinking user bases and revenue. And there are a couple keys: One was moving forward early on a new strategy in a proactive voluntary way. From a consumer standpoint, we've done a couple of things well that have allowed the base to grow. One is our distribution method. Co-bundling with our software partners has worked very well for us. It allows us to establish a degree of value with the consumer, since the consumer can always make a choice. With most of our partners, you have to pay something to do something-- that's a value proposition. You can't get access to the partner's software for free unless you agree to see the ads-- we've made the deal very clear up front and people respond to that.
At the same time, we've worked very hard to improve the experience of the ads. I referenced frequency caps, the idea of greater targeting capability; you try to make the ad experience as high quality as possible, only showing an ad when it is most likely to be considered useful and welcomed by the consumer.
The last thing is focusing on user communications-- the retention side of the business. While I can't say that we have things licked there, I think our retention has been improving, and that adds to the overall user base as well.
Chapell: The downloadable software space would seem fairly robust these days. One application that I've kind of kept my eye on recently is Ding by Southwest Airlines. If Ding is successful, I can certainly envision others in the retail and travel space following suit with their own desktop applications. Do you think others will announce their own desktop applications, and do you view that as a potential threat to your business?
Day: Actually, I don't think it is, and I'll explain why.
First of all, though, I do think you will see others follow Southwest Airlines' lead. I agree the market for downloadable apps is very robust. I know there have been spyware issues, but consumers, with anti-spyware tools, still seem in control of their desktops. We just look at it empirically: the number of downloads occurring is increasing very rapidly.
Ding is a great example of a corporation saying, hey, we can take advantage of this. So I can certainly imagine another travel company doing that and communicating with their best customers.
The advantage WhenU has is that it's a horizontal play. I'm not a big fan of vertical software solutions when it comes to these sorts of applications. The reason is, for the vast majority of consumers, downloading software is still an effort. If you think, vertically, how often does someone look for a date, or buy a car, or book travel or shop online? You do these things once a month, maybe three times a year-- not enough to support a downloadable application.
The WhenU opportunity is to play horizontally and offer these values to users when they need them, all in an all-in-one sort of situation. I think Southwest or others can develop their own complimentary applications, but I think they're still going to value partnering with a third party like us because they'll always want more users, who they won't be able to reach through their direct efforts.
So the Southwest application is great for us. It just drives a greater degree of consumer awareness and comfort with downloadable software, which really aids us.
Chapell: Any final thoughts?
Day: I think behavioral is in a place to grow well. One of the impediments to online advertising's growth is a lack of targeting for those consumers who don't target logically. The fundamental rocket power that's going to propel the space is, I think, going to be behavioral targeting. The most interesting thing for WhenU continues to be the transition from adware, and all the controversy, to being recognized as a quality permission-based behavioral solution.