Dave Morgan on Why the Web Comes Up Short

Dave Morgan is CEO of Simulmedia, a New York-based TV ad-targeting firm. He spent over a decade in online advertising, founding Real Media and then behavioral-targeting network Tacoda, which AOL bought for $275 million in 2007. For the past two years, Morgan has lived in the TV world. He spoke to Digiday about why the Web has taken targeting too far, why publishers should imitate Zynga, and the uphill battle Internet ad players have in cracking into TV budgets. Follow him on Twitter @davemorgannyc.

What’s your take on ad targeting now with DSPs and RTB?
It’s too complicated. I don’t understand it. I think in the name of turning the online ad market over to math the companies have created a perception that it’s all our of [marketers’] control. It’s about one machine talking to another about messages delivered to another machine. It makes it virtually impossible for companies to differentiate.  If they can’t differentiate, I don’t know how they’re going to build long-term sustainablity and barriers to entry. My sense is 90 percent of the targeting available today is too granular, redundant and dramatically exceeds the capacity of the markets to exploit. Just because you can doesn’t mean you should. Sure, some direct-response marketers can exploit some of these capabilities, but no brand advertisers can. The problem is that the math parts of the applications are dramatically overbalancing the art. It makes it hard for marketers and agencies to do business with them.
What about the privacy concerns? Big deal?
All that data brings massive burdens, particularly in costs and privacy. The question is do you really need the real-time availability of one-to-one targeting data that’s tied to offline purchasing when the vast majority of marketers have no ability to exploit it — and it creeps out users. I think there’s a big difference between broad anonymous segmentations, which is what drove the targeting marketplace four years ago, and billions and tens of billions of permutations of granular targeting attributes now.
What should keep publishers up at night?
The fact that impressions are growing faster than digital advertising expenditures. That would keep me up at night if I was in the business of publishing content to attract an audience to sell advertising against. I’d be looking at Zynga’s business model and trying to find a way to build one as efficient. If they don’t, they won’t be in business long. When it comes to the quality of gaming, Zynga invests more money in high-end developers than anybody. It’s about multiple revenue streams. People pay for content and utility. Advertising is a tertiary revenue stream. It also has a highly scaled platform. I’m surprised we haven’t seen content companies try to build a partnership with Facebook like Zynga did. [Zynga CEO] Mark Pincus understood it and built a very cooperative business model working together with Facebook. They’ve built tens of billions tog collectively. Why haven’t we seen a music publisher do that? Why not content? Content owners don’t want to give into the fact that they need to live on top of the Facebook platform, but that’s the world now.
Simulmedia is often described as a way to bring Internet-like ad targeting to TV. Fair?
It’s a simple way to describe it. It’s really about bringing a higher degree of packaging and segmentation. I don’t think you need to make it very complicated. You can see TV audiences continue to grow. You have really big audiences that are growing and an impactful medium to deliver an ad. It can make you laugh, or cry, or hug the person next to you on the couch. But in most cases you have to give the same ad to 105 million households. If I was in the DSP-RTB world, I’d be thinking of giving 105 million ads to 105 million households in real time. My view is you can give at least five different ads to 25 million households and improve the effectiveness of those ads by 50 percent. Then you’re using Web-like measurement techniques with panels 800 or 1,000 times bigger than the biggest panel today. It lets you measure things more than broad sex and age characteristics, like women 18-49. I don’t know any marketers who want to talk to all women 18-49, or only women 18-49.
I always see that slide showing time spent on the Internet not equalling budget spent. What’s your take on it?
Time does not equal impact. They don’t get that. The Internet has a lot of time but not a lot of money. Newspapers have a lot of money but not so much time. The market is correcting itself there. One chart no one likes to look at is the TV bar. Marketers actually have allocated pretty equally to TV.  If you look at the amount of total audience minutes allocated between the large TV properties and the large Web properties, the TV properties are much stronger. For example. Facebook now represents 25 percent of time spent online in the U.S. If you look at total audience reach on a monthly basis between CBS and Facebook, CBS has 40 percent more reach. Look at audience minutes. In a month, CBS is 5 times bigger. So actually Facebook is doing well. If Facebook was rated like a TV network in audience minutes, it would be the size of PBS. I don’t think most digital people truly appreciate the massive audience scale that TV still represents.
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