From Paper to Mobile: the Evolution of Advertising

Jeremy_cropped Jeremy Hlavacek, Vice President, Programmatic at The Weather Company speaks with GrowthCap’s CEO, RJ Lumba. Below is the Q&A:

RJ: You’re one of the more knowledgeable and connected people I know in the media tech sector, can you share with us your background in media and, as part of that, some of the major companies and projects you have been involved with.

Jeremy:  Sure. I’ve been involved in the digital industry since the late ‘90s after I finished undergrad and moved to New York. My first digital job was at, then I moved to Lego, the toy company. There I helped build out digital experiences for their various product lines, ecommerce experiences, gaming experiences; we did some interesting stuff with partners like the NBA and the NHL to help build the Lego Sports Products, as well as a product called Bionicle, which was one of the company’s best sellers.

I then worked in a strategy consulting program at Ogilvy, the large advertising agency in New York, and subsequently Worked for Dotmenu (acquired by GrubHub and Seamless). My first programmatic job was about four years ago at Varick Media Management, the agency trading desk for MDC Partners. MDC Partners is a holding company for such agencies as Crispin Porter, Bogusky, Kirshenbaum Bond Senecal + Partners, Donor Media etc. In the early days of programmatic media, it was a several hundred million dollar industry; today it’s somewhere between $3-$5 billion heading towards, on a global level, $20 billion. At Varick, I was the Vice President of Strategy and business operations and today I work at the Weather Channel, as the Vice President of Programmatic. This is basically a sales channel for Weather where we sell our digital ad inventory in automated fashion on exchanges.

RJ: Exchanges have become quite popular and prevalent in the sector.

Jeremy: Yes, exchanges are the digital market places run by companies like Google, Yahoo, AppNexus, a start-up you might’ve heard of here in New York. We move a lot of inventory that way. Today, programmatic media sales account for about 30-40 % of the digital ads revenue generated at the Weather Company; that’s mobile ads, online video ads, display advertising, and mobile video, as well. We’re one of the largest and also fastest growing areas, in terms of ad sales and revenue in the company.

RJ: Our readers will maybe have a very general understanding of media technology. Can you maybe do a 101 on programmatic buying?

Jeremy: Digital media was invented, so to speak, in the mid-90s. I think the first banner ad was sold in 1994 to AT&T; it was really built on a traditional media transaction model – initially sold the same way that print advertising was. So owners of media properties (which were websites) would basically carve out a piece of real estate on their site and sell that to an advertiser, at a price called the CPM or cost per thousand, very similar to how the print industry does it. That was also done by human beings, so that meant a media buyer and agency would probably have a three martini lunch with a media seller from a company like Weather, or ESPN, or NBC Universal, and they would cut a deal. Those deals tended to be what we call direct buys or guaranteed buys: basically that buyer is agreeing to purchase a certain quantity of inventory at a certain price over a period of time, and by the way that business still exists today—so there is still lots of media that is bought and sold directly on a guaranteed basis by sellers. This tends to be more the custom for sponsorships, for strategic white glove treatments, not necessarily the standard banner ads.

What happened overtime is that as the internet scaled, and a lot people don’t appreciate the scale of exactly how big the internet marketplace is. A company like Weather, for example, is a large digital publisher. We have over a hundred million unique visitors on our website on a monthly basis. In the programmatic channel alone we will sell billions of impressions per year. This huge number is much bigger than print of newspaper and the reason for that is obvious — more people are using internet. There is also the ability to consume more media, so in traditional print people might read one newspaper a day, a couple of magazines, some people might even read two or three newspapers. It is not unusual for people to read dozens of websites a day, and even within those websites, stories are published all day long.

RJ: I can imagine that visitors go to the site multiple times per day.

Jeremy: We’re publishing weather updates and we are writing stories about environmental conditions and weather conditions around the world. People visiting our website multiple times a day generate tremendous traffic, impressions and scale. So really what’s happened is that the scale of the properties has basically outstripped the capacity of a direct sales team. They still sell a large portion of our inventory, but the programmatic side is growing much more quickly. Earlier this year when we had all the snowstorms in New York, we were doing hundreds of millions of impressions on a single day. And there is no way for a seller to call up a buyer a day before a hurricane or snowstorm and say, “Hey would you like to spend an extra $500,000 tomorrow?” Transactions just don’t work that way.

So that’s where programmatic works really well because the way media is sold in the programmatic space is that we basically put our supply up for sale in this real time auction-based market place, again run by companies like Google and Yahoo. We control the amount of inventory that we put into that market place and the prices that we want to charge for it. Basically, computers or automated machines do both the selling and the buying. So we control pricing and supply on our side. On the buy side, which was my previous role, the agencies call the trading desk that actually buy in those exchanges a demand side platform, similar to an E*TRADE account. You put a budget into this digital interface and you basically go to the market and set some parameters to try and meet your buying needs.

RJ: What do you see as some of the more interesting emerging trends in media technology?

Jeremy: The great thing about this space is that it’s been full of growth and innovation for the last five years. In terms of what’s next, I think the growth areas are going to be around mobile. Media properties are starting the process of converting their products to a mobile experience—so I’m referring to apps. At Weather Channel we have one of the top 5 apps on iTunes: 130 million people have downloaded it, so there is clearly scale there. The challenge I would say is how do we create strong revenue mobile streams from the audience and how do advertisers create ad products that work for them? So today what you’ll see is a lot of banner ads—they are typically in a size of 300 X 50. They’re the small ads—they look like little miniature billboards that you’ll see on an app. Those aren’t really great units on a number of levels. One, they don’t really perform for advertisers; they don’t find a lot of lifts and clicks and kinds of things people would typically track. So as a result, publishers don’t get paid very much for those ads. So it’s sort of a lose-lose situation right now. I think there’s a lot of innovation coming in rethinking those experiences. You’ll see a lot of people talk about native advertising. That’s how I would categorize the space, especially on mobile. Twitter, for example, has their in-feed sponsored stories, Facebook—they’re launching a mobile ad network. So there’re a lot of people working to make mobile a more profitable and better performing media channel for everybody. I think there will be a lot of innovation there.

Cross device or cross screen targeting is growing as well. People are consuming more and more on their mobile phones—but it doesn’t necessarily mean that they’re turning off the TV. So companies are thinking about how to reach consumers across all three of those screens at the same time. So startups playing in this space are looking for ways to connect the data-points and understand that when I am on my mobile phone and am watching a certain television program at home, how can they create a unified ad experience. So certainly the sports leagues are looking into this in a big way — a lot of people when they watch a sporting event are also tracking either conversations or statistics on their phone or their computer. So there are opportunities there to create those multi-channel programs.

RJ: Jeremy, thank you for your time.  I think this will be informative for our readers, particularly the investors in our community targeting the media sector.

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