Rocket Fuel CEO John Says Ad Exchanges More Like A Technology Platform Than Media Source

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George John is CEO of Rocket Fuel, Inc., an online advertising network.

Rocket Fuel CEO George JohnAdExchanger.com: How do you see the role of the ad network evolving over the next 12-24 months? Will ad network arbitrage disappear?

It has been hyped that the ad network marketplace is overly crowded with more than 400 players. But when you take a closer look at the market in detail, of these supposed 400 networks, 370+ are small niche buyers and vertical content aggregators that act as basic service providers to make buying media a little easier for agencies and advertisers. The remaining 25 or so aren’t really data targeting companies but rather inventory aggregators who basically sell pre-defined profiles or “buckets” of impressions and call them customer “segments.” Many of the traditional players are only scalable through efficient operations, not technology. There are actually very few companies with real technology platforms and intelligent systems that help them make sophisticated and insightful targeting decisions in real time.

Because of the existing climate, over the next 12-24 months, we feel the ecosystem will go through rapid change and the data-inventory value creators (those that can make sense of and understand the value of all types of data online), not the content aggregators, will be the winners.

The industry has advanced and is in a critical transition period. Advertisers and publishers are starving for better solutions that really provide technology and data-driven value beyond mere site selection. In the current marketplace, data sellers and exchanges have created tremendous new opportunity for innovation and rapid change. Rocket Fuel, as a technology-driven platform, is unusually well-suited to take advantage of this new world order and create something wholly new.

In our view network arbitrage will not disappear – quite the contrary. Ad networks that genuinely create value by better use of data will pay advertisers more - and make more money for themselves - by increasing the overall value of the ecosystem.

What is Rocket Fuel seeing from its clients today? Any trends you can share?

Based on the data we gather from companies like Quantcast, we’re a top-50 Web destination in terms of overall traffic, and have gotten there within 6 months of starting operations. We’ve run campaigns for more than 140 advertisers, analyzed more than 50-billion impressions, and seen over 37-million unique users. We’ve been the number one ad network for an advertiser’s media buy, ramping overall CTR by 5 times for a consumer electronics brand. We’ve delivered a 72.5% increase in an advertisers overall campaign ROI goal for a women’s fitness apparel brand. We’ve lowered the average CPA by 25% for a video game manufacturer. Campaigns on our network tend to be blended in terms of being brand awareness campaigns for premium advertisers who are also looking for some kind of a secondary response or engagement metric.

There are a lot of interesting trends in the marketplace now. Let’s focus on two areas:

  • Emerging data/exchange marketplace. The advertising marketplace is going through a major transformation in 2009, in which access to both inventory and data is far more liquid. The only problem is that not many companies seem to have any idea what do with all these options. More flexibility means more complexity – unless you can be smart about how you engage with these markets. True engagement requires a handful of new skills – ability to integrate technology, ability to value data/inventory in real-time, and ability make ad serving decisions based on this value. The players who can quickly and intelligently “get wired” into the emerging marketplace will have a huge advantage. Advertisers and agencies see this coming, but they are not traditionally technology-driven organizations. So they are looking for partners who can help them cross over into this new world.
  • Another interesting trend we’re seeing is the over-reliance on retargeting. Of course that works fantastically, but it is essentially limited to existing relationships. Finding new customers requires different tools and different metrics. The advertisers that understand this will take market share from competitors.

Is media buying in the future all about "rocket science"? What about insights about the consumer - isn't that important?

It’s hard to imagine a world in which marketers’ understanding of their customers, products, and target audiences will be entirely by machines. Our view is that all marketing starts with human knowledge, creativity and understanding. This would include insights – and the more the better – about consumers.

But this starting point is confronted by a tremendously complex set of ways to engage with audiences. Of course that’s where the rocket science comes in: how we leverage human insight and then take it from there to best understand audiences, results and interaction with advertising. This is really about letting machines do what they do best, which is making lots of little tiny decisions based on lots of information.

One of the biggest challenges we see in the industry isn’t that marketers lack insights about consumers. Just the opposite. Systematically using those insights, and then using them again on the next campaign, and the next, and the next, is almost beyond the means of the current generation of marketers. So much is forgotten between campaigns that it almost feels like we are starting over every few months. With better understanding of data and the systems to use that understanding, we can improve marketing in a much steadier and progressive manner.

Do you consider yourselves a behavioral targeting ad network? If so, at the end of the day, are most BT networks simply "retargeting" ad networks?

Our targeting capabilities and technology platform provide a much more granular and transparent picture of the consumers on our network. Most other networks create a limited number of segments or categories for their advertisers, which create a “one-size-fits-all” approach for all advertisers in an industry vertical. For example, a network’s travel profile will contain every related category including vacations, hotels, flights, etc., which dilutes the effectiveness for each specific advertiser’s brand and unique campaign objectives. Rocket Fuel takes the opposite approach by using our technology to build a customized audience profile for each and every campaign we run. So we can deliver much more focused and specific audiences designed specifically for an advertiser and their campaign objectives.

Our platform goes beyond behavioral, contextual or geo-targeting by combining algorithms, artificial intelligence and expert analysis to find people on the Web who are most likely to consider, respond to and excite others about an advertiser’s brand. The purpose-built technology drives results for advertisers by automatically leveraging massive amounts of internal and third-party external data and serving only the best impressions in the context of each advertiser’s unique marketing objectives.

Our optimization technique gets better over time as we learn what works and what doesn’t work for each campaign. Rocket Fuel is able to use rapid automated testing and user-level targeting to adjust campaigns around the clock, boosting campaign performance in hours instead of the weeks or even months it would take to pour through the data manually.

So say you want to run and manually manage and make sense of a campaign with 5 different creatives, 20 Web sites, in 50 states, with 5 different demographic profiles, and 10 different targets – that would be 250,000 possible combinations to look at and make sense of… before the campaign ends. We do this automatically, in real time. Our platform allows decisions to be made in minutes (what’s working, not working, and where to serve the best impressions) and makes campaigns get “progressively smarter” the longer they run.

Most BT Networks aren’t just retargeting networks. They’re something even simpler – they are just “site aware” networks. In other words, they are aware of what sites particular users have visited recently. If a visitor visits a travel site, then he’s a “travel intender.” If a web user visits a site about mother’s issues, then she’s a “soccer mom.” These overly simplistic definitions are then used to target users around the web. They can work in some instances, but ultimately are too generic to show strong performance.

Can display advertising move towards the bottom of the purchase funnel? If so, how?

Display advertising serves advertisers up and down the purchase funnel already. Many advertisers are entirely focused on driving transactions (i.e. on the bottom of the purchase funnel) in sectors like Travel, Finance, and Retail.

The bigger issue is how can display advertising do a better job for advertisers trying to drive transactions? This is huge because publishers need more revenue to build ever more sophisticated web sites, and advertisers will only pay more if display advertising works better.

At Rocket Fuel, we believe that we can achieve this goal through better understanding of data, and better real-time decision making about which ad to show to which web surfer. Our customers are pushing us in this direction every day. The better we do, the happier they are.

What's your view on ad exchanges?

Rocket Fuel works with every major ad exchange and ad optimizer, including Right Media, DoubleClick AdX, Pubmatic, Rubicon, OpenX, and AppNexus. So we have a very positive view on ad exchanges.

Overall we see them as a lot more like a technology platform than a media source. Simply put, they make it easy for us to two things that are very helpful for our business:

  • Test new web sites rapidly. We are always looking for new web sites that deliver good results for clients. The old model of calling and negotiating terms, whether short term or long term, can be very slow. It can often take months of discussion and paperwork before the first ad is served on a new partner’s site. With exchanges we can test hundreds of new sites a week, with set-up sometimes only a few seconds.
  • Find particular individuals that are especially well-suited for an advertiser’s message. This is the pure audience view on advertising, in which our interest in the person is vastly greater than whatever site they are on. In a data-driven approach, this gives us a lot of room to drive good results.

Exchanges are not well understood in the agency community. Many think of exchanges as just another bunch of blind ad networks, with all the ills that such a description implies: low quality, lack of transparency and control, and endless daisy-chaining of ad requests. Certainly it is possible to use exchanges in this way. But we think of exchanges as just the opposite. We consider them a super flexible inventory source that gives us exactly the amount of transparency and control that we need for each ad campaign.

And your view on data exchanges? Do these provide ROI or are they just a "sexy" advertising tactic?

Rocket Fuel uses every data exchange, as well as a growing number of proprietary data sources.
The biggest challenge is that often, very few of these data exchanges have little idea what the value of their data is. Some use a marketplace mechanism to drive price, and by implication establish value. Yet the models for this are so new, and the participants so few, that the pricing is meaningless as a value-determiner. Data exchanges need companies like Rocket Fuel to help them understand the actual value of their data. This is something we are hard at work on right now.

Long term, an open and flexible data infrastructure on the web will be hugely valuable for publishers and marketers. They will free everyone from the shackles of “context is king” so that whatever data is available carrying signals of consumer intent can help marketers reach their goals.

Does impression-level real-time bidding (RTB) hold promise? Or is it all hype?

We believe that RTB does hold promise, but it is even more in its infancy than some of the other technologies discussed above. As far as we understand, there are actually zero real-time marketplaces generally available as of this writing. Internally at Rocket Fuel, our platform conducts real-time auctions for every impression we serve, but that is closed inside our platform, and is generally hidden from our clients. We actually use it mostly as an optimization strategy.

Looking ahead, being able to pick an impression now based on super-recent data will be a key factor in driving value for marketing. Adoption will be slow, as none of the current large players have the technical capacity to participate in such a system.

How does Rocket Fuel differentiate itself when presenting its services to agencies?

Rocket Fuel is making the commitment to build a real technology platform that is “data agnostic.” We think all data is good data that can be used to give you a better idea of how to predict consumer behavior. Instead of building a typical silo-based approach, like a behavioral targeting or retargeting technology, we’re opting for a well-rounded “hybrid” approach that integrates with every type of available internal data and external data from third-party social, lifestyle and purchase intent data providers. We also use a mix of machine learning, artificial intelligence, blended analytics and expert analysis to interpret the data and automate many of the processes that would be impossible to complete if they were done manually.

When we present our services to agencies, the things that we use to differentiate ourselves are:

  • A deep commitment to technology to drive better value for marketers. While there are a lot of companies that talk the talk in terms of optimization, machine learning, data mining, etc. most are fakers. Customers can tell the difference.
  • Interesting insights that demonstrate the kinds of things we learn and how we use them.
  • Detailed customer case studies and examples to prove the reality of what we can deliver.

Most agencies will tell you that despite a lot of talk, most ad networks don’t actually deliver much in the way of value. Rocket Fuel is different.

Follow Rocket Fuel (@rocketfuelinc) and AdExchanger.com (@adexchanger) on Twitter.

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