Many of the ad innovations have been a hit with brands and the trade press. But what they haven’t done is stanch a troubling decline in the Times‘ digital ad revenue. What’s the problem? To get a better idea of how the Idea Lab fits into the Times‘ operations and the company’s revenue strategy, I dropped by for a chat with Todd Haskell, the group’s VP of advertising.

Haskell began by explaining that the Idea Lab was spun off in 2010 from the Times’ R&D Lab, a blue-sky experimental forum, in order to create practical products for advertisers in a short time. He described recent examples:

• A Prudential campaign that invited readers to pull up the front page of the New York Times on the day they were born. The ad format, which drew on pre-existing Times’ archival tools, was a hit on social media. Here’s a screenshot:

• A Wisk campaign that was derived from a Times’ culture story about how Picasso painted over canvasses. The original story invited readers to wave their mouse over a Picasso photo to reveal what lay underneath. For the detergent ad, Wisk asked readers to use their mouse to undercover underlying dirt stains. According to Haskell, those who did spent an unusual amount of time fussing over the ad. Here’s a screenshot (you can touch up Picasso here and play with stains here) :

• The Times‘ city guide app, The Scoop, inserted a Citibank map for New York City’s new bike-sharing program

• A National Geographic campaign drew on the “Times Machine” (which Haskell says is normally used only by “history geeks”) to provide historical backdrop for its Killing Lincoln show

According to Haskell, the New York Times‘ digital story-telling machinery is appealing to companies as a way to convey heritage and complicated brand stories. He adds that clients like Prudential say they have had tremendous response to their campaigns, including huge lifts from social media.

But despite the promise of such ad tools — and clever platform tools like Ricochet and Sparking Stories – the Times’ overall ad performance is limping. Recent earnings results show that digital ad sales are not just flat but actually declining — a troubling development at a time when digital revenue is supposed to stabilize the company as it faces a permanent decline in its print business.

Haskell says the company has been unable to pre-sell all its inventory, and attributes the overall ad challenges to two factors — “an explosion of inventory from social channels” (read Facebook) and the rise of automated or “programmatic” buying which lets advertisers purchase digital ads on real time exchanges.

New York Times Idea Lab, photo by Rani Molla

He predicts, however, that the new formats will help woo brands back from the programmatic trough; he adds that the Times‘ reader data and performance metrics will also persuade companies to spend more money. Finally, Haskell also sees programmatic as an opportunity as well as a threat — the Times is offering customers who make premium buys a chance to participate in a private exchange of Times ad inventory (where prices will stay higher since the Times ad slots aren’t sloshing around with shady fly-by-night websites like Toothbrushing.net).

All of these questions will be sitting on the doorstep of the Times’ newly minted head of sales. The company announced the new position in April, but says its still having a good long look for candidates.

According to the research, released Tuesday morning, news publishers are running three times more ads than a year ago while also relying increasingly on automated real-time exchanges to sell the ads. Here’s some other highlights from the figures (which are drawn from DoubleClick, not YouTube or other networks):

• 40 percent of the video ads that ran between January and March this year were from first-time video advertisers.

• 68 percent of all the ads came from four categories: automotive, tech, retail and consumer packaged goods.

• Entertainment sites are attracting more than two thirds of the ads, but categories like sites devoted to news, sports and electronics are quickly increasing their share

• Video ads that let viewers skip ahead after 5 seconds are more popular (d’uh!) but these type of ads also yield a much higher return for publishers

The survey did not, unfortunately, offer any insight into how video CPM’s (which are much higher than those for display) will hold up as more and more publishers try to get into the video game. The findings come at a time when media companies like AOL and Yahoo are creating original series and video ad network Tremor Video has filed for an $86 million IPO.

Finally, despite the enthusiasm of Google (and many others) for online ads, take note that the bigger picture suggets that the vast majority of video ad money is going to stay tied up in TV for a good many years to come.

DoubleClick also set out its survey in an infographic if that’s your cup of tea:

Doubleclick Slide on Online Video Ads

The dispute between Google and its “bad apples” involves technical details but, fundamentally, it’s about crummy products designed to force feed ads.

In the case of AVG, it worked like this: when people downloaded its free security software, they automatically received a “safe search” product (unless they were alert enough to uncheck a box during the download process). The unwanted product then installed itself on their browser toolbars as a default search engine. It also — and this is the critical part — served as a platform for AVG to collect money by showing ads, and proved about as easy to uninstall as resigning from the French Foreign Legion.

Veteran tech writer Emil Protalinski was first to report AVG’s hijinks last summer, calling it the “worst foistware I’ve ever seen.” Since then, investor site Seeking Alpha warned that AVG’s aggressive tactics to get ad revenue would lead Google, which supplies ads to AVG through its AdSense program, to take action. The search giant apparently decided it could do without AVG and, in its new policy announcement, explained:

For example, in the last 90 days, we have seen over 100,000 complaints about software that changed users’ browser settings or about toolbars that they couldn’t uninstall.  We want to avoid these kinds of bad user experiences.

Seeking Alpha also warned that if Google jilted AVG, the site would be forced to live on Yahoo ad revenue — which would bring in less money. This prospect appears to have had its intended effect on AVG.

The outgoing CEO of AVG, JR Smith, explained in a Monday phone interview that its “safe search” product was no longer bundled in a way that forced consumers to opt out. He added that AVG recently signed a new two-year deal with Google and said it complied with all the company’s conditions.

“They’ll send you default letters and kick you off the network,” said Smith, adding that Google takes tough lines to promote a clean ad ecosystem.

Google, in response to a request for comment, only repeated its policy announcement. Yahoo did not respond at all.

Tough line or just tip of the iceberg?

Google’s new policy aims to reign in AVG-style tactics by forcing software that uses its ad services to provide “one-click uninstall” and to go through a Google approval process. In the bigger picture, the policy appears to be part of a bigger effort by Google to clean up scammy ad practices involving toolbars.

While toolbars have legitimate uses, they can also be a vehicle for mischief. In addition to AVG, other public companies like Babylon have acquired a reputation for malware; the latter offers a translation program but the installation process can also lead to browser hijacking. Some techniques are even more nasty.

Certain scams typically invite users to download a program like “Find out who unfriended you on Facebook” but really serve to inject unauthorized ads. One example is Sambreel, a notorious ad outfit that forced its way onto the webpages of the New York Times and other prominent publishers last year; the hijacked ad space likely cost the Times and others millions in lost revenues. Even Google itself has been a victim through its YouTube video site.

An executive at a major publisher forwarded new screenshots this month like the one below which shows how a “Browse to Save” toolbar device (which claims to find deals for shoppers as they search the web) has used a Sambreel product to take over YouTube’s ads:

According to the executive, who did not want to be named, Google is doing the right thing but faces an uphill battle. While it can whip sites like AVG into line, unlike companies, sleazy actors will simply shop around for another ad exchange to do the dirty work. He said that some exchanges — which act as trading houses for digital ad inventory — often turn a blind eye to bad advertisers so long as they bring in money. In this bigger picture, Google appears to be trying to raise the bar in the industry in order to prevent a crisis of confidence in the online ads that are its lifeblood.

The toolbar policy comes at a critical juncture for the online display ad industry. On one hand, the industry recently suffered another black eye from a botnet scandal and may also be losing ground to the current mania for native advertising. On the other hand, Google, AOL, Facebook and others are developing a sophisticated suite of programmatic ad tools that could make the industry more efficient than ever before.

(Image by  BMJ via Shutterstock)

“This gets us back into the ad tech game in a serious manner,” said CEO Tim Armstrong, speaking at the AdTech conference in San Francisco on Tuesday.

The new Marketplace product, which will compete with offerings from Google and Adobe, is intended to provide publishers with an alternative to using multiple companies to carry out the process of selling and serving digital advertisements.

“All these companies create a false sense of complexity in industry but also take a lot of money out of it,” said AOL Networks CEO Ned Brody, in a recent interview. Brody claimed that the multiple pieces in ad tech amount to “too many mouths” to feed, and that AOL’s new integrated platform will let publishers keep 80 cents, rather than 50 cents, out of every ad dollar they receive.

Brody also argues that the lion’s share of ad tech innovation has occurred on the buyer’s side, giving brands new tools to obtain ads more efficiently but failing to help publishers. He claims tools like Marketplace will fix this imbalance. Brody also says that AOL’s own media entities, like Huffington Post and Engadget, use its ad tech tools — giving it a perspective on what ad tools other publishers want. An ad manager I spoke with was more skeptical, saying companies are constantly offering magic bullets to make advertising cheaper and easier but that the industry remains much the same.

From a larger business context, the ad tech offerings are also part of Armstrong’s efforts to refashion AOL into a company that no longer has to rely on its legacy dial-up internet subscriptions. This has meant creating two other separate divisions: one dedicated to its media properties, and another dedicated to its ad technology. Recent earnings reports show the two newer divisions are performing well from a revenue standpoint but are still waiting for profits to roll in.

At the conference, Armstrong also says he wants AOL to be like financial firm Goldman Sachs by relying on strong partner relationships, but also innovating in its own right.

Instead of simple transactions between publisher and buyer, digital ad sales rely instead upon a bewildering degree of middlemen who offer competing versions of a lengthy technology product. Ad executives say, for instance, that there are now eight different technologies just to count if an ad has even appeared.

“How f’ed up is our industry? Even after you work with five or 10 companies, you have to hire two more companies to find out what you achieved,” said Ned Brody, CEO of AOL Networks, while speaking on Monday at AdExchanger’s Programmatic I/O conference in San Francisco.

The good news is that Brody predicts that the ad industry will consolidate and offer publishers fewer and easier choices. Instead of having to navigate a series of disparate SSP’s (supply side platforms), DMP’s (data management platform), ATD’s (agency trading desk) and so on, he says more companies will offer a one-stop shop. Brody also suggested that that fewer “mouths to feed” along the ad chain will result in publishers receiving closer to 80 cents, not 50 cents, on every ad dollar.

Alas, this promise of a simpler and more lucrative ad landscape may not emerge anytime soon. Speaking from the publishing point of view, the chief revenue officer of The Weather Channel, Curt Hecht, was more sanguine about the situation.

Hecht agreed that the ad industry was over-complicated but said the Weather Channel “embraces all these things” and looks for “market signals” — chatter from agencies, marketers and tech partners — to ensure it’s familiar with whatever technology its ad buyers request. In other words, publishers like The Weather Channel have accepted that the current cluster of ad tech companies may not untangle itself anytime soon.

Publishers’ hopes for simplicity may also be dashed by ad buyers’ increasing desires for cross-channel marketing — reaching potential customers on laptops, mobile devices and more in the same campaign. While this may deliver more effective marketing messages, it also has the potential to further complicate the current ad tech witches’ brew, especially on the measurement front.

As other speakers at the conference noted, ad buyers are still skittish about the tools used to measure online ad purchases on platforms like video. While the metrics are fast improving, publishers may not be able to promise that ad buyers are reaching more than 50 percent of a given video audience — let alone a cross-platform one. All agreed that the online ad economy will improve significantly with the arrival of a single Nielsen like rating, which may (or may not) get here by the end of 2013.

The bottom line is that the ad tech industry remains a fragmented industry with many moving pieces and that, despite the promise of a streamlined experience, publishers will have to wait awhile to see more daylight in the notorious LUMAscape slide.

(Image by nmedia via Shutterstock)

Then something happened. The company’s revenues grew, its share price soared and CEO Tim Armstrong revealed a strategy to make AOL a media and advertising powerhouse. The company’s winning streak continued Friday morning as Wall Street greeted AOL’s latest earnings report with glee; the stock shot up another 12 percent when markets opened.

“We’ve walked through the the value of the turnaround and got to growth,” Armstrong said on a morning call with investors.

It’s too soon to say the company’s back on top but, for now, the results look like the real deal. Here’s why: as analysts fussed over AOL’s debacle with hyper-local site Patch and its dwindling dial-up business, the company quietly invested in state-of-the-art ad technology and rejigged AOL to inject new revenue streams. The most important of these are inside the AOL Networks group — a business unit that offers ad tech tools to publishers and advertising agencies that are still learning to navigate the world of automated ad buying. The Networks group grew 37 percent year-over-year and posted revenue of $183.5 million in Q4. (Total revenue for AOL in the quarter was up 4% from a year ago to $599 million; adjusted OIBDA income was down 7% to $123 million).

During this time, AOL has also become number two in online video thanks to products like HuffPo Live; this is significant because video is one of the most lucrative forms of online advertising. AOL now plans to draw on its fancy ad tools to create automated buying for its own video inventory while, at the same time, offering those tools to other companies who are still catching up on the video front.

Meanwhile, AOL’s media properties don’t look as dysfunctional as they did a year ago. Armstrong appears to have figured out how to manage the mercurial Arianna Huffington and, as for his pet project Patch, the hyper-local site is still losing money but he promises it will be profitable by the end of  the year.

The bottom line is that AOL has three major revenue streams, all of which look viable. There are still danger signs, of course: AOL’s display ad business looks shaky and, as Henry Blodget points out, the company’s revenues may come from three streams but nearly all of the profit is still coming from the legacy subscriber businesses.

But, for now, investors are right to like what they see. People looking for 2013′s turnaround story should stop fussing over Yahoo — it’s AOL that is poised to be this year’s comeback kid.

Correction: an earlier version misstated the sale of AOL’s patents; this has been corrected to say the patents were sold to Microsoft (which in turn sold them to Facebook).

Disclosure: GigaOM distributes some video content through AOL.

(Image by Rob Hainer via Shutterstock)

Now, though, the Huffington Post’s comment strategy suddenly makes a lot more sense in light of “Conversations,” a new tool that surfaces discrete discussions within the comment stream and then lets readers read those discussions on a separate webpage. In the case of the Hillary story, for instance, the first comments that appear at the bottom of the story will now be “conversations” sparked by popular members of the existing HuffPo community.

The new set-up should make it easier to jump in on a given debate about the story that’s of interest. In the Benghazi story, for example, groups of people can find each other to discuss specific facets of the story — whether the US should be in Libya; whether the incident was Hillary’s fault; whether Hillary is actually a Muslim agent sent from Mars to destroy America and so on.

The fact that the “Conversations” will now have their own URL also makes it easier for people to share them and invite others into the discussion. The feature in some ways resembles the buzzy start-up Branch which lets people grab existing conversations and continue them in new places (though, unlike Branch, HuffPo’s system is not invite-only). To get a better idea of what HuffPo is doing, here are two screenshots from a recent story. The first is an existing conversation (I’ve circled the button that takes it elsewhere) and the other is what the conversation looks like on the new URL:

Huffington Post CTO, John Pavley, explained in a phone interview that the site relies mostly on algorithms to parse comments and to identify worthy conversation leaders but that it uses human moderators too. HuffPo’s inspiration for its comment system comes in part from Reddit, the popular group-reading site, he added. (The move also comes that at a time that publishers led by Gawker’s Nick Denton are re-evaluating the philosophy of comments in general).

The share-a-conversation feature serves to make order out of the comment chaos, but could also turn into a serious money maker for the Huffington Post. According to Pavley, the company will use parent company AOL’s ad platform to serve up relevant ads next to the conversations. This is significant because the HuffPo will not only have more pages to monetize; it will also be able to offer advertisers the promise of “hyper-engaged readers.” This type of audience is being touted by companies like Disqus as extra valuable because readers are more likely to engage an ad if it’s next to a subject they’re passionate about — the idea is that, if they’re taking the time to comment, they presumably are engaged.

HuffPo is rolling out Conversations slowly and, for now, the feature is only appearing on the site’s World and Gay Voices sections. It will appear across the whole site soon.

(Image by siSSen via Shutterstock)

OneSpot is in the latter camp. The Texas-based ad firm, which has clients like Dell and Home Depot, believes the banner ad problem can be fixed and points to its easy-to-use technology as a way to do so. In a nutshell, OneSpot offers a rapid way for brands to create ads from pre-existing content — reviews, white papers, slides and so on — and display them in high value settings for a good price through the help of ad exchanges.

In practice, this might mean that an ice cream chain selects a piece of content it controls — perhaps a company blog post or a video or a newspaper review. With the help of OneSpot, the ice cream chain zaps that content into the form of an ad and place it on sites where ice cream fans are likely to be. The advantage of this approach, rather than randomly spraying an ad around the internet, is that target customers are likely to engage with the advertiser because the ad is content they care about.

To explain it another way, OneSpot’s method lets brands take advantage of the fact that many online ad slots are now being filled with dirt cheap junk like this…

.. and replace them with quality ads for a low price. Here is an example of the OneSpot approach, where a piece of content called “Desert Survival” has been packaged into an ad — the advertiser, hoping that Outside readers will be interested in the content, has paid to place it (through an automated ad exchange) on the top right of the Outside page:

One big upside to this approach for advertisers is the chance to hand over the task of ad buying to OneSpot. Doing so spares them the dizzying task of working with ad exchanges to place the ad content themselves. OneSpot also gives advertisers a way to keep tabs on their campaign with real-time analytics; the advertisers can employ A/B testing to tweak their campaigns and measure ROI.

While there are a flurry of companies making big claims about changing the ad game, OneSpot appears to be the real deal. It has been working with major retailer clients since March and received $1.5 million in funding from investors that include RSL Venture Partners and 500 Startups. I sat down last week with founder and CEO, Matt Cohen, who explained his view on the ad industry:

“Advertising is a business model, not a type of content … It’s when one party buys attention from another,” Cohen said, arguing that “interruptive content” fails and leads to banner blindness.

The most intriguing aspect of Cohen’s model is that it appears to be a hybrid of bespoke “native advertising” which is being hailed as the way of the future, and the existing display advertising business that is still popular because it scales so easily. OneSpot-served ads also come with Twitter and Facebook buttons that make them easier to share (another increasingly essential element of online marketing).

If the OneSpot model catches on, it will increase pressure on advertisers to find quality content and, at the same time, benefit writers and other content creators.  It may also reinvigorate the sagging display ad market by replacing worthless “lose your belly” ads with more valuable ad content.

D’oh! This is precisely the sort of thing that retailers who have just laid out a million bucks for Facebook or Twitter ads don’t want to hear. But here’s the study, showing that Facebook ads only led to 0.68 percent of shoppers making an online purchase on Black Friday (and Twitter ads produced no sales at all!) :

Fortunately for retailers (and Facebook), there is more to the story. According to a media intelligence service, Aggregated Knowledge (AK), Facebook ads have a big effect on online purchase decisions — leading to a 51 percent increase in conversions (the term for when people buy or do something in response to an ad). AK also says Facebook ads are a way for brands to reach big target audiences they wouldn’t reach elsewhere online, and that “conversion rates” are 72 percent cheaper than for other online channels.

AK knows this because it works with large social media advertisers to collect data about Facebook user behavior. This data collection is possible because Facebook recently provided e-tailers with tools that will let them track users to see who responded to an ad. (Yes, there’s a creepy factor here though major sites like Amazon and Google have long used similar tools).

AK’s numbers are good news for Facebook but the social network will still have to persuade advertisers and the media to accept them. The challenge lies in getting ad types to accept the notion of “multitouch attribution” rather than “last touch.” In plain English, this means that conversions should be counted even if the occur hours or days after you leave Facebook — for instance, you see a bath salts ad on Facebook, surf dozens of other websites, and then buy those bath salts the next day. (TechCrunch’s Josh Constine has made the same point well here).

Seen from this lens, Facebook’s “party” problem isn’t so bad. After all, we discover lots of new desires at a party — that girl’s dress, that guy’s cowboy hat, those delicious cocktail wienies — that we go out and buy for ourselves later on.

(Image by Ariwasabi via Shutterstock)

This, anyways, is the promise of BlueKai, a company that helps publishers and brands collect information and marketing insights about their audiences. BlueKai’s primary customers have always been advertisers but now it’s turning more attention to publishers, offering tools that help them create reader profiles and develop data-driven ad sale strategies.

“The world before for publishers was ‘I have these great audiences, I have these places’ please buy them’,” said BlueKai CEO Omar Tawakol in a recent phone interview. Now, though, ad buyers want publishers to supply information that lets them reach very specific groups of people — soccer dads, not soccer moms for instance. Publishers can offer this information by mining their audience data (including registration info and log-in location) and combining it with data BlueKai has about those users’ web-surfing activities. Such tools can also help publishers track when the same customer is coming to the site through a desktop, tablet or cell phone device.

The data tools are fine in theory but are they a practical investment for publishers who could spend the money on writers or developers instead? According to one executive, some publishers might not have a choice.

Vikram Somaya, a former VP of Operations and Audience at Reuters, says that audience data has become “table stakes” for premium publishers if they want to be considered for major ad purchases by national brands. In practice, this means that a company like Ford might only consider buying online ads for a given campaign if the publisher can provide a target audience of car buyers.

“Anyone who hasn’t picked an [audience data] product, is behind… it’s not an option to ignore anymore,” said Somaya in a phone interview. He acknowledged though that, for now, BlueKai-type tools may only be practical for big publishers that are in Comscore’s list of top 500 web sites. (Somaya, who is now a VP at the Weather Company, used to work at BlueKai but said his opinion is impartial).

A publisher’s size, however, may not be the only consideration about whether it should invest in audience data. The nature of its readers is a consideration too. The more general a publisher’s audience, the greater its need for data. As the FT reported last week (reg. req’d), Time Inc has just launched a major new ad strategy based on mining customer information so as to offer better-placed ads.

On the other hand, audience data is less critical for more specialized publications. As an executive for a major New York based publication, who did not want to be named, explained by email:

While we are a BlueKai customer, our experience is that most advertisers do not require audience segmentation data as part of their buy. It certainly sometimes comes up, but it’s the relatively rare exception, not the rule. My guess is that it’s probably more important for publishers with a more mass audience. Our audience is relatively targeted (and valuable) already and so segmentation isn’t needed to get the audience advertisers are seeking.

What this means in practice is that niche publishers can likely forgo fancy data tools for now.

(Image by Dusit via Shutterstock)