April 13, 2010

Up Close and Personal with Dave Morgan


Madison Avenue's interest in understanding people has always been its reason for being. The same goes for publishing. For years Time Warner's publication, People Magazine was the gold standard due to its ability to get "up close and personal" with everyone from the family next door to the families living in the White House or Buckingham Palace.

However in 2007 the ability to understand people has changed. To some, it seems that the only way to stay up close and personal with the consumer is to have a robot-like understanding of technology. Consider that Google bought DoubleClick, Yahoo purchased Right Media, Microsoft's AQuantive, WPP Group's 24/7 and most recently, Time Warner's AOL Internet unit's acquisition of TACODA.

It raises the question, "How can a marketer still maintain a common sense relationship with its consumers without having to get an advanced degree in widgets, or begin using pocket protectors and getting retro-fitted for geeky, coke bottle-thick glasses"?

Okay, are we exaggerating? Well, this is Madison Avenue!

However, rather than the editors try to explain how to understand people in the digital age, we thought the best person to do that would be Dave Morgan.

Dave Morgan founded TACODA in 2001 with the goal of applying next-gen of target marketing technologies to help marketers stay close to their consumers in the computer age. Prior to that, from 1995 to 2001, he founded and was the Chairman/CEO of Real Media, Inc. A lawyer by training, Dave served as General Counsel and Director of New Media Ventures for the Pennsylvania Newspaper Association in the early 1990's where he helped launch more than a dozen new media businesses.

We sent Tim McHale out to chat with Dave but with explicit direction that McHale keep his pocket protector and geeky glasses at home.


Tim: How's it going?

Dave: It's going very well!

Tim: For those of our readers who aren't familiar with Tacoda, please explain briefly the kind of service your offer advertisers.

Dave: Sure, Tacoda is the world's largest behavioral ad network. We started back in 2001 and developed technology for web site publishers, but then a couple of years ago we expanded and made it an advertising network. That's the focus of the business. We have more than 4,500 websites who are our partners, like WSJ, NY Times, NBC, Fandango, Comcast etc...

Tim: What do you do exactly?

Dave: When people surf these websites we anonymously segment consumer browsers into target groups for advertising. And we use this anonymous information to segment them into people who are looking for specific types of goods and services. This means that as people surf on other sites in our network we're able to deliver more relevant information to them.


Tim: How are you different from Advertising.com?

Dave: Well, Advertising.com is a performance-oriented broker network. They're focused on cost per acquisition and cost per click. They have a massive network and they use behavioral targeting as one of a number of techniques to try to maximize conversation and clicks. They sell leads, it's very direct response-oriented.

Tim: But to the untrained eye, I would imagine that Tacoda and Advertising.com would be perceived as being in the same bucket.

Dave: Depends on how little the trained eye is. We only focus on brand advertisers. We only sell on CPM and we only sell people based advertising. We sell car buyers, we never sell car sections.

Tim: If I'm a media buyer am I buying from Tacoda or the publisher?

Dave: It's a wired-down network that we control. We no longer license technology to anyone.


Tim: Are you selling the Tacoda network like 24/7 Real Media, a company you personally also created?

Dave: Yes, and once again, the differences between Tacoda and 24/7 Real Media are that they are very response-focused. We believe the real opportunity now is with big brands. As big branders are moving online they buy more along lines of television and magazine metrics. Tacoda is not like buying traditional media metrics where you buy editorial adjacencies and integrated sponsorships More than 80% of the ad supported page views on the net do not have an intuitive valuable commercial context like car pages, travel pages, tech pages.

Tim: Really?

Dave: Yes. Most of the content is general news and social and photo sharing and mapping and things that don't have natural a commercial context. So that gives a real opportunity for behavioral targeting because while the contextual areas sell out at really high rate, 15 and 20% rates these non-premium areas are lucky to sell for 50 cents. We come in and apply this massive database and see 80% of the US browsing population on an unduplicated basis, about 50 xs per month each. We have massive reach in our network. We've got more reach than let's say 2 portals put together.

Tim: When you're bucketing behaviors, is it based on cookies?

Dave: Yes, we use cookies. When a consumer's browser goes to a page in our network like Kelly Blue Book.com, we see a browser that's looking at SUV content in a Tacoda cookie on their browser. We can see the cookie which lets us know that at a certain time a consumer looked at SUV content. So when that person show's up on a page on another Tacoda network site, let's say About.com or USA.com, we will find them on a non-contextual page which has a remnant placement that we have taken control over. We'll sell and serve an auto ad to that person on that page. But we only sell out-of-context advertising targeted according to previous behaviors.


Tim: Can you add more than a Kelly Blue Book cookie to define particular user?

Dave: We could but we don't. We think the most critical issue in this area is going to be protecting consumer privacy. We only work with anonymous data. We are very careful in appending other data because you never know how it was captured. And we think consumers will be nervous about that. Plus we found we don't need to. In other words, there are all these normal metrics marketers have been using for a long time, the demos and socio-demos for targeting that don't really apply to us. We find it's more valuable to see what people are actually doing than what they say they are. And the kinds of rates we see - whether it's tracking brand metrics or performance metrics - we can dramatically enhance the value of the advertising.

Tim: If I'm on Kelly Blue Book, I would be in that bucket versus a vacation destination. Do I have that right?

Dave: Yes, but there are some things that are just intuitive about hand-raising. We capture more data a day than Wal-Mart does. So we have the world's largest behavioral media database. We capture 20 billion behaviors everyday. This allows us to start putting things together in very non-intuitive or counter intuitive ways. We can find out that people that like independent films really index well for Lexus cars.

Tim: That means Tacoda can do behind-the-curtain analytics.

Dave: Yes, we do that all of the time.


Tim: Why hasn't behavior targeting been the driver for advertisers?

Dave: The media business is a very slow-to-change industry. While there's this idea that's it's crazy, frenetic constantly changing, it's not. It's people spending other people's money. They don't want to get fired so they don't want to spend money much defiantly than they did the year before. The thinking is that since they didn't get fired last year what they did then is still working this year.

Tim: There's also that behavioral targeting is always associated with a CPM increase.

Dave: It's actually not. When you're targeting ads into non-contextual inventory, it is actually cheaper. But it's a change and change happens slowly. First marketers needed to become comfortable that the technology and technique worked. It took years of work and dozens of research projects and case studies to prove that. And then it was about getting scale. No one wants to buy ads in a Petri dish. They want to buy tens of millions of audience at one time. So until we built our network and got it up to massive scale, big enough be to bigger than a portal, we didn't get the attention.

Tim: Right.

Dave: But if you ask most marketers, they all know it's going this way. It's been predicted for 20 years that we'd go this way. It's been a question of addressable, measurable digital, interactive media that has been the Holy Grail. And that's always had some high expectations. Finally we now have these applications. Our network was the first that actually delivered on the promise.


Tim: I expect that AOL will certainly increase the awareness of the opportunity here. It's going to raise the awareness and help the business overall.

Dave: I think that's a good indicator that the market is now getting ready for this. It doesn't surprise or disappoint me that it took the market awhile to understand it, that's just the way things work.

Tim: You mentioned that Tacoda has its own sales force?

Dave: Yes, we sell primarily through agencies, the large digital agencies that are part of a holding company. We have a lot of triangular relationships with direct client communication. The agency helps us with the system, since ours produces an awful lot of insights for advertisers. For example, we can tell advertisers like Snapple what kind of responses they're seeing with the new black tea product. And how to optimize all media, not just online but all media to best reach those targets. It's because we have real time insight.

Tim: If I'm going to be advertising, am I sitting down to a user screen like a DoubleClick where I'm inputting tags?

Dave: No, we're working with large brand-oriented programs. You're working with people. It's not a self-service relationship, like search.


Tim: If an advertiser makes a $100k buy, do they just give you the Insertion Order?

Dave: Yes, we're going to talk about objectives, metrics goals and flight dates, plus what kind of other media they're running.

Tim: Are you offering a mobile product.

Dave: No, we're not doing mobile because there's just not enough scale there.

Tim: How about pre-roll?

Dave: The big issue there is pre-roll is already sold at a real premium and it's also a scale issue. There's only so much of it available. We're trying to work where advertisers can make a big difference by delivering tens of hundreds of millions of impressions.


Tim: What would a threshold buy would be? If I'm going to make a difference, how much $$ would I have to put on the table

Dave: The best programs for us start at $25,000. The average program is from $250k and $500k and that's moving up constantly. We have a lot of $7-figure programs per quarter. That's really where people can begin making a difference.

Tim: I imagine that auto is a big category for you.

Dave: Auto is big, technology is big, packaged goods are really big because consumer package goods people really understand who their target audiences are. And consumer electronics is also a big category for us. We do a lot of work with Sony and Panasonic.

Tim: Are you familiar with in-banner chat?

Dave: I have seen some of that. We can deliver any form of rich media as long as we know that it can clear on enough sites.


Tim: Can you deliver onto a newsletter html?

Dave: Typically, no and the reason is very few email readers will let cookies through. Nothing prevents us from delivering, but we can't really target well so email is a limitation. It's really hard for any email to accept dynamic advertising.

Tim: How do you see Tacoda working if there is a connection with television usage?

Dave: Clearly what happens on the PC today is what's going to happen on the TV in 4 years. TV is going to internet-protocol addressable, measurable advertising. It's going to be measurable first and then addressable later. All of those lessons are being developed on the web now. There was a question 4 or 5 years ago as to whether it was going to be internet or proprietary-driven. We're very cognizant of what we do now on the PC is what will drive TV tomorrow.

Tim: So we won't need Nielsen anymore for a sample base

Dave: Not the way it's used today. They'll still be a need for Nielsen and ComScore's third party data. But it will be used differently and of course now it will be census-based not just panel-based. You'll use census and then panels to get deeper information insights.


Tim: Give me an example.

Dave: Sure, we mapped our entire census-based database against the ComScore panel. It gives us extraordinary insights around demographics and e-commerce. For as much as we think behaviors are the most important things to look at, clients still want to see the metrics they've been using for years.

Tim: Most media buys back into the list of properties on the plan as opposed to beginning with them. Something like this is by definition right off the objectives page. It fits the exact description of what the target of the buy is supposed to reach.

Dave: And that's what's really critical. Two-thirds of our sales team have been selling ads for 8 years and have been in media for a dozen years or more. We have a very senior team because we talk specifically to a marketer's original objectives. We are not a retrofit. Tacoda enables an advertiser to begin and end with "who is it you're really trying to reach and why?"

Tim: That good.

Dave: Plus, we are extremely flexible. If a marketer is targeting their brand to health-conscious people and sports and fitness people, they may find out it doesn't work for the sports and fitness audience, so they can drop that element out of the buy quickly. Advertisers can do that with Tacoda. Actually a lot of clients use us on the front end of a plan because we can start determining where the best target groups are and the best responders are. That's what we do with the movie industry. We work with a number of studios to do that and we've done that with some CPG product launches.


Tim: So if a media plan needs to deliver people who buy consumer electronics, it would be less important about what site it's running on than the behavior that the ad is served to.

Dave: Yes, we serve to people not pages.

Tim: But aren't advertisers still sensitive to environment.

Dave: We run very much a velvet rope network so we provide some transparency of all to the network. We do not use un-moderated UGC. We don't have any sites that advertisers would be uncomfortable with. For every 10 sites that want to join the Tacoda network, 9 of them get turned away. And the reason is while we are a network, our largest advertisers are not acquisition-based marketers like Net Flicks and Vonage. They are advertisers like GM, HP, Coke, and P&G.

Tim: Do you find yourself in competition with publishers?

Dave: There are concerns about that but not once a publishers sees how we sell it. We don't sell an ad in NYT.com or ad in the business section. We sell "small business decision makers-type" demographics on our network, based on their behaviors. A marketer can't cherry picking where they want the ad, nor do we let them exclude sites.


Tim: But if my ad happens to run through Tacoda on NYT, they will receive some revenue.

Dave: Yes. They'll get revenue on an ad unit that was typically a remnant ad. Every major site today needs to work with 3rd party channels to maximum their yield. And as far as 3rd party networks go, we are the highest-yielding and we have all the best brands because we don't do direct response.

Tim: One more question. What advice would you give a college grad that wants to get into the interactive ad industry?

Dave: I think the ad industry right now is an extraordinary place for young folks coming out of school to get into because of its dynamic. It's moved quickly into a technical and quantitative-focused industry. Certainly people coming out of school today are better trained than almost anyone working in the ad industry today. They could have a real advantage. We're desperate for talent because the digital side of the business is growing so fast. It's so hard to find anyone with 1-3 years experience in media planning and buying. There's a huge need for entry level folks coming in. This is an industry that is really coming of age and its going to have a huge impact for the next 8-10 years.

Tim: Dave, this was great. Thanks a lot!

Dave: My pleasure, Tim.


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