When it comes to the effectiveness of online advertising, most people just think that if an ad for a product or service runs on a page of content directly related to that ad, it will be noticed, read and/or acted upon more than the same ad run in unrelated content, out-of-context; pudding if you will. But how do you prove it?

We started by working with some pros - OTX, a leading global consumer research and consulting firm (http://home.otxresearch.com/) that specializes in measuring and testing the impact of advertising messages on brands. In fact, we have done two, separate industry category studies on the effectiveness of contextual advertising with the folks at OTX; one with a leading personal consumer electronics advertiser and have just completed a second with a leading consumer packaged goods advertiser (Download the PDF).

The results prove what many have thought, but very few have ever tested: context works.

Our study tested the same skin care ad for three separate placements; on a general news page, on a page of content from a general news site specifically about skin care, and finally on a website specifically about skin care. 600 women between the ages of 18-65 saw each ad. The results conclusively show that the ads seen on pages of content directly related to the product produced significantly higher brand recognition for both the product and the advertiser than the ad seen in out-of-context content. (Read the press release here.).

Sometimes some of the most effective solutions in advertising are right in front of us. There certainly are a number of targeting options available for advertisers and their agencies. Geographic, demographic, behavioral, time-of-day are just some of everyone’s favorites. But as audiences continue to pursue their interests out beyond the portals, on the millions of vertical content sites (we like to call that the “Passion Tail“), smart brands will do well to start “in context,” before heading to the pudding.

Read more in Ad Age: “Contextual Targeting Boosts Loyal Following“

Last night, John Pavley, CTO of ContextWeb, and Derek Brinkman, VP of Product Development, presented the ADSDAQ Exchange self-service publisher portal at Scott Heiferman’s New York Tech Meetup.

With the able coordination of Dawn Barber from the NY Tech Meetup, John and Derek were pleased to be a part of the jam-packed agenda which included the following exciting, New York-area technology companies and technologists - check ‘em out!

1. Steve Rosenbaum: http://magnify.net
2. Oliver Hurst-Hiller: http://DonorsChoose.org
3. John and Derek: http://exchange.contextweb.com
4. Mark Ghuneim: http://www.trendrr.com
5. Ben Kaufman: http://kluster.com
6. Ben Satterfield: http://twiddla.com
7. Justin Ouellette: http://muxtape.com
8. Nate Westheimer: http://bricabox.com

To view the video of John and Derek’s complete presentation at the New York Tech Meetup at the IAC building, 555 West 18th Street, please click below:

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The Dallas-Fort Worth Interactive Marketing Association (DFWIMA) invited us down last Tuesday, March 11th, to speak with their members about the who, what, where, why and how of advertising exchanges.

For an hour, we spoke about media fragmentation, marketplace response from portals, sites, networks and exchanges and about something we call “The Passion Tail”.

In presenting “The Passion Tail,” I argue that sites are no longer as relevant as individual pages of content. If you look at the proliferation of The Long Tail of content publishers (in the millions) and how 75% of site entry is a deep dive thru search (regardless of publisher size), the consumer is connecting with her passions by going directly to the pages of content that matter to her. Exchanges are one way to make this phenomenon addressable to marketers. In particular, at the ADSDAQ ad exchange, we contextualize each and every page and provide a level of control for the brand advertiser not commonly seen in exchange or network models.

For those that attended the presentation, below, we have also embedded video of Rob Norman of WPP’s GroupM speaking at the IAB Annual meeting in February.

Video, audio and a copy of the presentation follows.

Video of Jay Sears, SVP of ContextWeb at DFWIMA discussing Media Fragmentation and “The Passion Tail”:

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As announced on their blog, last night was the inaugural event, Dream Big - the future of Women in Media, for the NYC Women in Media & Technology (aka Wimlink).

I spoke on a panel with Dina Kaplan (Co-Founder and COO of Blip.tv) and Nicole Tecco Reece (Principal at Tipping Point Partners). Juliette Powell (co-founder of The Gathering Think Tank) did an excellent job moderating a lively discussion and kicked off the evening on a positive note with the question,“What are we optimistic about over the next few years?”

Dina felt optimistic about the creative video content Internet users are creating from their living rooms. Her company, Blip.tv, focuses on enabling this creativity by providing tools and services for hosting, software, advertising and distribution.

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Our Story So Far:

In Part 1 of this series, I pointed out that .NET and LAMP development is a matter of preference not features, or performance, or scalability. Basically .NET = LAMP for Web 2.0.

In Part 2, I talked about how the lack of professional project management for open source frameworks can lead to constantly churning architectures and abandoned projects.

By now, you might think I’m a Microsoft otaku. Maybe. Or, maybe I’ve learned through 15+ years of trying to transform ideas into production quality code that the popular answers are not always the best answers. It is popular to say that LAMP is more scalable than .NET or that open source code is better because it is free. You don’t make many friends at in the high tech world by calling into question the ubiquitous popularity of LAMP.

But now for the dramatic conclusion of the Web 2.0 .NET vs. LAMP showdown: Managed Code, what it is and why you should care.

Did you ever wonder why your computer crashes? What causes the dreaded blue screen of death or the spinning beach ball of death? Unmanaged code. Managed code, a term coined by Microsoft but a concept found in plenty of LAMP environments, is code that has boundaries. Managed Code runs inside a VM, a virtual machine, and it must obey the edicts of the VM. If the VM says it can’t write to a particular location in memory then that location is off limits. If the VM says it has to stop execution so the VM can check the health of the system then that is exactly what the code does. In the world of Managed Code the VM is the traffic cop, the code is the motorist, and the computer is one big speed trap.

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Whether it is Microsoft, or some other suitor, Yahoo!’s days as an independent company seem numbered. And this is a sad thing for a company that created a unique culture that served as a model of excellence for Silicon Valleys and Alleys the world over.

I’ve never been an Microsoft employee, although I do have an offer letter from 1995 that I turned down in a misguided act of fealty to Apple, but I feel as if I understand the Microsoftie culture very well. Like Yahoo!, Microsoft has a one-of-a-kind culture. There are even books on how to run your life the Microsoft Way. The Microsoft Way is so virulent that their culture is often compared to Star Trek’s Borg–”You will be assimilated!”

Thus I don’t think this whole “buy Yahoo!” thing is going to work for the Yahoos (That’s what the cool Yahoo employees call themselves: Management Yahoos, Technical Yahoos, Paranoid Yahoos, Chief Yahoos.).

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Advertisers and ad agencies are abuzz with the prospect of a Microsoft - Yahoo! combination announced this morning. On an investor call this morning, cash king and man-at-the-helm Steve Ballmer said “scale matters”. This from a man who likes to win the “size” wars.

What are agencies and advertisers thinking this morning? Consider:

• Impact of Consolidation. There are two sides to this coin.
  • First, advertisers will be thrilled with the prospect of a serious challenge to Google’s hegemony. It’s a little added bonus that GOOG disappointed with their earnings (lucky timing). “Micro-hoo” will have to grow search share and defend and expand Yahoo!’s long-standing leadership with branded display ads (which Google is about to attack aggressively with its pending acquisition of DoubleClick by leveraging its DFP ad serving publisher base and DoubleClick ad exchange).
  • Second, watch for the continued rise of the “independents” — independent ad networks, ad exchanges, ad serving companies. Either way to slice it, we are a talking about a monopoly (Google) or a duopoly (Google and Microsoft - it’s funny that Microsoft is almost certainly annoyed at the prospect of a duopoly…) and advertisers are not interested in putting all their eggs in one proverbial basket. This holds true for Sir Martin Sorrell of WPP and are in the “frenemy” camp or if you are John Wren of Omnicom and are in the “best of breed” camp. Either way choice is, as Martha Stewart would say, a good thing. Among the independents would be ValueClick (independent ad network and ad serving - watch this stock go up and to the right), yours truly-ContextWeb’s ADSDAQ exchange (independent ad exchange) and an assortment of independent vertical ad networks.
• Media Fragmentation, Scale and Control
  • This Ballmer-Yang duo still needs to address the burning issue of media fragmentation impacting many advertisers. Audiences on the portals (Yahoo.com, AOL.com) are in decline and these users (the people advertisers want to spend money to reach) are spending more time on small and medium-size content sites–Chris Anderson’s Long Tail. This issue is not addressed in this transaction. No one here seems to have an asset like Google’s 1,000,000 Adsense publishers or a coherent plan on how to secure an asset like this.
• Scale and Control–the need for “Brand Safe” advertising environments. We predict the “word of the year” in the online advertising business will be: PLATFORM. It’s the P-word, learn to love it. Many of us are building scale around platforms (ContextWeb’s own ADSDAQ ad exchange, AOL’s Platform A and purchase of Tacoda, Yahoo!’s purchase of the RightMedia ad exchange and BlueLithium ad network, Microsoft’s purchase of the AdECN exchange). But advertisers are a (rightfully) demanding lot and they want scale AND CONTROL across these platforms. Most media companies are not able to provide this key “control” element. This is a barrier that must be eliminated before ad dollars, especially brand advertising dollars, flow onto these platforms.

Post a comment and be sure to see our earlier post on the MSFT-YHOO combo on its impact on the advertising exchange market.

More Links: Search Engine Land, The New York Times

Quick Recap: In my last post I talked about how the choice between LAMP and .NET for Web 2.0 application development has become a matter of preference not necessity. But what about costs? Isn’t Microsoft’s .NET stack more expensive than the free and open technologies that make up LAMP? After all it costs a web master nothing to download and install Linux, Apache, MySQL, and Perl where as Microsoft software actually costs something. If only the cost of development stopped with the check you write to Microsoft! By far your most expensive resource when developing the next killer web portal isn’t software, hardware, or salaries—it’s opportunity costs that will kill you before your killer app makes a killing.

Say you decide to use LAMP to bring your Web 2.0 app to life. You hire a couple of open source programmers and tell them what you are looking to do. They may do it all with custom code written just for you but it’s more likely that they take advantage of a framework like CakePHP or Maypole or Django. (The names are funny but these open source frameworks save you thousands of hours of coding.) The thing to worry about here is not just getting the project done but rather what happens one or two years down the road.

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The ADSDAQ online advertising exchange has been featured this past week in interviews with Jay Sears, SVP of Strategic Products and Business Development at ContextWeb.

Click the image to see the entire WebProNews interview:

Jay discusses the premium inventory benefit to advertisers of the ADSDAQ exchange with Abby Prince of WebProNews.com at December’s Search Engine Strategies Conference in Chicago. In addition, the meteoric growth of the just-launched, self-serve ADSDAQ publisher platform is highlighted. Self-serve publishers grew to 1500 in just 30 days beginning in mid-October.

On the Adotas website, a complete Q&A with Jay Sears and Adotas writer Sarah Novotny is available regarding the ADSDAQ exchange and its points of differentiation.

According to Jay:

“Our advertisers have a wonderful and unfair advantage by our ability to look at billions of impressions and pull out just the ones that work for them. “

Read more on the Adotas website.

Speakers (from left to right): Ahmet Ozalp, Partner, Atlas Venture Capital; Keith Smith, CEO, Zango; Antti Öhrling, Co-Founder, Blyk; Shanthini Sarkar, SVP of Operations and Product Management, ADSDAQ by ContextWeb; Joel Dreyfuss, Editor-in-chief, Red Herring and panel moderator

Red Herrring Global 100 Conference, Seattle, Washington, December 4

“What’s the revenue source for new digital distribution models?” Joel Dreyfuss, Editor-in-chief, Red Herring, asked Ahmet Ozalp of Atlas Venture Capital. “And how will user generated content be monetized?” Ahmet responsed with the obvious (though relevant) answer. The two main revenue sources will continue to be advertising and subscription models. As a VC, he added, he’s interesting in investing in companies that are building out the infrastructure needed to support the digital distribution, along with investing in companies that are part of the new digital distribution medium.

Next, Joel raised an important and sensitive issue: total online ad spend world wide was only 6% of all ad spend in 2006. If users are spending more time online, why are advertisers not allocating more of their budgets for online?

ADSDAQ by ContextWeb’s Shanthi Sarkar made the point that online audience is fragmented. There are few ways for advertisers (especially brand advertisers) to reach their target audience and control their brand. They can buy directly from a single site, but very few sites have large enough reach to meet advertiser’s needs. Audience behavior has also shifted in the past two years. According to eMarketer, users spend 61% of their time online viewing sites other than the top 20 portals, and they’re spending more time on niche content sites. Ad exchanges, such as ADSDAQ, provide advertisers with a way to reach a large audience, while providing them with the ability to control their brand by not displaying their ads on inappropriate content. Because of business models, such as ad exchanges, Mrs. Sarkar predicated that we’ll see more ad dollars being allocated to online.

Pushing further, Joel asked, “In what way can ADSDAQ give this type of control?” Shanthi explained that ADSDAQ’s real-time technology targets at the page level. The targeting capability excludes pages with negative content. Ad exchanges have an advantage over ad networks, as networks manually categorized sites into channels, and ADSDAQ’s real-time, automated technology is dynamic. According to Technorati, 120K new blogs are published daily, which means they’re virtually impossible to manually categorize. Traffic to the new content is highest right after it’s published, so manual categorization can’t compare to the real-time, automated technology in the fast growing world of online.

Joel discussed Blyk’s business model, which involves an exchange for mobile advertising, with Antti Ohrling, and Zango, a gaming advertising group, with Keith Smith. The panel wrapped with Ahmet Ozlap stating that, as a VC, he’s very bullish on the digital distribution models and thinks there are great opportunities to be found.