Lookery.com

Quick Overview

There are many forms of online ad targeting for display ads – contextual where ads are targeted to the content on the page (think Google Adsense), demographic where ads are targeted on a user’s demographic information (what Lookery helps publishers and advertisers do) and behavioral targeting where ads are targeted based on what users do online – ie. visit websites or complete actions at a particular site (filled out a form, bought something, rated a product, etc.). A classic example would be a user goes to their favorite band’s website and then the next time they went to the entertainment section of their local newspaper’s website they would get shown an ad for that band’s latest album or upcoming concert.

Intenders, here, there and everywhere

The bread and butter of behavioral targeting are intenders – folks based on their online behaviors who appear to be ready buy something very soon typically less then seven days. Intenders convert at high rates when presented with targeted offers resulting in high effective CPM’s across the eco-system. Publishers and ad networks make money either by getting higher then average CPM’s for their inventory or for high conversion rates on CPA offers. And almost like fads, new hot high converting, intender rich categories come along. This is a cycle that has played itself out over and over again over the last 10 years. The smart guys make a killing while the going’s good.

It’s happened before and It will happen again

It’s happened already many times – here’s a short history of some of the previous Intender booms:

• Auto – 2004-2008
  Auto has always been a major driver of behavioral targeting the last few years benefitting everyone from Google to Internet Brands (aka Carsdirect.com)
• Household Durables – 2004-2008
  The rise of high end e-commerce fueled consumer electronics and appliance e-commerce sties
• Mortgage & Finance – 2003-2006
  With qualified leads selling from $50-500 a pop, companies like LowerMyBills made a killing
• Mobile Phones & Ring Tones – 2004-2006
  A key driver of under 30 monetization as mobile co’s and ring tone services went wild chasing this high converting group
• Online Dating – 2004-2006
  Before the rise of free sites like OkCupid, Plentyoffish, Woome, & Craigslist, dating paid some of the best CPA’s online
• Online Gambling 2002 to 2005
  Gambling esp. poker was a major gold rush for online pubs emerging from the last ad recession with high payouts at least until the FTC decided to get all uppity

Crash

The problem is that the last boom – auto and household durable intenders – has come to a crashing end. Auto sales are down from a rate of 16-17 million per year in the US to an annualized rate of 10-11 million. That means there are 5-7 million fewer Intenders (and their result – conversions) to monetize. That’s a lot of money that just vanished out of the ad market and explains why the online ad market especially display is going to feel some pain. At $500 a net conversion (an actual car sale which includes likely lots of gross conversions – visit to dealer website, visit to manufacturer’s site, etc.) – the Auto Intender market decline represents a 10% hit to the overall online ad market ($2.5-3.5 billion out of a $30 billion a year market).

The behavioral targeting focused ad networks and publishers are the ones who take the brunt of that market as tagging someone who visits Kelley Blue Book, or the NY Times auto reviews or a local dealers website will happen less frequently without the ability to raise the value of an Intender to make the difference. Remember the value of an auto intender/conversion is relatively fixed by the value of the car purchase – manufacturers can only pay 10% of the value of the purchase. Fewer intenders means less revenue for those companies and publishers.

The Phoenix will rise from the ashes

Now the advantage of the the implosion of the auto intender market is that overall ad inventory gets cheaper as the market chases and waits for the next Intender boom. Cheaper inventory is the ash that the next boom can arise from as new market segments discover Intenders.

We don’t know what the next boom will be in Intender targeting (perhaps shopping cart/ e-commerce intenders as a defensive play in a down market), but we do know another will rise. And publishers this time will be smart to start tagging their audiences so when that day comes they’ve already got the audiences tagged and monetizable.