AOL is acquiring Tacoda to obtain access to behavorial targeting technology

The consolidation in the online ad market continues. AOL has agreed to acquire Tacoda, a U.S. company that offers behavioral targeted ads.

Behavioral ads, which are relevant based on a person's online behavior, are the next phase of online advertising. A few weeks ago, Yahoo launched SmartAds, which combines behavioral information with demographic information in ad serving.

Behavioral targeted ad spending is projected to nearly double next year to $1 billion and then nearly triple to $3.8 billion by 2011, according to research firm eMarketer. Earlier this year AOL acquired Third Screen Media (for mobile ads) and AdTech AG (ad serving). AOL purchased video ad firm Lightningcast last year and Advertising.com, the largest third-party display ad network, three years ago.

Take-overs in mobile advertising: Microsoft acquires ScreenTonic and AOL acquires Third Screen Media

There is growing interest for mobile advertising. All major operators are already exploiting mobile advertising or have started exploring it.

Since the mobile telephone is the ulimate digital way of reaching a person individually, manybelieve mobile advertising is ad heaven.

Early May Microsoft announced its acquisition of European mobile advertising firm ScreenTonic. ScreenTonic has partnerships with mobile operators in the U.K., France and Belgium. WIth this acquisition, Microsoft aims at complementing its Digital AdvertisingSolutions platform by providing advertisers with a range of mobile ad formats, from display to text, as well as ad management and reporting capabilities.

Meanwhile in mid May, AOL took over mobile ad firm Third Screen Media. AOL will integrate Third Screen Media into its subsidiary Advertising.com, which it purchased in 2004.

Microsoft announces $ 6 billion acquisition of aQuantive

Today Microsoft announced it will acquire Seattle based aQuantive, which owns Avenue A | Razorfish - a famous dotcom web agency -, but also Atlas, DRIVEpm, and Accpiter - three firms, which are also active in the marketing optimization area -.

Atlas supplies web site optimization, precision paid search, and campaign managemetn services. DRIVEpm delivers precision online advertising services. And Accipter provides among other things online behavorioal targeting services.

Once again, we see the marketing optimization industry is moving quickly and changing fast. Of course, Microsoft's acquisition of aQuantive was triggered by Google's take-over of DoubleClick.

Marcomm services firm WPP acquires 24/7 Real Media

The previous posting I ended mentioning M&A activity regarding Acxiom. Today, WPP announced the acquisition of 24/7 Real Media. This company is one of the key players when it comes to online marketing optimization. 24/7 Real Media's products cover for example:

• Search engine optimization
• Online campaign management
• Precision targeting

So, will even old WPP become an engineering firm eventually?

Marketing is becoming an area for engineers

Companies who are seeking to improve their marketing and sales effectiveness should have a look at marketing optimization technologies. Obviously, technology itself won't make marketing more effective. But, combined with analytics and process improvements companies can nowadays importantly improve their marketing ROI and reduce waste.

Traditionally, marketing departments of major corporations have been seduced to develop creative TV or billboard campaigns, without having to justify the return of such bulk and product centric campaigns. Marketing effectiveness can be obtained by shifting towards customer centric precision campaigns. Using data mining software (for example SPSS Clementine or SAS Enterprise Miner), marketing departments are able to predict which (potential) customers are most likely to purchase and hence improve response rates and reduce campaign expenses.

However, data mining is not enough. Companies seeking marketing optimization need to be prepared for organizational change and to review the marketing processes. When companies have re-designed their marketing processes, they can consider acquiring campaign management and marketing resource management tools.

Campaign management tools not only automated part of marketing workflow and campaign execution), but they also help formalizing approvals and roles and responsibilities, tracking campaign performance near real-time, and standardizing campaign KPIs. Software firms such as Unica and SAS offer such tools.

Marketing resource management software (vendors include Aprimo and Unica) contribute to marketing optimization by automating, tracking, and managing budgets, marketing assets and projects within the marketing process.

The area of marketing optimization technology is moving fast. Other areas marketing managers should pay attention to include:

• Contact optimization
• Search engine optimization
• Web site optimization
• Behavioral targeting of online visitors
• Interaction management
• Web interaction optimization

Although, marketing is indeed becoming increasingly an area where engineers can shine, companies need to prevent that creativity does not get lost. Without creativity, companies won't be able to create the desired emotional bond between their brands and its customers.

Also more established information solutions company are moving gradually towards marketing optimization technology. Early April of this year Acxiom acquired web interaction optimizer Kefta. Yesterday, by the way, Acxiom itself was acquired by Silver Lake and Value Act Capital.

Video search engines

Why online video search is a threat to TV signal distributors

Large Internet players - such as Google, Yahoo! and AOL - are looking to gain hold of the emerging online video business. While online video in terms of size is incomparable to the traditional video business models, it is definitely gaining traction. Research by comScore Media Metrix indicates that in the U.S. in Jun 2005 already 56% of the Internet population viewed streaming video online. Moreover, in Q2 of 2005, the average consumer viewed 73 minutes of streaming video content per month. These figures of course stand bleak when compared to the 3 to 4 hours that consumers spend watching TV daily, but it does show the potential of online video.

Online video can be monetized in traditional ways, i.e. through:

• Advertising
• Consumer fees (subscription, pay-per-view)

The largest Internet players are making most money of advertising, and in particular paid search. They are now looking to extend this model to online video. This makes sense: they already draw massive traffic and they have established relationships with advertisers. In fact, in 2005, advertisers spent already $225 milion in 2005 on online video ads (not bad for an industry in its infancy) and that figure is expected to grow almost 8-fold to $1.5 billion in 2009, according to eMarketer.

Video search engines will enable web portals to provide their customers access to a plethora of content, subsidized through advertising. It makes no sense to offer an unlimited range of videos, if customers cannot find what they are looking for. That is why AOL has acquired video search start-up Truveo and why Google and Yahoo! are investing in their own video search technology.

There is reason to believe that companies like Google and Yahoo! can, in the future, lure away viewers from traditional TV signal distributors, such as cable and satellite companies - as they:

• Can provide access through their video search engines to an unlimited range of videos
• Know how to monetize search

Still, content owners are reluctant to publish their content online. But, telling from Apple's success in selling videos through its iTunes Store, it won't take long before they give in.

So, should TV signal distributors offer a plethora of content and consider investing in video search and use this technology to enhance its VOD offering?

Who will win the battle for online VOD?

With its VideoStore, Google is entering the video-on-demand business. Google will soon start offering, in the U.S., episodes of popular series, such as CSI, for $1.99 per episode. For $3.95 it will ofer NBA shows and for $0.99 it will offer TV shows. Customers will be able to pay via their credit card.

While being an early entrant, Google's decision for launching online video-on-demand (VOD), must have been accelerated by Apple's success with the videos it offers through the iTunes store. However, Google is taking a slightly different approach. As Apple offers videos for $1.99, the Google services will act as a marketplace and lets the content providers decide in what capacity and for how much they want to sell their content.

Two prerequisites for a successful VOD business, as cable operators for example have learnt, are proven and user-friendly technology, but also a strong relationship with the content owners. Content owners - especially the Hollywood studios, the major broadcast networks, TV producers and the large music labels - tend to have a strong bargaining power in the content value chain.

There are three reasons to believe that Google can surpass Apple's video success:

• Its marketplace is more attractive to content owners
• Google has a far wider reach: Google is globally the third most visited English language site, while Apple is number 24, according to Alexa; this will attract more visitors to the VideoStore and it will also appeal to content owners
• Google has compelling video search engine

 
True, Google's product range does not comprise the excellently selling iPod video, but one may assume consumers won't make a quick shift in their behavior in terms of watching videos: the TV set or even a PC monitor are much more suitable for watching video than handhelds ever will be, at least in the foreseeable future.

The next question is: how will Google's (and Apple's) move affect the traditional distributors of video? For sure, the videotheque business is doomed, but how will operators (cable, satellite, DSL etc.) be affected? As long as consumer prefer watching video over their TV (and consumers love their TVs, as demonstrated by the hours they continue spending watching TV and they intend to do so, as the sales of flat-screen TVs shows) and there are no user-friendly solutions for beaming video from their PCs to their TVs , the role of these operators won't change too much.

Operators are in a race to continuously increase the speeds of their Internet access products, making it easier for customers to download videos. At the same time the price of broadband keeps dropping.

It seems to me that the speed at which Google and the like are growing the value they add to customers in terms of what they can get online, is by no means being matched by the operators. Will there in the future be a different role for operators other than offering a commodity called Internet access?