The Mystery of Display

Last week, almost two weeks after word spread that Microsoft had an interest in Yahoo, MarketWatch.com published an article titled, "Microsoft’s play for display," with the subtitle, "Buying Yahoo a major bet on a new boom in such advertising." Really? Sarcasm aside, most of those reading that article do not work in the field, and the writer most likely felt as though he uncovered a secret strategy given the constant emphasis placed on Microsoft competing with Google for search. Then again, with Google’s stock down almost 31% this year, the most recent whack which took the stock solidly below 500 happening two days ago on third-party data suggesting slow to zero growth on paid clicks, the Google monster seems less scary, although in theory every bit still as dominant. While Google probably makes more money on display ads than almost anyone, especially if you consider that their AdSense ads are really just display ads that show text links ads instead of graphical ones and a small purchase they made called DoubleClick, Google isn’t a display company. They are a technology company. Outside of their billionaire head of business development, I wouldn’t relish a sales role at Google.

Sales by definition works counter to technology. It relies on people, whereas technology often looks for ways to do without more people – certainly technologists sometimes do. And in engineering cultures, the sales roles quite often play second fiddle in importance and those filling them second class citizens. A story that comes to mind to further illustrate the fundamental differences between sales cultures and technology cultures comes from someone who attended the recent "Crunchies," an awards ceremony honoring Web 2.0 and other engineer driven sites. Winners had a time-limit of 30 seconds per acceptance speech. Turns out five seconds would have been ample time. Put a stellar ad sales guy up there, on the other hand, and five minutes later he or she would still be recounting an anecdote with the audience in tears having laughed so much. In the ad world, much like in the entertainment world, the deal makers get treated like the engineers of Silicon Valley.

Technology culture versus sales culture, machines compared to people, this defines search versus display, and it explains why a search company hasn’t yet become a display company or why another that traditionally fared well with display, all things considered, could find themselves dwarfed by a company that seemed like such a distant second. Search versus display has played itself out in total ad spend as well, with search rising from a fraction of online spend to encompass the largest piece by almost double. Last year, display was dead. This year, though, it’s long live display, as many analysts now think that display, if not the driver of growth, will be the beneficiary of increased online ad spends. The aforementioned MarketWatch article says, "Market demand for such ads, Yahoo’s forte, are expected to grow sharply for several reasons. Faster broadband connections open up the potential for "rich" media — defined as video or anything other than just static display. Further, companies that have resisted Internet marketing in the past have started to, sometimes grudgingly, warm to the medium." If you read that and took a double take, so did we, as I had to check the date of the article, thinking at first the author wrote it five or more years ago. While those same macro-trends still hold true, the big brand dollars and rich media will only account for a small percentage of the growth. Increased targeting for better yields stands to make a much more monumental impact.

Nowhere does the issue with display hold more true than Affiliate Summit. Outside of the mobile subscription products, hardly any companies there make money on display. Affiliate Summit featured a few interesting technology companies and many networks, but not one display company. Advertising.com, who had a decent presence, came on behalf of their affiliate platform, now greatly enhanced through their acquisition of buy.at; they did not attend to promote the company’s industry leading ad network. And, this is a truly fascinating problem. Think about many of the companies you met, and/or many that you know in this arena. If we broke down by revenue the largest segment of traffic and the predominant verticals of offers, we would have email for traffic and subprime, education, and mortgage for the verticals. Only the latter of those verticals, education and mortgage, managed to cross the display chasm. Outside of education and mortgage, I can’t think of others that have managed to robustly thrive on display as well as email. And, when it comes to education and mortgage, they have done stellar on email, but email doesn’t eclipse what they can do on display or search. The same doesn’t hold true for that other star of email, subprime which includes payday loans, specialty credit cards, and other loan types for those with poor or no credit. Given the amount of money that takes place over email, and considering that those who read email probably surf the web, you would think that we’d have subprime advertisers in the top 10, top 50, or even top 100 advertisers of display, but we don’t. Further more, that’s what makes display so tough. Unlike search or its equally large offshoot contextual ads, the traditional graphical display business doesn’t offer the same fine tuning or digestible budget.

With display, you can’t spend one-thousand dollars and reach a proper sample. With display you could spend one-hundred thousand dollars and be no closer to making certain performance-based categories work. The lack of subprime success via display highlights why incentive promotion has fared better. People might search for pay day loans or they might definitely click on them in their inbox, but so far, you can’t just pepper the display world and have them click. You can, though, pepper the display world with free offers and get them to click. Once you have their attention, you can then show them certain subprime offers and some will convert legitimately (not doing so just to get their offer). That you can find the user this way means they exist, and as display can make it so that companies find them directly instead of accessing them because they went for something else, will mean those in display make much more. While we know display will continue to focus more and more on branding dollars, I wonder if it will ever become the equal opportunity vehicle that search is or the subprime killer app. that email is. With search and email getting either tougher or more restrictive, so many are looking towards display, but I’m not convinced display is looking to them.