The growth and maturation of mobile advertising depends in part on the continued ability of publishers, developers and advertisers to identify devices in the mobile app environment. Hence the mountain of blog posts on the topic once it appeared that Apple was actually rejecting apps using Apple’s UDID for this purpose. Dependency on UDID relates to how device identification enables relevant ads to consumers, analytics, frequency capping, conversion tracking, and/or app authentication; with Apple’s decision, the industry needs to develop effective and enduring solutions to ensure advertiser campaign success and the resulting publisher monetization needed to fuel the continued growth of mobile advertising.

Recognizing the import of UDID in the ecosystem, Apple’s decision to reject UDIDs can appear at first glance to be a setback to the industry. Indeed, it feels like jumping into cold water—planned and fretted—but when you splash down, the water is still dang cold.  

But the splash-down is a just a temporary shock to the system, and fortunately the industry has been considering different solutions to provide a privacy-safe, effective, enduring, and ultimately better method to adapt to Apple’s decision.

Those companies that have grown up in mobile are very familiar with the foundational reality that mobile advertising (apps in particular) does not have third-party cookies—a mainstay of online—and depends on first-party data to enable targeting based on parameters such as demographic, psychographic, and location. First-party data passed on an impression enables privacy safe targeting without the need for device identification, and is a positive element to highlight in this context.  This “silver lining” however, should not be confused with an argument that device ID solutions are not necessary. Much like cookies, device IDs can and will serve other necessary purposes that will enable the ecosystem to flourish.

At Nexage, we have considered and analyzed all of the available solutions, and what is clear is that initially there will not be a single, or even dominant, substitute for UDID on iOS. We know that exchanges will play an important role as the industry innovates and evolves in this area, and Nexage’s goal is to enable solutions that maximize the value to buyers and sellers to drive liquidity (and commerce) through this transition period, and for the long term.   

Most participants (ad networks, ad servers, analytics, mediation and exchange companies) have proclaimed their support for alternatives to UDID, and there is anything but consensus.  Here are some of the solutions the industry (meaning both individual providers and industry groups) is working on or have thrown their support behind:

1. In-advertising solutions that create a trackable ID when a user clicks through to the advertised application, which is later matched to an ID created upon application download; used primarily for conversion tracking and attribution.
2. In-app solutions where the app download generates a cookie by launching the browser upon download—the cookie is the ID—also used for conversion tracking.
3. Device fingerprinting where a unique device identifier is created using device attributes (for each device).
4. Using a hashed version of the device MAC address to replace UDID.
5. The various open source solutions such as OpenUDID and ODIN.

Any or all of these may work—meaning that the industry is poised to overcome the deprecation of UDID—but it signals solution fragmentation in the near-term as different companies and approaches vie for attention and votes.

So what are we doing here at Nexage in response to recent events? First off, we will not embrace any one solution at this time, but in fact have to adapt to the decisions of the participants in our exchange, both buyers and sellers. Along those lines, our iOS SDK will support the passing of a hashed version of the device’s MAC address, which is driven by many of our developer customers. This is not to the exclusion of other solutions that, depending on the purpose and method of collection (emphasis on privacy), are very viable solutions as well. Certainly the industry group platforms such as ODIN and OpenUDID hold much promise. The role of the exchange is in part to take fragmentation and turn that into liquidity by accommodating the demands of its buyers and sellers. We embrace that role while being an active participant in the development of sustainable solutions for device identification.

Ultimately, the industry should depend on a solution 1) where its existence is created by those with a pure interest in the privacy-safe growth of mobile advertising and 2) which is purpose built to address the requirements of the mobile advertising ecosystem. It’s tempting to conclude that this is a problem that needs to be addressed/solved by the device/OS manufacturers, yet it’s a device manufacturer’s decisions that have led us to where we are today. Apple will always be a lighting-rod on matters related to privacy—largely because of their size and influence—not necessarily their actions. Apple’s decision on how to respond to the pressures around UDID was certainly influenced by the impact their decision could have on their business as a whole. I would suggest that for as long as iAd represents $100M of their $127B in annual revenues, the weighting which the impact of their decisions has on mobile advertising will be proportionate. This is not a criticism as much as it is a simple reality.

Regardless of the chosen solution of our customers, the industry must also strive to mirror the transparency, notice, choice and opt-out capabilities that exist online today. We do think the industry inevitably needs to rally around a solution that:

1. Does not make publishers or buyers need to stand up a technology shop to succeed.
2. Does not create privacy risk, such that the solution is inevitably unsustainable.
3. Does not create artificial advantage to one provider at the expense of market liquidity.
4. Produces results.

We know it is not “if” we develop an effective and enduring solution set, it is when. We look forward to working with all of you as we build out this great industry.

We are in the midst of event season – that means filled planes, ok coffee, and great networking events, which continues to be a core competency of this great industry!

Conference attendees, from Barcelona to San Francisco, have been informed, regaled, beguiled by all things mobile advertising, as they try to figure out what’s new, what’s happening, and what’s next in mobile advertising.

For us at Nexage, we exhibited at MWC, and presented at Gridley's Annual IDEA Conference, Digiday Mobile LA, GDC, Xconomy Mobile Madness, and sponsored at SXSW.

It is always interesting to see “what is the swirl and key debates” for mobile advertising; in great part because this is such a dynamic market where the exact evolutionary path and pace are yet to be defined. Here are some discussions that caught my attention and, to me, are important conversations that shape our industry.

1. Mobile native is becoming the design principle

The mobile native concept, namely that creative, campaigns, and business operations should be explicitly designed for the mobile environment, is gathering steam across the industry. This is notable, as the prior overriding logic was to take all things online, for example, creative and third-party cookies, and apply them to mobile. That logic ignored the real and persistent differences between online and mobile and, frankly, was going to artificially hold mobile back.  The good news is that the mobile native theme permeated these events, including our GDC presentation with Kiip, and seems to be the focus of market participants across the industry; this represents a critical and positive change that benefits everyone in the ecosystem.

2. Campaign analytics and measurement front and center: CTR or ROI?

What’s the best measurement environment for brands in mobile advertising? At DIGIDAY, there was continued skepticism about click-through rates (CTR) as the guiding metric. The opposing view to CTR is ROI, which argues that the best way to understand the value of a mobile campaign is to look at the uptick in sales. The thought process is that mobile advertising—whether the campaign is to provide brand awareness (a la many of the premium car companies) or a local campaign that directs consumers to local shops and events—is a piece of the puzzle that drives top-line gains. But the trouble is that mobile cannot be (accurately) detected as an isolated lever, which means that you cannot be overly sure of mobile’s exact contribution to sales. The evidence provided by an agency executive revealed that they were able to acheive a 3x+ overall campaign ROI when mobile was a key piece of the puzzle—for her customers that was bottom-line consideration. This makes sense (and makes common sense), although it runs afoul of the data-heavy expectations for online. Stay tuned as this debate will continue.

3. Standards emerging, but getting some strange receptions

Even though there was broad support for standards (and more standards), there continues to be an odd assertion that standards (meaning both technical standards such as OpenRTB 2.0 and standard business practices) would commoditize mobile advertising. In this case, panel members and presenters directly linked the reduction of cost and complexity to the reduction of price value. I recognize that, in some industries that are under massive price pressure, cost reduction initiatives follow price commoditization—but that is not the case in mobile advertising.

It was odd to me as the adoption of standards—meaning the reduction of cost and complexity—enables publishers, buyers, and agencies to allocate more resources (time, money, and people) to the primary job of driving the business forward. Take ad units as an example, the definition of standard ad units by IAB does not constrict the value of the creative, it simply means that the creative—which  are increasingly clever, story-based, and vivid—can be built faster and more efficiently. As an industry, we should be rallying around standards, like ad units, OpenRTB 2.0, and common business practices that make this industry less complex and more efficient.

4. Expanding support to RTB, and not just for efficiency

RTB has had a funny journey, in great part due to its role in online advertising. It was seen as both a critical technology to drive efficiencies and revenue at scale; it was also seen as a technology that both displaces human decisioning and would, due to efficiencies at scale, commoditize the industry. There is both wisdom and pathos in those ideas. The most important concept for RTB is that mobile RTB has a very different role and value than online RTB due to its key role in enabling real-time, impression-level targeting.

Mobile RTB is seen as critical, and not simply for efficiency, but for creating real targeting value for DSPs and real-time buyers who are able to select those impressions that they value based on detectable targeting parameters (demographic, location via geo-fencing, device ID, and psychographic/behavioral), and avoid buying those impressions they don’t.  It is nice to see such a widespread view of mobile RTB as being high-value, high-efficiency, high transparency, and high control option for publishers, DSPs, trading desks, and agencies.

5. The mobile game market is startling...and some changes are coming

Of all the dynamics in mobile, mobile gaming would have to be the most startling. There was once this argument that the mobile phone was fundamentally ill-suited for content or interaction (thus putting a ceiling on growth). It is fair to say that mobile gaming pretty much blows that theory to bits. It has achieved extraordinary growth and is now a primary design platform for game developers; but it is also about to be affected by notable external and internal dynamics.

The external dynamic is currently dominated by the deprecation of Apple UDID, which will have a significant effect on the industry. Game developers depend on UDID as a primary mechanism for customer acquisition (let alone the effect to many CPI campaigns that count on UDID to track conversions). It will be interesting to see how fast (note: not if, but how fast) a common industry solutions emerges that is practical, scalable, and does not create privacy risk. Stay tuned for a post from us on this topic in the very near future.

The internal dynamic is different, and is centered on economics. Mobile gaming has relied on the freemium model that has been mostly funded by a few heavy spenders of virtual goods. In essence, a dual strategy forms: (1) continue to prime the virtual good pump with more goods, more offers, and ads that promote virtual goods, while (2) driving the mobile advertising revenue stream to de-risk overall growth. This plan has worked (gloriously) to date, but there is real risk in sustainably growing virtual goods revenue to subsidize a growing customer base that is increasingly dominated by casual gamers.  The good news is that while that risk is real, the value of mobile advertising is increasing, driven in great part by consistent improvements in the creative,  ad placements (that fit into the logic of the game such as firms like Kiip are delivering), and ad relevance so that ads have real meaning and value to consumers.  So while I recognize that many game developers are focusing on the existing in-app revenue stream and customer acquisition, they will need to, in the very near-term, become expert in mobile advertising to keep this train rolling down the tracks.
 
Beyond the remarkable (and sometimes zany) innovations in mobile gaming, the mobile game industry is in for a very interesting 12 months going forward.

6. There is a little more sanity (but no less sarcasm) to the "Year of Mobile"

The sarcastic comment “so this is this year of mobile” seems to finally have a common and useful retort (or contextualization for us diplomatic folks). In fact, this is the decade of mobile where we are in the midst of an unprecedented, global  mobile revolution –  bolstered by eye-popping number like China Mobile’s growth rate or US smartphone penetration – and clarified by such comparisons as “more people have access to mobile phones than toilets.” (Ironically, that same stat is used to re-invigorate the effort to bring running water and sanitation to the world-over.)

Of course, the real intent of the message is that this is the Year of Mobile Advertising, which assumes that there is some hard cutover or binary event that this either is not the year/or this is the year (or for that matter, prior growth rate were simply unimpressive). Without being too pedantic about it, we are in the midst of a very rapid, but not always orderly, mobile advertising evolution driven in part by the issues presented in this post.  So for us keeping score and providing editorial relief, I submit that mobile advertising will be less of an event and more like a journey – great news for us journey-loving folks.

Congratulations to Gridley, Digiday, GDC, MWC, SXSW and Xconomy for putting on such great events. Keep it coming.

Well, mobile advertising has just taken another important leap forward with the release of the OpenRTB 2.0 specification. Before we talk about what it means (and why you should care), let's talk about what it is. OpenRTB 2.0:

• Includes support for VAST video ad units – to simplify and accelerate the adoption of video ads that significantly enhance ad quality and consumer engagement.
• Harmonizes the API standard across mobile and online in a common lingua franca – to simplify cross-channel campaigns.
• Provides finer definition of geo data – to improve the performance of local and hyper-local campaigns.
• Provides more flexibility to support 3rd party data segments – to extend how real-time buyers can characterize and target audience.
• Supports richer attribution (e.g., fine grained content categories, mobile app parameters, device IDs) – to further improve targeting.

As you can see OpenRTB 2.0 makes important gains in key value drivers for mobile advertising: video ad units, location targeting, data and associated audience targeting, and mobile/online harmonization.

We (Nexage) have stated (and restated) our belief that mobile advertising is rapidly maturing and closing the gap between the extraordinary opportunity and real capability...OpenRTB 2.0 is a strong proof point. Nexage is proud to have been part of this effort and we congratulate and thank everyone who participated. So game-changing is this standard and so broad was the groundswell of enthusiasm that the IAB has adopted OpenRTB 2.0 as its own.

The development of standards is so important for this industry – and the cooperation across the industry to develop and deploy standard-based solutions is both exciting and critical to moving this industry forward. For those that remember, Nexage Chaired the OpenRTB 1.0 mobile effort, where our goal was simplifying and accelerating the adoption of real-time buyers in mobile and real-time bidding (RTB) overall. We were a pioneer in mobile RTB, building our exchange in late 2010/early 2011, and we strongly believed that creating a standard at the very heart of RTB (namely, the bid request/response protocol between exchanges and bidders) was crucial. We made a decision to make our IP available to the market and to our competitors as we believed that moving the market forward was more important than gaining first mover advantage. It was the right decision then – it still is today.

In some corners of the universe, standards are not exciting. For mobile advertising, standards are downright exhilarating.

So let's take a moment, a deep breath, and celebrate. OK, let's get back to work and drive the industry forward.

There is Pi. There is Tau. There is, of course, the spiritual battle between the advocates of Pi and Tau. (The author does take sides, but opts not to for the sake of universal harmony.) There is the Divine Proportion that yields the Golden Number. There is the irrationality of √ 17  as presented in Theaetetus, but as they say, that’s just theory. And for those more tuned to the journey versus the destination, there is the Fibonacci Series.
 
And there is 100 billion.

As in “100 billion galaxies each having 100 billion stars” by Carl Sagan.  The “$100 billion” amped up extortion from Dr. Evil. There are the threats and counter-threats of reducing the federal budget by $100 billion (by moving to 1-ply toilet paper, we hear). There is a small company in California that thinks they are worth $100 billion. There is the landmark comparison between McDonald’s 100 billion hamburgers and mobile app installations that shook Ronald to the core.
 
But enough of these co(s)mic trivialities… Nexage is pleased to announce that we have crossed the 100 billion ads requested threshold today, February 3, 2012.

This 100 billion threshold has meaning in a market that is growing and rapidly maturing; in a market where liquidity is the life-blood of our customers’ business. Most importantly, 100 billion is an outcome of our customers’ trust in us to drive their business forward.
 
Thank you.
 
And now to driving the next 100 billion…

The last 30 days have been interesting for us here at Nexage in great part due to how to market has responded to our Nexage Private Exchange announcement and Ernie's article on Why 2012 is the Year of Mobile Advertising. We received a significant response in terms of direct comments, tweets, likes, and calls for both—truly a nice outcome.

But patting one's back only gets one a sore arm (and if successful, a sore back). So we asked why these pieces caused such a significant response?

Here's what we learned: the market has been seeking proof points that mobile advertising is neither flighty, fragile, or flimsy; instead mobile advertising is rapidly becoming an efficient and highly liquid market underpinned by a reliable, powerful infrastructure...that creates value across the ecosystem of publishers, buyers, agencies, and advertisers. The announcement and article sent a strong signal that mobile advertising is rapidly maturing so that it can meet its amazing potential and, more to the point, so that business leaders have the confidence and clarity to increase investment.

The marketplace of ideas is now shifting from a somewhat shrill tone—either asserting that mobile has already fully arrived (exuberance) or mobile can never meet its potential (skepticism)—to a more constructive tone of identifying and analyzing the build blocks that will shape the market, as evidenced by these recent articles in DIGIDAY and AdExchanger. Surely there is work to be done and, indeed, there is the appropriate focus not on just the sizzle of the acronym, but on the blocking and tackling of ensuring the technology works. And 2012 marks a key turning point for mobile advertising as we shift from hype to productivity.

Amen to that.

Technology performance. Reliability. Scalability. Resilience.

Is this not the sexiest, most fascinating, and iconic topic that is on top of everyone’s most “talked about” list as we enter 2012?

OK, maybe not.

In fact, it may be that in a market prone to hype and deals over drinks, technology performance may be considered dull, unimportant, and inconsequential. That is, until the very technology you depend on:

• Is fraught with error and downtime that directly degrades revenue
• Is hard to scale so that you need to tap into capex or allocate resources to the technology, versus focusing resources on growth
• Is fragile, quirky, unreliable and your provider is far too willing to consider fragility “normal business practice."

Technology matters. The strength, completeness, and reliability of technology is inseparable from business performance. This may, indeed, be the sleeper story of 2012 and beyond. 

So let’s bring it into focus. Our CTO, Jim Butler, who is a key architect of OpenRTB 1.0 and soon to be released OpenRTB 2.0, talks to a number of technology issues that are intrinsic to business performance. First up is technology reliability as measured by up-time.

“Is the platform up?”  A simple and fair question, but the answer often depends on who you ask.  “Really?”  Caveats abound not just in technology, but everywhere you turn.  Ever actually read the fine print at the end of a car commercial describing the lease terms?  Of course not; you’d need a high-def DVR, intravenous caffeine, and time to burn. Drug caveats are worse, unless you like dry-mouth, eye pain, and in rare cases death.

“So is the platform up?”  Your service provider may claim an impressive 99.99% uptime or even the 99.999% gold standard. Typically applied on a monthly basis, these numbers roughly allow no more than about 5 minutes or 30 seconds of downtime per month, respectively.  But grab some coffee and read the fine print, or better yet just ask. Many providers exclude scheduled maintenance from the equation, which might include software deployments, network updates, hardware preventive maintenance, etc. These are all valid tasks, but if they’re offline during the process, you need to know; their “real” uptime percentage may have a few less 9’s. Some less reputable providers may even classify an operational state as uptime when the platform is minimally capable of responding, but with major features unavailable – some that may be critical to your business.

I advocate a customer centric view of platform availability. If our customers can use our platform normally with the requisite performance and the features they count on, then we’re up. Otherwise, we’re not up, irrespective of how valid our reasons may be. I take this position not only because I’m proud that we’ve built a platform that enables high “real” availability, but because we too are customers relying on the platforms of many other companies. But one advantage of sitting where we sit in the mobile ecosystem is that we can shield from our customers the downtime of other platforms by aggregating multiple media providers.

And yes, our platform is up (no caveats to follow).

It is equally as important to contrast an RTB exchange in mobile from an RTB exchange in online. Mobile is different. Those of us in mobile advertising find ourselves pointing this out regularly. It brings both unique challenges as well as tremendous opportunities. One of those opportunities just now coming into focus is the role of the RTB exchange in driving considerable growth and liquidity in mobile advertising.

Things you want to know about mobile RTB:

It’s about the data. Publishers put inventory with data in - and get premium CPMs back. Publishers have valuable first-party data (data collected by the publisher as part of the service/application/content experience that they provide). Mobile RTB exchanges enable the publisher to pass that information (zip, lat/long, age, gender, etc.) on an impression-by-impression basis, in real-time and for one time use (read: no profiling).

In mobile, where third-party cookies are neither available nor reliable, first-party data is the current gold standard for audience buying, and the RTB exchange is the enabler. Contrast this with online exchanges, where the role of the exchange is to expose remnant inventory to buyers who buy low, and augment with third-party data on the buy-side to drive the value of an impression.

It’s about the data. Buyers also reap significant value from RTB-delivered first-party data, as it give buyers the ability to target audience in real-time, to support both brand and direct response (DR) buys. The list of attributes—location, gender, IAB category, age, demographic—is growing, giving buyers more and more opportunity to target the specific audience needed to drive campaign success. The whole “right time, right place, and right price” position exists in mobile thanks in large part to the role of the RTB exchange.

The RTB exchange is bringing new $$$ to mobile. Advertisers and online demand side platforms (DSPs) are shifting considerable spend into mobile. Mobile DSPs, each with a unique value proposition, are growing in numbers. Vertical DSPs (e.g. travel) are growing to serve specific market niches. An RTB exchange allows these DSPs to decision in real-time, optimizing and applying proprietary intelligence in order to deliver against the demands of their advertisers on each impression.

The RTB exchange combined with mediation/yield optimization drives liquidity. When integrated with a yield optimization platform, RTB exchanges in mobile provide maximum liquidity to the market. In essence, it becomes the foundational and strategic technology for a mobile advertising market.

Buyers on the exchange are not typically the same buyers on mediation/yield optimization platforms. DSPs concentrate on exchange buying, while most mobile ad networks buy via static connections to mediation players. As a publisher, if you don’t partner with a company that has both, you are artificially—and maybe severely—limiting your market.

The beauty of an integrated market for publishers is that you maximize your available market, enable a cohesive set of controls and gain the unique advantage of fully integrated yield optimization. You simply set a reserve dynamically on the exchange based on the intelligence derived from yield optimization; if it doesn’t sell on the exchange, the impression gets passed to mediation. The result is increased fill and higher CPMs.

RTB in mobile is rapidly evolving. Our mobile RTB is rapidly expanding and evolving. Key additional capabilities such as privacy-safe audience targeting (first-party data enabled), private mobile exchanges for publishers with complex channel and control requirements, and buy-side solutions that dramatically improve efficiency and targeting will be released in the near future.

After all, the “tech” in mobile ad tech must create persistent strategic advantage to you. To achieve more, you should demand more.

Watch this space as we put a spotlight on current RTB capabilities as well as new offerings and partnerships that will continue to highlight the tremendous potential (and reality) of the mobile RTB exchange.

To drive liquidity, a platform should enable publishers and buyers to sell and buy inventory at the best possible price. Sellers need access to buyers with controls of how they sell. Buyers need access to inventory with the ability to efficiently target and buy audience. And they both need the confidence and transparency to determine fair market price.

Efficiency can be difficult to define as it is often subjective unless directly connected to cost or margin considerations. But we can probably argue that mobile advertising today is not (adequately) efficient; we have an overly complex ecosystem with too many hands taking a share of the advertising dollar.

Automated markets are intended to improve efficiency; to do so, players in the market will need to consider new table stakes, and buyers and sellers should use these table stakes as selection criteria.

With these comments in mind, let’s look at the emerging table stakes for a mobile advertising marketplace:

• Mediation + RTB. Marketplaces need to connect as many buyers and sellers together as possible to drive both efficiency and liquidity. For publishers and developers, marketplaces will need a tightly integrated mediation and RTB platform that enables them to access all types of buyers—ad networks, demand side platforms (DSPs), and beyond.
• Business controls + visibility. Customers need a set of controls, notably brand safety and price controls, to run their business the way they want. Full visibility and insight into daily performance and weekly/monthly/quarterly trends enable customers to dynamically tune their business.
• Public + private markets. Private markets include the ability to stand up a fully orchestrated private market on mediation and RTB (via a private exchange), so sellers select whether they want to gain access to the full public market of all buyers or to pre-select buyers based on business needs, brand safety or simple preference.
• Abundance + variety of advertising opportunities. A marketplace should enable, not constrain, the types of ads available or where they are available. Standard banners, rich media, video, and interstitials should be available across both mobile web and applications.
• Any buyer. The mutual goals of liquidity (accessing as many buyers as possible) and efficiency (giving buyers the most efficient access to the market) require marketplaces to enable and empower any buyer that wants to enjoy the benefits of automated markets. This includes, but is not limited to, ad networks, DSPs, agency trading desks (ATDs) and game developers pursuing new customers. A marketplace should be accessible whether or not the buyer has undertaken the daunting effort of building scalable ad delivery technology.
• Reliability.  Amongst the sea of seemingly outlandish claims, it can be difficult to figure out what is real and what is a façade. Though commonly overlooked, delivering reliability and scale is critical and necessary. In mobile advertising, some players have chosen to skip right past the necessary step of building a rock solid, reliable, scalable platform in order to focus on “shiny objects” – typical cases of too much sizzle and not enough steak. Reliability is only “optional” if revenue is speculative; it is vital when revenue is important (read: you have targets).

Advertisers, publishers and developers are taking a more strategic view of mobile advertising, mandating that the ecosystem and underlying technologies should both enable and drive business success. This changes expectations and, inevitably, realities.

End-to-end marketplaces that benefit buyers and sellers will diminish existing complexity and inefficiencies and allow simple, efficient transactions to take place. And now that you know the table stakes for a mobile advertising platform, look around and find a platform that converts your company’s potential into bottom-line results.

With the market growing leaps and bounds, market liquidity is expressly an achievable goal, but there are some dams in the flow of commerce. The three “dams” are (1) complexity in the market, (2) scaling challenges across business models, and (3) a lack of transparency to inventory and/or inventory pricing.

Overcoming Challenges

Mobile advertising has been washed with the accusation of complexity; some of it deserved due to fragmentation, some of it merely signals the distinctive differences between mobile and online. Don’t get me wrong, fragmentation is real—there are many buyers connecting to many sellers in many different ways. The inefficiency diverts resources—time, money, people—away from directly building the market versus just managing complexity. And it screams for a simple market model where sellers and buyers tap in, trade (and trade often) and grow their respective businesses.

In defining that market model, we come across “dam #2”, scaling challenges across models. Let’s start with direct-sold models that have enormous strength and internal support. Direct-sold models are superior in managing the amount of inventory available to maximize eCPM and to control the way publishers want to run their business. The challenge is scaling these businesses as revenue targets outreach the extent to which they can protect eCPM values. The theory is that to increase ad revenue and avoid channel conflict, the publisher would deliver remnant inventory as blind onto the network or real-time bidding (RTB) exchange, intentionally driving revenue through fill rate gains at lower eCPM. It is, in great part, a relic of the online business that considers how third-party data defines the economic reality.

The challenge is scaling these businesses as revenue targets outreach the extent to which they can protect eCPM values. The theory is that to increase ad revenue and avoid channel conflict, the publisher would deliver remnant inventory as blind onto a network or real-time bidding (RTB) exchange, intentionally driving revenue through fill rate gains at lower eCPM. But going blind (dam #3) devalues their own inventory—especially given the lack of third-party cookies in mobile—such that publishers can artificially suppress demand and lower eCPM results. This can impact revenue performance, and of course, limit liquidity gains.

In essence, the combined models create awkwardness on both sides: artificially scarce inventory at artificially high prices, combined with an intentionally obscured and devalued inventory.

Driving Liquidity

All three dams make sense in how they came to be and why they persist…in great part because there has not been an easy way to arbitrate among them. But like other efforts to remove dams, it focuses on innovations and fresh thinking. We need to build large independent markets to simplify and encourage liquidity, underpinned by RTB to enable impression-level audience targeting that is critical to advertisers (to unleash the big spend), using private exchanges to enable publishers to control how they want to sell their inventory and opening the spigot on going transparent (with all due brand safety rules in place) to drive up volumes AND protect price.

Today, mobile advertising is in a quasi-liquid state, but tides are rising. To build an efficient, fully liquid and vibrant mobile advertising market, we need to think through how to address the current dams that are slowing or shunting the flow of commerce. Part of this is evolving the approach to market; part of this is taking advantage of technologies and solutions available today, so that buyers and sellers safely and successfully convert the great opportunity of mobile advertising to business reality.

HANG TEN!

Mobile is fulfilling its promise: it is becoming more and more integrated into our daily lives, influencing beliefs and world views, enabling new means of interacting, living and even thinking that was science fiction not too long ago. A fantastic time, indeed.

The mobile explosion does, however, have essential issues of property, liberty and privacy that we must wrestle with. Who gets to say when messaging platforms should be throttled or monitored? What tracking is done and how can consumers interact with the trackers? What personal info should be asked for in exchange for free usage of intellectual property? As an industry, we need to find sensible answers to these questions that strike the right balance, or someone else will, which may produce results that limit creativity or our ability to deliver value to our customers. 

That leads us in mobile ad tech to some important questions: how do we advance the goals of our businesses and industry while preserving the trust of our customers? How do we help our customers monetize the fruits of their labors that preserves the value of their IP, respects the needs and desires of end users, and ensures that the end-to-end flow of commerce is uninterrupted and flowing so the engine of growth that has brought us this fantastic era of mobile doesn’t sputter out of fuel?

In other words, how do we ensure we are not just beneficiaries, but, indeed, builders of the mobile ad tech space?

In our view, we achieve this by following key business principles:

• Communicate with our industry colleagues, the press, prospects and customers in a clear, unambiguous manner – don’t inflate current capabilities or delivered benefits; be clear on what’s real and what’s roadmap, and don’t hide behind jargon.
• Build platforms that can scale reliably with performance; don’t release what are really just testbeds or proofs of concept to customers that won’t know the truth until it’s too late.
• When you do make a mistake or fail, step up and acknowledge it, learn from it, and move on. In a dynamic, demanding sector such as ours, failure is inevitable. If it’s done honestly and we learn from it, it can be a good thing.  We have to stop pretending that there are no failures, papering over our missteps and trying to obfuscate the reality.
• Spend time understanding the customers’ requirements.  Don’t spec in a vacuum, don’t build without a roadmap, don’t launch without a clear position and message as to what you’re doing and why.

This list is not meant to be exhaustive, and I welcome comments, brickbats, additions, or any other feedback.

In our coming posts, we’ll try to add to the conversation in this, our fantastic world called mobile. And we’ll also be doing our best to live up to our own standards, as expressed here and elsewhere. 

See you on the bit stream.