<p>INB 201 GBT Advertising and technology</p><p>Change in Advertising business Extreme personalisation in advertising has been slow to come, except in search advertising, where Google, Yahoo and other engines have been serving up ads tailored to users’ interests for years. But now it has arrived in earnest. According to one poll by Adobe, a software company, most marketers say they have seen more change in the past two years than in the previous 50. 1. Media type as proxy for targeted group: WSJ or MTV Target individuals themselves</p><p>2. Surge of internet-based ads – now 25% of all ad dollars or $125 billion (of $500 billion industry)</p><p>3. Americans spend over 12 hours a day consuming media (sometimes concurrently), and digital media account for around half of that total. 4. The rise of mobile devices, such as smartphones and tablets, which began when Apple introduced the iPhone in 2007. Now more than 1.7 billion people (around 20% of the world’s population) use smartphones. Users now prefer apps (self- contained programmes on smartphones) to websites’ home pages, and in America they are spending less time on desktop computers. 5. Mobile devices, unlike desktop computers, are typically used by only one person, which is a great help to advertisers who want to target specific users. Being closely connected to people’s personal lives and daily habits, the mobile device is the true “mini-me”. This year, for the first time, Americans will spend more time on mobile devices (not counting talking) than they do on desktop computers. 6. The rise of social networks such as Facebook, Twitter and Pinterest, which have become an important navigation system for people looking for content across the web. “The convergence of social and mobile has given an addressable audience online that’s 100 times bigger than ever before,” Social networks hold rich data about their users, who volunteer lots of information about themselves. Facebook and Twitter can also see where else people go online, which can help them sell their users’ attention to advertisers. 7. The third big development has been the rise of real-time bidding, or “programmatic buying”, a new system for targeting consumers precisely and swiftly with online adverts. Publishers, advertisers and intermediaries can now bid for digital ads electronically and direct them to specific consumers at lightning speed. his firm has the chance to bid for around 10m online advertising “impressions” (ads seen by a user) every second. Real-time bidding will spread further as more screens, such as televisions and billboards, become connected to the internet. 8. New types of firms are emerging: a mashup of advertising firm, media firm, and internet firm. Such firms require different kinds of skills than before: quantitative skills for analyzing data, creative media skills for creating content, and technology skills for developing strategies for reaching individuals. 9. Building on the vast amount of data produced by consumers’ digital lives, it is giving more power to media companies that have a direct relationship with their customers and can track them across different devices. An entire industry has sprung up around targeted ads. Third-party tracking companies gather information on browsing habits and online purchases, often invisibly. A race is on to have the best data and become the “intelligence broker”. “This is an information war,” says Omar Tawakol, the boss of BlueKai, a data broker, which tracks users online and sells that intelligence to companies. “This is 100% about having more information about the customer and being able to generate more commerce as a result of it.” 10. Unlimited scale and low prices makes internet advertising business hard to make money</p><p>Data gathering</p><p>“First-party” data are collected by firms with which the user has a direct relationship. Advertisers and publishers can compile them by requiring users to register online. This enables the companies to recognise consumers across multiple devices and see what they read and buy on their site. “Third-party” data are gathered by thousands of specialist firms across the web. “We have this tremendous growth of companies that people do not talk about as household names,” says Mahi de Silva, the boss of Opera Mediaworks, a mobile-advertising company that is one of them. To gather information about users and help serve appropriate ads, sites often host a slew of third parties that observe who comes to the site and build up digital dossiers about them. BlueKai, for example, compiles around 1 billion profiles of potential customers around the world, each with an average of 50 attributes. To identify users as they move from site to site, third parties use technologies such as cookies, web beacons, e-tags and a variety of other tools. Cookies, widely used on desktop computers, are small pieces of code that are dropped on a user’s browser. According to TRUSTe, the 100 most widely used websites are monitored by more than 1,300 firms. Some of these firms share data with other outsiders, an arrangement known as “piggybacking”. Data gathering allows firms to glean what sites users have visited, what they have shopped for, what postcode they live in and so on. From this the firms can infer other personal details, such as their income, the size of their home and whether it is rented or owned. Typically web users are tagged when they visit a particular website, but companies are getting cleverer about expanding their reach. RadiumOne, an advertising-technology company, puts cookies on users, normally unbeknown to them, when they click on a weblink sent by a friend. PubMatic, a firm that helps publishers sell advertising space in real time, provides some 50-70 data points about users on desktops and around 100 on mobile, including the mobile device’s precise position. Mobile users spend close to 90% of their time online in mobile applications, or “apps”, which do not support cookies, so advertisers, app developers and intermediaries use other tools, such as their device’s ID, to recognise them.</p><p>Data brokers earn their living by helping advertisers and publishers manage their own first-party data, as well as selling them more data about users. They divide them into segments defined by location, device, marital status, income, job, shopping habits, travel plans and a host of other factors, and auction those segments off to buyers of ad space in real time. For example, eXelate, a data broker, sells “men in trouble”, presumed to have relationship problems because they are shopping online for chocolate and flowers. Another data firm, IXI, sells a segment called “burdened by debt: small-town singles”. Credit-card companies, including Visa, MasterCard and American Express, all sell anonymised data about their cardholders to advertising companies. Bidders for advertising space can go to MasterCard to buy aggregated segments of consumers who are likely to subscribe to particular telecommunications services, for example, or stay at particular hotel chains. American Express has an edge, says someone in the data business who has worked with the company, because it actually issues the card (whereas MasterCard and Visa are in partnership with banks), enabling it to put cookies on users when they log in to check their statements and see where else they go online. Mindshare, a media buyer, wanted to find the best place to advertise for its client Kleenex, a tissue manufacturer. It took part in search auctions to see where people were Googling for cold and flu remedies, but deliberately kept its bids low enough to lose. Then it concentrated its marketing on regions where lots of people seemed to have the sniffles. Firms work to connect the offline and online worlds. Facebook, for example, has joined with Datalogix, a data provider, to link purchases in both spheres. Acxiom, one of the largest data brokers with expertise in the offline world, recently paid more than $300m to buy LiveRamp, a firm that helps match offline data about customers with online information. From a commercial point of view, a mobile’s best feature is its location-tracking capability, which shows exactly where the phone is. Advertisers are experimenting with “geofencing”, which allows them to reach people within a particular area. For example, 1-800-Flowers, a flower retailer, has tried sending ads to mobiles within driving distance of a shop. Pantene, a shampoo brand owned by Procter & Gamble, got together with the Weather Channel to target people with ads for specific hair products to suit the weather in their postcode. Behavioral profiling</p><p>How good a job do the categories do in locating types of people who are receptive to an ad?</p><p>How good a job does the variations of an ad do in targeting different types of people?</p><p>Programmatic Bidding explains how she uses superfast algorithms to buy 20m-30m advertising “impressions” a day. Today one of her clients, an American bank, has asked her to find new customers. At first she guides the algorithm to buy as many impressions as possible near bank branches. Then she narrows her targets, choosing criteria that produce a better hit rate. For example, she finds that tablet users sign up more often than iPhone users, and afternoon seems to be a better time than morning. She instructs the algorithm to bid more for consumers that have recently visited the bank’s website, who may be more easily persuaded. Real-time bidding sounds high-tech but straightforward. When a consumer visits a website, his browser communicates with an ad server. The server sends a message to an exchange to provide data about that user, such as his IP address, his location and the website he is visiting. Potential ad buyers send their bids to the exchange. The highest one wins and an ad is served when the website loads. All this typically takes about 150 milliseconds. In reality, though, the ad-tech ecosystem is stupefyingly complex. Real-time bidding is a form of “programmatic” buying, which means using computers to sell advertising space. An advertiser can buy a certain number of impressions on a website in advance at an agreed price and execute the order by computer, avoiding the need for paperwork, spreadsheets and faxes. The technique was first used over a decade ago in search advertising, in which advertisers bid for search terms entered by users, and Google and other companies serve relevant ads alongside the search results. Programmatic buying tactics http://marketingland.com/programmatic-ad-buying-a-tactical-primer-61357 A study by BCG, sponsored by Google, found that advanced behavioural targeting, which uses technology to reach specific users with the desired characteristics, helped advertisers increase their return on investment by 30-50%. One popular tactic is “retargeting”, which allows advertisers to look for people who have visited their website before and show them an ad related to an item they were looking for but did not buy. So far programmatic buying has taken hold mainly in America, which accounts for around a third of global ad spending, along with Britain and continental western Europe, but it is set to become a global trend. Singapore is already home to several ad-tech firms. China, which will overtake Japan to become the second-largest online- advertising market after America this year, is behind in automated buying because it does not have third-party ad servers or data that advertisers trust. Upmarket publishers have been cautious about making their premium ad space available for sale by computer because they think, probably rightly, that it will put pressure on prices. But more of them are testing the market. Some, such as the New York Times, the Wall Street Journal and The Economist, have created private exchanges which limit the number of advertisers who can bid for their ad space or buy it in advance, giving them more control over pricing. The rise of real-time bidding is important because it offers a glimpse of how other ad- supported media may change over time. As more devices, including television sets, radio and outdoor billboards, become internet-equipped, a market for advertising space that can be bid for will spread to other industries, eventually even to television. And in the longer term the coming “internet of things”, such as connected homes and cars, could be powered by a system similar to programmatic buying. According to John Battelle, an entrepreneur, “media are laying the trace path for how we interact with information-based services in every category of endeavour.” The rise of the internet and ad-tech services has encouraged some large advertisers to set up their own ad-buying departments. Technology firms, including Adobe, Oracle, Salesforce and IBM, offer software that can do some of the things agencies used to charge for, though Brian Wieser of Pivotal Research Group, which studies the industry, says this probably accounts for only 5% of the ad-agency business. BREAKFAST CEREALS ARE usually harmless enough, but Kellogg’s, which makes a lot of them, has become many publishers’ worst nightmare. Starting in 2009, the firm began to pour a lot of money into digital advertising, and today it spends around 25% of its $1.1 billion advertising budget online. That should be cheery news for digital publishers, but it has not worked out that way. Behavioural targeting and programmatic buying have allowed Kellogg’s to find the users they want to reach more easily and for less. It has now established a price benchmark of $5.40 per 1,000 impressions, down from around $12 just a few years ago. “Data have allowed us to find that audience at that price,” says Jon Suarez- Davis, the company’s vice-president of digital strategy. In the longer run the new techniques should allow Kellogg’s to cut its spending on advertising, because digital involves less waste. Behavioural targeting has complicated media companies’ lives because it has made their once-vital role of aggregating audiences for advertisers much less important. Advertisers can now find the specific users they want for themselves Advertisers also like publishers with scale. The internet has transformed expectations about the number of people who can be reached through a single publication. The New York Times’s 31m monthly online users pale by comparison with Facebook’s 1.3 billion. The combination of size and knowledge about consumers has given tech giants an edge in online advertising. Google and Facebook alone controlled over 47% of all digital advertising in America last year, according to eMarketer, and over 57% of mobile advertising. Google dwarfs Facebook in revenue as well as in diversity. It serves ads on behalf of publishers and advertisers not just on its own sites but across the web. It owns Android, the world’s most popular mobile operating system, as well as YouTube, the world’s most popular digital video service.</p><p>Digital Art</p><p>What happened to the expectation that the Internet would destroy the creative media industries? many artists and commentators have come to believe that Ulrich’s promised apocalypse is now upon us — that the digital economy, in which information not only wants to be free but for all practical purposes is free, ultimately means that ‘‘the diverse voices of the artists will disappear,’’ because musicians and writers and filmmakers can no longer make a living. Take a look at your own media consumption, and you can most likely see the logic of the argument. Just calculate for a second how many things you used to pay for that now arrive free of charge: all those Spotify playlists that were once $15 CDs; the countless hours of YouTube videos your kids watch each week; online articles that once required a magazine subscription or a few bucks at the newsstand. And even when you do manage to pull out a credit card, the amounts are shrinking: $9 for an e-book that used to be a $20 hardcover. If the prices of traditional media keep falling, then it seems logical to critics that we will end up in a world in which no one has an economic incentive to follow creative passions. The thrust of this argument is simple and bleak: that the digital economy creates a kind of structural impossibility that art will make money in the future. The world of professional creativity, the critics fear, will soon be swallowed by the profusion of amateurs, or the collapse of prices in an age of infinite and instant reproduction will cheapen art so that no one will be able to quit their day jobs to make it — or both. Their financial fate turns out to be much harder to measure, but I endeavored to try. Taking 1999 as my starting point — the year both Napster and Google took off — I plumbed as many data sources as I could to answer this one question: How is today’s creative class faring compared with its predecessor a decade and a half ago? The answer isn’t simple, and the data provides ammunition for conflicting points of view. It turns out that Ulrich was incontrovertibly correct on one point: Napster did pose a grave threat to the economic value that consumers placed on recorded music. And yet the creative apocalypse he warned of has failed to arrive.</p><p>If anything, the numbers from the self-employed world are even more promising. From 2002 to 2012, the number of businesses that identify as or employ ‘‘independent artists, writers and performers’’ (which also includes some athletes) grew by almost 40 percent, while the total revenue generated by this group grew by 60 percent, far exceeding the rate of inflation. The number of self-employed musicians grew at an even faster rate: There were 45 percent more independent musicians in 2014 than in 2001. (Self-employed writers, by contrast, grew by 20 percent over that period.) How can this be? The record industry’s collapse is real and well documented. Even after Napster shut down in 2002, music piracy continued to grow: According to the Recording Industry Association of America, 30 billion songs were illegally downloaded from 2004 to 2009. American consumers paid for only 37 percent of the music they acquired in 2009. With such a steep decline, how can the average songwriter or musician be doing better in the post-Napster era? And why does there seem to be more musicians than ever? Part of the answer is that the decline in recorded-music revenue has been accompanied by an increase in revenues from live music. It’s elemental economics: As one good — recorded music — becomes ubiquitous, its price plummets, while another good that is by definition scarce (seeing a musician play a live performance) grows in value. Moreover, as file-sharing and iTunes and Spotify have driven down the price of music, they have also made it far easier to envelop your life with a kind of permanent soundtrack, all of which drives awareness of the musicians and encourages fans to check them out in concert. Recorded music, then, becomes a kind of marketing expense for the main event of live shows. Of the big four creative industries (music, television, movies and books), music turns out to be the business that has seen the most conspicuous turmoil: None of the other three has seen anywhere near the cratering of recorded-music revenues. The O.E.S. numbers show that writers and actors each saw their income increase by about 50 percent, well above the national average. If you make a great midbudget film in 2015, is the marketplace less likely to reward your efforts than it was 15 years ago? And has it become harder to make such a film? Then as now, if you make a small or midsize movie that rates on the Top 10 lists of most critics, you’ll average roughly $50 million at the box office. How have high-quality books fared in the digital economy? If you write an exceptional novel or biography today, are you more or less likely to hit the best-seller list than you might have in the pre-Kindle age? Here the pessimists might have a case, based on my analysis. Every year, editors at The New York Times Book Review select the 100 notable books of the year. In 2004 and 2005, the years before the first Kindles were released, those books spent a combined 2,781 weeks on The Times’s best-seller list and the American Booksellers Association’s IndieBound list, which tracks sales in independent bookstores. In 2013 and 2014, the notable books spent 2,531 weeks on the best-seller lists — a decline of 9 percent. The biggest change of all, perhaps, is the ease with which art can be made and distributed. The cost of consuming culture may have declined, though not as much as we feared. But the cost of producing it has dropped far more drastically. Authors are writing and publishing novels to a global audience without ever requiring the service of a printing press or an international distributor. For indie filmmakers, a helicopter aerial shot that could cost tens of thousands of dollars a few years ago can now be filmed with a GoPro and a drone for under $1,000; some directors are shooting entire HD-quality films on their iPhones. Apple’s editing software, Final Cut Pro X, costs $299 and has been used to edit Oscar- winning films. A musician running software from Native Instruments can recreate, with astonishing fidelity, the sound of a Steinway grand piano played in a Vienna concert hall, or hundreds of different guitar-amplifier sounds, or the Mellotron proto-synthesizer that the Beatles used on ‘‘Strawberry Fields Forever.’’ These sounds could have cost millions to assemble 15 years ago; today, you can have all of them for a few thousand dollars.</p>