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Evidence of Web Advertising Intelligence Visions of Web X-mas Past and Future from Avenue A’s Atlas Institute

Imagine if the accounting firm of Ebenezer Scrooge and Bob Cratchett tabulated Web hits, ad impressions and conversion rates instead of shillings or goose futures. “Bah, humbug,” Scrooge might curse as the avalanche of numbers from the most data-rich advertising medium in existence piled up around him. The ghost of Christmas Future would then reveal to the bean counters how Seattle’s Avenue A, Inc. successfully compiled all of this information in gigantic data stores. And, by setting up Atlas DMT (the DMT stands for Digital Marketing Technology) and the Atlas Institute, displayed the decidely un-Scrooge-like generosity of sharing its technology, and its wealth of knowledge, with all the Web’s interactive marketers and agencies.

Today, powered by Atlas DMT technology, the Atlas Institute, has become one of the world’s premiere E-advertising technology think tanks, and created the most complete vision of Web consumerism in the E-commerce cosmos. So keen is its acuity, in fact, that it can peer beyond this season’s gloomy general economic forecasts of a mere 4% growth over 2001 (making it one of the worst performing holiday shopping periods in the past two years), and picture a more promising online retail sector — such as EMarketer’s recently estimated Net increase of 16% over 4Q 2001 (excluding travel sales).

This year marks the second season Atlas has released a holiday shopping study published under its Digital Marketing Insight label, and definitive trends emerge from the analysis. As our discussion with Young-Bean Song, Director of Analytics for the Atlas Institute and Karl Siebrecht, Atlas DMT’s vice president of strategy and product management reveals, the many gifts that an Atlas has to offer in this or any other season, are the know-how, know-when and know-whom of Web advertising metrics.

Seattle24x7: What ‘s under the Atlas Institute’s tree of knowledge this season in terms of holiday research?
Young: Compared to our previous study, we observed many similar patterns, but we also saw some new things like the shortening of the online retailer’s drop off period which typically occurs a week or more before Christmas. From 2000 to 2001, we actually saw the time shorten from 10 days to seven days attributable to the higher confidence that people have in the delivery time that retailer’s are promising.

Seattle24x7: Last year you observed that the busiest online shopping day of the year was not the day after Thanksgiving but in fact mid-week on a Wednesday, indicating that the sharpest buying activity is going on at work?
Young: That’s exactly right. Online shopping peaks during the work week, during the work day, at lunch time. We know that from the sales activity we’re monitoring on lots of different E-retailers and brick-and-mortars. It’s very clear that for people who have access at work, prime time Internet shopping is during work hours. It makes sense. They’re sitting in front of their computer. They have their broadband or high-speed T-1. It’s easy for them to access whichever store they need to.

Seattle24x7: The latest reports on the general retail sector contrast sharply with online E-commerce projections. How do you differentiate between the offline and online consumer demographic?
Young: We know that the people who are online, especially who are online while they’re at work, are a more affluent demographic. They spend more dollars online compared with folks who connect from home. Their incomes skew higher. There are a lot of specifics, some of which we publish, that show a very clear online segment that not only spends more online but also consumes more media in general.

Seattle24x7: How important then is broadband as a factor for holiday shoppers?
Young: Speed of connection is not only correlated with the number of pages and media consumption, it’s also consistent with consumer spending habits and confidence in the medium. People who have broadband connections have more confidence and are more willing to spend more dollars online. That’s consistent with all the at-work studies that we’ve done and when the conversions are peaking (at work and at lunch time).

Another factor that will influence the offline sector this season has to do with the shipping problems they’ve been having in terms of inventory. People who expect that to impact their selection walking into the store on the weekend, may opt to go online where Amazon.com has on the shelves exactly what’s displaying on their home page. For a variety of reasons, I think you will see a strong holiday season for the online segment. and probably a depressed impact overall for general shopping this holiday season.

Seattle24x7: Earlier this year, Atlas published research demonstrating that where you place your advertising online is at least six times greater in terms of producing response than the content of the ad itself?
Young: The results were very consistent with direct marketing and what we’ve found in direct mail. The biggest impact you’re going to make is reaching the right people, which is the science of finding the right media placement. For instance, finding the right place on Yahoo! Finance vs. Yahoo! Sports depends on what you’re advertising for. What we found was that when we looked at campaigns over and over again and we looked at the actual conversion rate, we saw that there was a huge variance between placements, between hitting the ball out of the park and getting really horrible results.

Seattle24x7: Seemingly a much greater variable than an ad’s creative?
Young: When we looked at those ad placements, at a 10%-off offer vs. a 20%-off offer, or at a red banner vs. a green banner, we saw big differences in both. But when you compared creative vs. media placement, we observed a 6x difference in the variability, and in the impact you can make from optimization, once you have this data. So the recommendation that we ultimately made to all of our online advertisers was the first thing you need to optimize is where you’re buying and placing your advertising. Once you’ve optimized your ads, the next step is to optimize your creative, your offer.

Seattle24x7: And yet, the medium offers such extraordinary capabilities for tailoring and personalizing the creative message?
Young: As more and more people adopt broadband and as more and more agencies and advertisers use more rich media, which is certainly becoming the case, (we have some advertisers where 80-90% of their creative is rich media), you’re going to see more creative and more impactful creative strategies that do make a difference. The basic .gif banner is still a significant portion of the ads that are being served these days and you’re going to see that change significantly in the next couple of years. There is a lot of room for improvement when it comes to creative strategies and optimization.

Seattle24x7: Have you found definitive evidence to support the notion that Flash banners are more successful than .gif banners by virtue of the richness of the media?
Young: Yes, there are numerous studies actually. Some from Dynamic Logic, and some proprietary ones that I’ve seen for specific advertisers, that have shown the benefits of rich media especially when it comes to branding metrics. Things like brand awareness, message association, etc. Whether it’s Flash or DHTML or Eyeblaster or whatever, there are significant gains especially when it comes to branding.

Seattle24x7: Your technology allows ads to be served according to whether the consumer has seen a certain type of an ad or has been to a Web page before. Is that capability being fully leveraged with advertisers?
Young: The advertisers who are using third party ad servers and are using Atlas DMT are realizing a lot of the gains you are talking about. Sequencing, for instance. Being able to show your best banner first. Or your best offer first. Or whether it’s creating segments of your audience and giving the 30% offer to the person who has never been to your site before versus someone who shops often and is going to make a purchase without an incentive. There’s all kinds of ways that advertisments can leverage targeting technology and rich media to increase the performance of their advertising and the number one channel to make that happen is third-party ad serving.

Seattle24x7: For those who don’t like to see advertising, the greater intrusiveness of pop-up ads or Eyeblaster ads seems like it could backfire in some cases.
Young: Well “liking” advertising is not necessarily correlative to the effectiveness of advertising. Part of the reality of advertising is that it is intrusive. Advertisers do benefit when people like it — y’know, the Budweiser frogs or Michael Jordan, or whatever, but it’s still taking time away from the TV show that you’re watching. So TV has gotten away with having an intrusive advertising mechanism and online has been unfortunately and unfairly bashed for using the same tactics that marketers have been using for years. Advertising that works is sometimes obtrusive.

Seattle24x7: Another one of the published reports on your Website is rather convincingly titled “Proof that Online Advertising Works.” What is that research all about?
Young: That’s actually a collection of different pieces of research, some from The Atlas Institute, some from other sources, like DoubleClick, Dynamic Logic, and AdKnowledge.

The studies basically looked at the different questions and the different myths that people have about online advertising. For example, the myth that online advertising is just a direct response medium, or that you can’t brand online. Well, in fact, that’s not true. One of the studies that the Atlas Institute did was what we called a True Lift Study in which we created separate test and control groups of users in our ad serving system. In the test group, we showed actual advertising, and to the control group we showed American Red Cross banners. Over a month long period we looked at the resulting sales from those two groups of people after being exposed to both of those campaigns — the beauty of a control group and a test group. We actually saw a 10% lift in the test group over the control. And, 80% of that lift was from users who never clicked on any advertising, further illustrating the fact that online advertising does work, and that it’s not just a direct response medium.

Seattle24x7: What other insights have you uncovered?
Young: We found that 13-14% of users who are clicking on your ads are actually people who have already been to your Website which points to the retention value of online advertising — that people are using your advertising as channels to go back to your site and to purchase from you. One more tidbit on that study is the fact that the conversion rate of clickers who have already been to your Website is over 200% greater than users who are clicking and visiting your site for the first time. There’s a lot of that kind of evidence that really points to the power of the data and a lot of the value that people are missing and not attributing to their online advertising.

Seattle24x7: Can you describe the relationship between Avenue A and Atlas?
Karl Siebrecht: Avenue A was all one company up until late 2000. And we effectively operated like an interactive advertising agency. The one distinction being the fact that we built our own technology to service our clients. There wasn’t anything on the market at the time that was good enough to fulfill all the potential that the interactive medium had, so we built our own technology. It delivered great results for us, and we built some great client relationships.

Over time we looked at that investment and thought we could leverage it more effectively outside of our own agency by commercializing the technology. We opened it up to other agencies.

Seattle24x7: The current product offering is known as the Atlas MarketSuite 3.0. How is it delivered?
Karl: Technically speaking, it’s an ASP-based software solution. Our primary customers are the major advertising agencies, or the interactive arms of major advertising agencies. The core pricing structure is on a volume basis. So we get a technology fee, sometimes referred to as an ad serving fee (cents-per-thousand ads delivered). The technology fee maps to the same structure as the way online media is sold, (on a per thousand basis). We also have a number of add-on, more advanced features that are priced separately.

One of the planning tools that we’ve created is what we call SiteFinder. It effectively looks at all of the anonymous users who walk into your online store. And we ask the question, “Where else on the Internet has Atlas DMT actually reached these same users?” Atlas has served billions of ads on thousands of sites on tens of thousands of different placements. We’re able to generate a report that shows where your current customers and visitors tend to cluster on the Internet, which is great data for helping to find new prospects. Being able to go from these users who are exhibiting some kind of behavior on our advertisers’ Websites and then cross-referencing that with the billions of ads that we serve across the Web requires an immense amount of computing power that is completely enabled by what we call WARP, our web analytics results profiler.

Young: Another tool is the GRP & Reach Forecaster. We’ve taken the data that we’ve collected and combined it with some of the leading syndicated research out there and actually created the industry’s first and most comprehensive tool that marketers can use to forecast how many users they’ll reach, and how many times they’ll reach them. They can slice and dice that by all the demographic segments that they want, and all in the planning stage before you serve a single ad. It’s a great example of using our data and analytics to really further the industry.

This has broken the door open for all the large brand advertisers, all those who denounced the Internet, who said you can’t brand online and I don’t care about conversion rates, I care about how many males 18-24 I’m going to reach on Fridays. All of a sudden, we’ve developed a planning tool that helps them do that and we’ve gotten affirmation from the Advertising Research Foundation that our methodology is the way to do it. We’re working with them to look at duplication across sites. You’re going to see more and more research coming out from us, at least quarterly, but hopefully more frequently than that.

Seattle24x7: Thanks for talking shop with us. Happy holidays!

Larry Sivitz is the Managing Editor of Seattle24x7.