Much of marketing is language. Marketing to marketers is also very much a question of language. For instance, look at today’s New York Times piece on real-time bidding for online ad placements.

The article gives this example of the process:

“Say a man just searched for golf clubs on eBay (which has been testing a system from a company called AppNexus for more than a year). EBay can essentially follow that person’s activities in real time, deciding when and where to show him near-personalized ads for golf clubs throughout the Web.”

In fact, the method of personalizing ads based on user activity has not really been, as the article’s lead puts it, “largely missing until recently.” Instead, the term more commonly used for such real-time ad personalization has been “behavioral targeting.” (Read more…)

There are at least 3 points to consider about Yahoo!, which released its full year 2009 revenues on January 26th.

1) Compared with search advertising revenues, display advertising is becoming more important than ever to Yahoo! (which just reinforces the necessity of the Bing deal with Microsoft).

2) Yahoo!’s Q4 results indicate that brand spending is slowly coming back overall, not just for that company but in the overall US online ad market.

3) Back to search: Google is continuing to eat not only Yahoo!’s lunch, but its breakfast as well.

The backstory for those 3 points can be fleshed out by these 5 related spending trends, all US market only (which made up 73% of the company’s 2009 revenues): (Read more…)

Google’s earnings in Q4 and in all of 2009 were strong, but that might be more a case of Google’s strengths than the online space as a whole. Here’s why.

(Read more…)

Peter Kafka of All Things Digital has a post well worth your time about whether YouTube will finally bring in a profit for Google in 2010. He points to recent predictions by Barclays analyst Douglas Anmuth that YouTube will see revenue jump 55 percent, to $700 million, in 2010, and that it will “start contributing positively” to the Google’s earnings. Anmuth writes:

Perhaps the main take-away for Google’s display business is that in 2010 we believe YouTube will start contributing positively to EPS. An improving advertising environment certainly helps, but with YouTube monetizing more than 1 billion video views every week, and with strong sell-out rates on its home-page from larger advertisers–we note 90% of the top 50 Ad Age have advertised on YouTube–we believe the site can profitably take share of the branded display & video market. We project YouTube to generate $700 million in revenue in 2010, up 55% Y/Y. Usage continues to grow. In November the total number of YouTube’s videos viewed grew 139% to 12.2 billion in November and unique visitors grew 32% Y/Y to 129 million. As a comparison, Hulu, the second most popular video site by videos viewed according to comScore, recording 923 million videos viewed.

I agree that YouTube seems poised to grow its ad revenue in 2010, and I also agree with the market dynamics that Anmuth points out. However, 55% strikes me as an aggressive target. Some of the forces working in YouTube’s favor will be mitigated by headwinds from negative factors. Here’s a list of pros and cons the company will face in 2010:

PROS

• The site is adding more and more premium content, which of course is more monetizable than the user generated content (UGC) that made the site into the giant that it is.
• Usage rates keep growing, which I continue to be amazed by. Its dominance in the video space remains essentially unchallenged, despite Hulu’s strenghts as an episodic TV specialist.
• YouTube is getting smarter about the way it monetizes videos — more ad formats, a better overall presentation.

CONS:

• As hard as it tries to become a premium content portal, YouTube can’t shake the perception that it’s a UGC site. Even in the best of cases, it will only be able to monetize a small portion of its video inventory this year.
• The space will get more crowded as Hulu continues to spread its wings and other sites (i.e., Netflix) also gain traction.
• The spread of Internet-connected TVs could be a double-edged sword for YouTube. On one hand, the site could gain by making licensing deals w/consumer electonics firms. On the other hand, other companies (Amazon, Blockbuster, Netflix, Hulu) are also going to be scrambling to make deals, so consumers will have a wider array of options than in the mid-2000s, when YouTube took advtange of an open field.
• Because of the enormous price that Google paid for YouTube, the site has to do a lot more than reach profitability in order to pay off for the parent company. While I don’t think Google is unhappy with YouTube, there is more pressure to perform on YouTube than there would have been if the purchase price had been closer to the ground.

In summary, I think Douglas Anmuth’s projection is a bit aggressive. Taking into account the above, I agree that YouTube’s revenues should grow this year, but somewhere on the order of 10%-20%.

Momentum in the mobile ad market continues at a fever pitch. In story broken last night by Kara Swisher of All Things Digital and confirmed today by Quattro Wireless, Apple confirmed it is acquiring the mobile ad network for a reported $275 million. Apple also announced today that app downloads from its App Store had surpassed the three billion mark.

The timing for these announcements is no coincidence. Today was supposed to be “Nexus One” day, but instead, it’s Apple, not Google, that is grabbing headlines and hoarding mindshare.

I noted in an earlier post that I regarded Apple and Google as more “frenemies” than enemies, and that Google’s primary adversary remains Microsoft, with mobile constituting an important front in a much larger (and longer) war for computing supremacy. I continue to believe this to be the case from Google’s perspective, but Apple’s move today clearly signals that Apple regards Google as a major competitor in the mobile space.

As for the why behind the move, chalk it up to vertical integration: Apple builds and sells the iPhone, hosts the App Store and now, by incorporating Quattro into the fold, it can better monetize the ad-supported apps it offers through the App Store.  And then there’s the tablet angle, which Silicon Alley Reporter and the SiliconAngle blog both see as a factor behind the Quattro acquisition. Since the tablet remains a matter of conjecture – for now, at least – we can hold off on speculating on that aspect of the deal.

But regardless of the implications, which no doubt will become clearer in short order, it certainly breaks the mold. Then again, that’s something Apple’s used to doing.

Behind eMarketer’s updated US online ad spending estimates are a plethora of intertwined forces, both cyclical and structural.

The main cyclical force is the recession and its impact on both consumers and companies. However, the economic cycle has reached bottom — at least for the online ad industry. Recovery will be slow, though, which will suppress spending on key ad formats such as search, banners, and classified ads.

The main structural force is the move toward more non-advertising marketing. That is particularly true in the online space, where marketers are focusing more on social media and building up their Websites or brand microsites. For that reason, the spending numbers alone can be misleading because they fail to capture the full extent of online marketing’s growth.

The five prime trends that support eMarketer’s ad spending estimates are:

• Diverse Internet advertising. In eMarketer’s bottom-up model for Internet ad spending estimates, which develops the total from its constituent parts, the recession and ongoing structural changes are creating varying spending patterns for the individual elements. For example, while we project paid search spending to rise by 2.2% in 2009, classified ads will be down by 30.2%. And while classifieds are typically unsung, they represent the third-largest online ad format. Video is the only ad format that will get double-digit growth this year, at 40.2%, as brand advertisers look for effective ways to get out their message on the Web.
• Branding shortfalls. Based on Advertising Age’s annual “100 Leading National Advertisers” report, with data compiled by TNS Media Intelligence, only 25.7% of online display dollars in 2008 came from the country’s largest advertisers, down from 29.3% in 2007. That means the top 100 put 5.9% of their total measured media ad budgets into display ads in 2008, a tiny amount relative to the potential impact of these “rich” advertisers.
• Pricing trends. The largest share of online ad spending comes from direct marketing methods, specifically search and classifieds. That trend is reflected in the shift from CPM pricing — which is normally how brand advertising such as banners, rich media and video is sold — to performance pricing. Based on user actions, such as clicks, performance-priced ads usually cost less than CPM ads.
• Ad networks. Another factor to consider is the spread of ad networks, which nearly always reduce CPM pricing significantly compared with direct sales by Web publishers. A key reason behind ad network expansion is the corresponding rise of online advertising inventory — more Websites, more pages, more traffic.
• Publisher revenues. While Google’s US net revenues in the first three quarters of 2009 were up by 4.3% year over year, Yahoo’s plummeted by 13.2% and AOL dropped by 11.8% in the same period. When you consider that 71% of total Internet revenues in the first half of 2009 came from only 10 Websites, spending losses among even only a few major sites can significantly shape the big picture.

Google has always been about disruption. In a very short span of time, it has changed the way we think about online search and turned the advertising world on its head, in the process becoming the colossus of the online world. Now, as the fabled “Google Phone,” which will bear the name “Nexus One,” moves closer to reality, Google appears set to upend the mobile communications industry as well.

Rumors have been swirling about the Google Phone for the past several months, and Google has been characteristically silent on the subject. But over the weekend, as Mashable reported, in response to tweets coming from inside the company, Google took the rare step of acknowledging the phone’s existence. Yet, the acknowledgment was vague, referring to the phone as a “mobile lab”—the kind of non-response response we’ve come to expect from Google about new products the company has under development.

More details quickly leaked out (including some pictures of the phone “in the wild”). Peter Kafka at All Things Digital confirmed that Google plans to sell the phone directly, meaning unlocked and without the usual subsidies that US mobile consumers have grown accustomed to. Call Google’s approach “European style,” although with a twist. Google plans to enlist carriers as distribution partners. Verizon got first dibs (as it did with the iPhone), and passed (also like it did with the iPhone), but T-Mobile jumped at the chance, Kafka reported.

No word so far on pricing, but I strongly suspect that Google will figure out some innovative way to make the phone more affordable than the typical unlocked handset. A more relevant question is how Google, a company not know for either direct sales or service, particularly where hardware is concerned, will handle those vital components of the handset business.

Google’s decision to build a phone and market the device in the way reports indicate is entirely lacking in precedent. And while Kafka’s blog post indicated that Google hopes to maintain a collaborative relationship with the wireless carriers, it’s hard to not to see the Nexus One as a shot across their bows and a potential threat to the already fragile loyalty of their subscribers.

As if buying AdMob were not enough to ignite the mobile industry, the impending launch of the Nexus One threatens to set it ablaze.

Google’s planned $750 million acquisition of AdMob has injected an element of excitement into the mobile sector in recent weeks. Perhaps too much excitement: the industry’s informal moratorium on predicting next year to be the year of mobile has been lifted in favor of a return to the hyperbole of yore.

As I’ve discussed here and in the media recently, the AdMob acquisition is a significant event, particularly for advertising companies operating in the mobile space, but after at least a decade of unfulfilled expectations, it’s safe to say that mobile advertising and marketing are not going to “explode” next year or the year after. Rather, mobile will continue to grow incrementally as more brands and agencies fold it into their marketing mix, a trend reflected in eMarketer’s outlook for mobile advertising (full version of the report is available here to eMarketer Total Access subscribers only).

At the same time, it’s important not to lose sight of the other side of the equation – consumers. And looking at recent research on consumer usage of mobile and attitudes toward mobile marketing presents something of a mixed outlook.

In terms of mobile adoption and usage, the trend is positive. The NPD Group noted this week that more US consumers have mobile data subscriptions than last year, and the Yankee Group’s “Mobile Commerce for the Holidays” webinar likewise indicated strong consumer demand for multimedia smartphones with data plans. Similarly, the third wave of “Mobile Market View,” BIA/Kelsey Group’s annual mobile consumer study, found significant growth in both mobile Internet usage as well as more “advanced” behaviors such as video viewing, purchasing and sending.

On the other hand, as consumers’ usage of mobile devices has grown more sophisticated, BIGresearch’s “Simultaneous Media Usage” study indicates that their attitudes toward mobile marketing have become more negative. Relative to last year, more consumers now dislike receiving text ads, video ads and text voicemail ads, and more feel that mobile ads constitute an invasion of privacy. Marketers can take heart that the percentage of consumers who feel that mobile ads a) can be helpful in making a purchase, and b) are acceptable as long as users get content in return both dropped by an insignificant 0.3%.

Rather than declaring victory over a single albeit large acquisition in the space, let’s remember there’s still a significant gap between marketers and consumers that must be bridged. Marketers have to stay focused on the work that needs doing today before we reach tomorrow’s oft-promised year of mobile.

P.S. Look for an expanded version of this post in my next monthly column for iMediaConnection, due to be published the week of November 30th.

Some interesting questions (and answers) about the future of online video ads from this short clip of our own Geoff Ramsey at Ad:Tech New York with Suzie Reider of Google/YouTube, Ira Rubenstein of Marvel, and Rob Hayes of Showtime.

Money quote from Reider (synthesized):

“I heard a stat that 80% of the creative of digital video — preroll or instream — is still in 30s and 60s. If that’s true that’s not such a good thing. It should really be showing up in 3s, 5s, 7s and certainly no longer than 15s. They should be shooting it for digital while they’re shooting it for television.”

Reminds me a bit of how the Adconion team is using re-targeting and in-banner video to drive engagement. Any thoughts, folks?

Google announced today it is buying leading mobile ad network AdMob for $750 million. That’s a hefty sum for a medium still considered to be emerging, although it’s still half of what Google paid for YouTube and pocket change for a company with as big a war chest as Google’s. Then again, Google tends to put its money where the market is (or, alternately, the market goes where Google puts its money, even if in the case of YouTube, ad dollars didn’t follow as quickly as Google would have liked).

Either way, Google’s acquisition sends a strong signal about the importance of mobile advertising in general and its growing centrality to the marketing mix. The move also indicates that as on the desktop, the twin bill of search and display will be the big driver of ad spending on mobile as well, a trend I identified in my recent “Mobile Advertising and Marketing: Change Is in the Air” report (full version of this report is available here to eMarketer Total Access subscribers only).

In the report, I predict that US mobile display spending will grow more than fivefold between 2009 and 2013 and mobile search will increase sevenfold. Looking at it another way, search and display represent 45% of US mobile ad spending in 2009, but by 2013, they’ll account for 72%. Key factors behind these big shifts are growing smartphone penetration and increased Web and application usage, as indicated in the following report excerpt:

A number of factors likewise point to steeper growth for display advertising. One is greater use of the mobile Web. eMarketer predicts that 36% of mobile subscribers will be accessing the Internet from their devices at least monthly by 2011, up from 26% in 2009. More surfing means more exposure to ads.

Another factor is increased usage of mobile applications, specifically free, ad-supported apps. All the available data suggests they will continue to become a more central facet of the mobile ecosystem, meaning that in-application display advertising will likewise grow in importance.

A third factor is the increasing array of attractive inventory options available to marketers. These include interstitials, takeovers and rich media interactive ads.

With respect to search, the logic behind predictions for its increasing primacy is clear enough: On the desktop Web, search ranks as one of the top online activities. As mobile devices mimic desktop PCs more in their capabilities, search will grow in importance on the mobile Web as well.

The AdMob acquisition comes at a time of renewed (or perhaps redoubled) marketer enthusiasm for mobile. Millennial Media, another leading mobile ad network, recently released the findings of its “state of the industry” study, conducted with online knowledge base DM2PRO, which indicated two key trends for 2010: more marketers planning on employing mobile advertising in the year ahead, and bigger budgets, especially among the brand marketers surveyed. All told, good news for the mobile ecosystem, especially for ad networks, which are now in play even more than before.