In the second of three parts, Dave Chase of the Altus Alliance argues that in five years all advertising will be behavioral.
Editor's Note: In part one of this short series, Dave Chase explored where interactive media and marketing will be in five years, and described the media consumption habits of a hypothetical married couple, Mike and Jill.
Meanwhile, let's take a look at what's going on behind the scenes. The cookie that the cable company has stored is keeping track of various actions that Mike and Jill are taking (sites they visited, shows they watched, searches they performed). This behavior is combined with the ad marketplace system running at Google or the particular search provider of choice. This system is similar to Google's Adwords system or Overture's Precision Match. In the future, it's likely to include behavioral targeting attributes as well.
In this ad marketplace, millions of similar actions are aggregated and offered up to what, by 2010, will be millions of advertisers for sale in a real time automated auction. These marketers will have established their spending levels, as well as behavioral and demographic profiles. In the time it takes to complete an average search, several advertisements have already been sold against each of the programs recorded for Jill. On the media outlets' sites, they are doing additional optimization (a.k.a. "inventory yield management"). This optimization determines what the optimal type of ad to serve is. In one situation it might be a textual advertisement, while in other cases it might be a more traditional TV ad.
As Jill goes to watch the travel shows that Mike has teed up for her, the ad delivery system is poised to take action. The way in which the ads are viewed will be dependent on the couple's billing preference with the cable provider (yet another yield management variable). They may have chosen the free cable option that requires them to watch ads at set periods. As the show starts, a number of advertisements appear at the bottom of the screen. A couple of these have dollar signs next to them, indicating that Mike and Jill can reduce their cable bill if they watch the ads. This is attractive, particularly since Jill wants to watch them anyway since they are infomercials for a San Diego area spa. She can choose to watch them now or later.
Later on in the evening, Jill checks her email before going to bed. The ad delivery system knows this is the same person who has been watching ads about San Diego area attractions, so it serves up some discount offers for packages to San Diego. Jill then emails the offers to Mike with a message about how excited she is about going to San Diego.
Who knew that an ad delivery system could enhance marital harmony?!
Will these sorts of events transpire five years from now? I believe so. Undoubtedly, the specifics won't take place exactly like this, but it's not a huge leap to get to this place with consumers and businesses that are more than willing to benefit from the experience.
If you buy all or part of this scenario, then what does it mean for the parties most financially vested in the ad marketplace -- media outlets, ad agencies and marketers?
To start, it means further evolution in their business models. Perhaps the most radical impact will be on ad agencies that have already seen their business evolve.
Tomorrow, I'll make the potentially provocative -- and potentially ludicrous -- statement that Google will be the largest ad agency in the world by 2010. While this notion may not seem worth thinking about, viewing the ad agency business through a Google prism will, I hope, cause ad agencies and their clients to experience profound insights.
If you want to have more fun with the Mike and Jill previous scenario, you can weave in various other variables that include, but aren't limited to, the following:
- Product placement evolution. At one time there was a website that allowed you to buy products that were shown in TV programs. Think about that woven into the aforementioned ad marketplace. This is an evolution of what Advertising Age's Madison+Vine regularly reports.
- User reviews. User ratings of various advertiser products could become another variable determining which ads get served. Amazon-like collaborative filtering can be facilitated thus increasing content consumption.
Tomorrow: Google in 2010.
Dave Chase is a partner with Altus Alliance, which specializes in driving revenue traction for emerging businesses. He publishes a blog entitled Market Velocity that focuses on how emerging businesses can gain market traction. Before joining Altus Alliance, Chase spent nearly 20 years in the industry with the last twelve years at Microsoft in various senior marketing and general management roles, including his role as MSN's managing director for industry marketing and relations. In that capacity, he was responsible for MSN taking a leadership role within the Interactive Marketing industry to grow Online's share of the overall ad market in concert with AOL, CNET, Yahoo!, Google and other market leaders.
Chase played leadership roles in launching several new businesses within Microsoft including Microsoft's entry into the enterprise software and server business which is now an $8B business. This included co-leading Microsoft's first vertical marketing efforts where he grew the Healthcare vertical market from virtually no presence to a market leading position. The healthcare business now represents over $400M in revenue for Microsoft.
From there, he was integral in Microsoft's entry into consumer Internet businesses that achieved both critical and financial success. These included Sidewalk, Encarta and HomeAdvisor, which were among the first profitable consumer Internet businesses for Microsoft. He has contributed numerous articles to iMedia.