When AOL bought Frankfurt, Germany based AdTech last week, many people were unaware of what the 50 man company did, and since we had to talk to AdTech for our forthcoming paper on Addressable Advertising, we thought it was worth picking the brains of CEO and Chairman Dirk Freytag, to see if we could glean some more of AOL’s strategy in advertising.
AdTech has been around since 1998, and is a 50 man company which serves around 1.3 billion advertising impressions each day or 35 billion a month, from a single German server farm, covering mostly US and European web sites. The company came into existence as a reseller of US ad serving software Ad Force, and in 2001 wrote a suite of its own ad serving software.
It is a European DoubleClick, but is lagging DoubleClick’s market share even in Europe. ‘In some European markets we lead, in others, it is DoubleClick,’ Freytag explains. ‘We have been doing the ad serving in Europe for AOL for some time, but in the US AOL uses a DoubleClick system.’
‘To serve an ad on the internet isn’t difficult, but it’s all about efficiency, scalability and inventory management. Advertisers and web sites need to have a clear view of what inventory has been sold and what is left, they need geographic considerations and demographic information to help take advertising decisions.’
Unlike DoubleCLick, which both sells software for advertisers to host themselves as well as hosted services, AdTech only offers a hosted system, and we understand AOL hosts its own DoubleClick service for the US.
The Frankfurst system sits on about 300 HP and Dell Linux servers tied together with Cisco gear and AdTech will now become part of Advertising.com, which with the other recent AOL acquisition, Boston based Third Screen Media, will form the backbone for ad serving on both internet sites and on the mobile web.
At the time we said that this was all about chasing the eventual multi-platform market whereby advertisers chase the right targets, but don’t care whether those individuals are served ads while they play games on their handsets, watch TV on the internet, or are just browsing web sites.
To some extent Freytag confirmed this point of view. ‘I can’t speak for AOL’s strategy you understand, but all the players in this market are acquiring right now, Google with DoubleClick and Microsoft with aQuantive, not so much because they have a hard and fast, carefully worked out strategy, but more that they do not want to suddenly be left behind. They have to cover each other’s moves and worry about detailed strategy later,’ he said, although he did describe the aQuantive deal as ‘panic’ buying.
So does that mean that the DoubleClick Google deal is what triggered the AOL purchase of two advertising networks? ‘You’d have to ask AOL that, but at present AOL adverts in the US will still be served by DoubleClick and there are no plans to move that to our service immediately,’ said Freytag.
There is perhaps more concern with internet advertising in Europe, where civil liberties groups are always trying to ensure that an ad serving networks contain no identification data, which would amount to a Big Brother style profiles being compiled about individuals using the internet.
‘We never contain data that goes right down to a specific individual, what we try to do it collect classes of data. We can work out from an IP address what physical location someone is living in. From there we understand what spending power they are likely to have. Even for customers which log on through DHCP and have a temporary IP address, it is still possible to establish the rough location. We can accurately locate 75% of internet browsers that come through ISPs.’
Consumers are tracked through this combination of knowing where they are and by leaving cookies on their PC so that multiple browsing sessions can be combined to form an even bigger picture. On top of this more data can be bought from other companies to fill out the picture.
‘We then focus on what the browsing activity is like for a specific person. If they have not been to a baby site in three years, we don’t want to be sending them advertising from a baby clothes manufacturer. But if suddenly they start browsing such sites, then perhaps it’s time to begin sending such adverts once again.
‘Apart from the Civil Liberties point of view, it just wouldn’t be economical to keep data at the individual level, and there is little data kept on genuine demographics, although this is changing fast,’ said Freytag.
So how does this change for mobile browsing and entertainment based ad serving? ‘The internet has gone through its learning curve for addressable ad serving, but mobile traffic is very new and it has its own learning curve to go through. The mobile gateway of each cellular operator gives out location data to say which base station each browser is attached to, but most services don’t yet do very much with this, because again it is not economic to bother to track it yet. But that is changing and gradually we will all begin collecting data on mobile browsing habits.’
Much the same it true of video advertising, ‘Today video advertising is less than 1% of all internet advertising and mobile TV is virtually non-existent. I don’t see the data from these being merged into one single database, because we collect different levels of details, but I do see it all being made available through a single front end for the advertiser to buy and get reports from both types of advertising on a converged system.
‘Content addressing is one way to go here, and by manually placing a tag into a video stream, it can call advertising that has the same content tag. That is likely to be one development for mobile TV, and for content addressable web video. You can do all this today, but until these new formats have considerable volume it’s just not worth doing very much with this.’
So the buying of these ad serving companies seems like an arms race, pulling together more and more experience and server function, not necessarily to use now, but to have ready when the new markets of video on the web and mobile web and mobile video, open up.
Auctioning is one such weapon that Google has made huge strides with. ‘More auctioning systems will come for advertising inventory and especially for addressable advertising, but in Europe they are not used very much, and will only emerge as these fresh markets develop further,’ said Freytag.
Finally we asked Freytag about video formats, ‘Right now it is a matter of ensuring that ad servers deliver advertising in the right video format, and it’s not easy. The more formats there are, the harder it gets.
‘By far the biggest format is Adobe Flash Video and more than 50% of videos served are in this format. We wish there would be some standardization here, so we could just support 3 or so formats, but companies like Brightcove which use a format that is mostly Flash, but has changes to a tiny proportion of the format, make serving adverts inside video harder.
‘Also the rules on serving video adverts are still not standard, although there are moves afoot to make them standard. Have you served the video adverts after 10 seconds of play, after 15 seconds, or only when it has ended? That standard may takes months to arrive at, or it could take a lot longer. Then we will see more video ad serving.’