Targeted Online Advertising

[Ian Batten]

On 11 Mar 2008, at 21:54, James Cox wrote:
>
> what exactly does Phorm propose to do?
>

As a business case?

I'd say they plan to run two businesses.  One, called Phorm, offers a  
stream of web analytics derived from a clickstream rather than from  
log analysis.  They sell these analytics to advertising brokers, and  
use the revenue to allow them to pay ISPs for the inconvenience of  
hosting extra kit on their network.  They are picky about who they  
sell their analytics to, and choose mostly to sell them to...

The other, called OIX for Open Internet Exchange (the open is phatic),  
buy web analytics from companies such as, oh, Phorm.  It then uses  
that information to insert adverts into empty place holders with  
better than random targeting, and sells that service to web  
publishers.  The publishers then sell those placeholders to  
advertising companies.

So the money flow is an advertising agency decides it wants to place  
adverts in a group of publications, targeted at people who want to buy  
cars.  They buy ``show these to people who buy cars'' slots from, say,  
the Guardian, who then play OIX to fill those slots.  OIX pass some of  
the money to Phorm, who in turn pass some of it to the ISP.  It's  
worth doing because the same slot can be sold to people advertising  
other products, and the magic is that every advertising agency who  
buys those overbooked slots will pay more than a single agency would  
have done for the untargeted page impression.

What's interesting is that OIX haven't gone for what I would have  
thought naively would be the best business model.  The strange thing  
here is that the advertising agency is left deciding the target  
audience they want _and_ the publications they want to put it in.  I  
would have thought a better model would be to dump the `open' and  
`exchange' part and just become a white-label Google: NewCo buys  
advertising slots from anyone who will sell, fills each one with a  
link to say ``place a targeted advert here'' and then sells slots for  
targets to agencies: that way an agency doesn't have to worry about  
what publication they are hitting.  But I suppose the problem there is  
that the agency may have complex rules surrounding which publications  
are and are not in keeping with their brand values.

I can see some problems.  The main one is the potential for nasty  
juxtapositions, in the spirit of the BNP/Vodafone/Facebook wrangle  
last year.  http://www.theregister.co.uk/2007/08/03/vodaphone_facebook_bnp/

Phorm/OIX are hoping to avoid this by banning political, medical,  
sexual, smoking and booze adverts, but that is about keeping the  
publishers (who aren't really their customers) and the users (ditto)  
onside.  They will also have to carefully control where they allow  
their slots to be placed.  Given, say, the G2's Pamela Stephenson  
column (http://lifeandhealth.guardian.co.uk/privatelives) was on the  
topic of anal sex a couple of weeks ago I can imagine some advertisers  
having a problem with being placed on that page, irrespective of how  
well targeted the readership is.

ian