The Yahoo DR business has been growing its market share across Europe over the last couple of years. It has invested significant resource into its data strategy, giving it an edge over third party ad nets. But given the growing commercial strength of Agency Trading Desks and self-service DSPs, what is likely to happen Yahoo's allocation of DR budget across Europe. In an interview with ExchangeWire, Director, EU Display and DR Marketplaces at Yahoo!, explains why the company's offering remains competitive in the market, why consolidation among European ad networks is inevitable, and why access to proprietary first party data and inventory is putting Yahoo in a stronger position.

The Yahoo DR business (Y!DR) grew its revenue by up to 60% year-on-year in H2 across Europe. What do you attribute to the growth of your share of the market? And where were the hotspots for growth in Europe?

NH: In 2009, we invested significant amounts of resources into growing the network – including doubling the size of the DR team across Europe, investing money in 3rd party data to combine with our already vast bank of knowledge and developing new technology to maximize performance for our advertisers. Our focused energy and strategy in DR has been extremely successful and we delivered world-class results for thousands of advertisers across Europe. In DR, when you drive improved performance for the advertiser, that is superior to anyone else on the media plan, you grow your share of wallet for each Yahoo! campaign significantly – and that’s what we’ve achieved across Europe.

The primary markets for Y!DR are UK, France, Germany, Italy and Spain and we saw each of these markets grow significantly in 2010..

How do you differentiate yourself from the likes of Adconion and Specific Media?

NH: If you consider the fundamental elements of any DR Network – reach, data, technology and optimisation expertise – Y!DR’s proposition clearly offers agencies and advertisers the opportunity to benefit from those elements, at scale.

It’s the proprietary and exclusive nature of our Yahoo! inventory and data combined with our ability to blend these elements with 3rd party inventory and data that begins to differentiate us. We do that in real-time, all across the world, for thousands of campaigns, across multiple billions of impressions. This, in addition to the analytical skills and expertise of our Optimisation Team and their experience in using the Yahoo!-owned Right Media platform will ensure our relevance and longevity and further differentiates us from all of our competitors, and ad networks with no proprietary inventory, data and open platform technologies.

Do you think third party ad networks with no access to proprietary first party data and content are going to struggle in this market?

NH: We all know that the industry is in a phenomenal state of transition at the moment. There has been significant innovation on the demand side in recent months and this has enabled agencies to have more tools at their disposal to buy media more effectively. This clearly puts pressure on ad networks that don’t have exclusive or proprietary access to audiences.

A network like Y!DR will always have an exclusive, defensible asset – which is our portal audience. Despite the changes in the market, we know that Y!DR has an integral role to play in the future and will continue to grow share because we have great insights and tools against which we can leverage our audience and the broader network for the benefit of the advertisers and the agencies. If you look at the some of the trends in the industry often buyers are looking for lower price because they don’t have the insights or tools to properly interpret value. Buyers are utilising exchanges without having the right framework to evaluate the true impact on the advertiser’s business or brand. That’s where Yahoo! can and will help the buy-side more effectively.

An example of this is the retargeting area – which is heading for some change this year as well. Too often as an industry we are focused on the last click or the last view, which inherently favours the retargeting specialists. As an industry, we need to get much better at valuing the entire path to conversion and recognising that attracting and retaining new users is equally important as retaining existing users.

You’ve invested quite a lot of resource in making your first party data work with 3rd party segments. Can you give some overview on how you’re making this work for clients? And who are you sourcing this 3rd party from?

NH: We know a lot about our Yahoo! users; their demographics, their declared interests through their searches, as well as their retail browsing behaviour as they make their way through our portal.

By combining the depth and breadth of this first party knowledge -which is one of Yahoo!’s most powerful assets with 3rd party data we are able to create unique and unduplicated segments. This enables us to offer our advertisers scalable performance advertising by attracting and influencing new users to their products as well as utilising the advertiser’s first-party data to take existing customers to the point of purchase.

In practical terms, the blend of analytical skill and data allows the Y!DR Optimisation team to use our combined 1st and 3rd party registration and interest data to target new users for our advertisers at the top of the purchase funnel; introducing users to an advertiser’s products with relevant and targeted creative campaigns. The team then leverage our combined intent data – such as search retargeting from Yahoo! (and other) searches, with various 3rd party purchase-intent partner sites and data companies - to influence a user’s purchase decisions by serving them ever more relevant ads based on their most recent behaviour and purchase intentions. Once users have been led to an advertiser’s site we are able to use re-targeting data to be more dynamic with the types of ads they are being served.

What’s your thinking on the growth of agency trading desks and DSPs? Are large European DR ad nets in trouble?

NH: Every time an industry undergoes change, complexity arises blurring the lines of what were once well-defined roles and market dynamics.

Whilst it was definitely easier a few years ago for less sophisticated ad networks to stay in business and play the role of an inventory aggregator without adding much value, the pace of change has made it such that you cannot stay in business today unless you are innovating and driving truly differentiated value. The networks that have made significant investment in technology, data, optimisation and proprietary or exclusive supply in order to drive value for the advertiser, should still prosper - whilst those who purely intermediate will struggle.

We say at Yahoo! that optimisation is a skill and not a commodity - we have learned that it takes time and investment to train sufficiently smart teams to consistently deliver best in class ROI. Equally it takes time and investment to sufficiently scale a network and understand the best use of data for each campaign/advertiser/context/audience combination - and we think that’s where the value of a network ultimately sits.

As long as an ad network delivers a measurable lift in performance, scale and reach there will be a place for them on media plans. Top tier networks who have invested in technology will be able to implement RTB as a more efficient way of matching a specific ad to a specific media context / audience profile but it will take some time before we’ll see RTB completely replacing the traditional method of pre-purchasing inventory. These two will likely co-exist for a while yet and it will be the networks who deliver performance at scale that will likely remain on the media plan.

As agencies become a lot savvier around exchange trading, do you think there will be less money on the table for ad nets? Will this cause a shake-out in the industry?

NH: There will be consolidation – it’s inevitable, but I don’t think there will be less money. In fact being efficient plus the rapidly improving opportunities to use first and third party data will likely grow the size of the overall pie. The precision of targeting online is unparalleled in any other media and as such we’d expect the flow of advertising dollars online to continue.

Consolidation has to occur – some agencies are known to have used 40+ ad networks in 2010 and this has merely added to the attribution issues in the industry and this is what has driven many networks to focus on the last click or view, which is highly inefficient

From a commercial perspective, are you concerned that WPP has launched GMM to compete with Yahoo! for DR budget within its agency group?

We understand the rationale behind GMM – and the notion of GMM pooling first party advertiser data will add value to the overall chain. GMM has been created to give an alternative to the media buyers within WPP, but ultimately the performance will be the determining metric of how much budget is spent with each player. Assuming that everyone competes on a level playing field, then it will act as an innovation spur to incumbents to continue to invest in their networks to drive performance – much as we’ve been doing for the last 18 months.

It isn’t simple to operate a world-class network at scale, across multiple territories and it is much more complex than sourcing data and inventory alone. So continuous innovation is definitely a good thing for the industry.

Additionally, we’ve long advocated the importance of open platforms. Yahoo! owns the first and biggest global ad exchange (Right Media) and this puts us in a better position than anyone to take advantage of the synergy that will come from agencies creating their own trading desks. As a company, we will work in partnership with them, to drive more value for their advertisers and greater share for us.

Is it possible for an ad network to go client direct? Or is the model in Europe too dependent on agency budget?

NH: It’s possible and one or two companies have shown that it can work, but it’s a short-term tactic. At Yahoo! we recognise the value that agencies bring in the broader chain and we believe it is more sustainable and preferential to work in partnership with the agency to deliver value for the advertiser.

Yahoo recently bought Dapper to add dynamic creative optimisation to its offering, which is particularly critical to re-targeting. Has the integration been successful, and is Yahoo able to compete with re-targeters like Criteo and Struq?

NH: It has been a key priority for Yahoo! to successfully integrate the Dapper technology into our DR offering. We see great opportunities to offer our clients an alternative to our competitors in this space, who generally only target users that have previously visited the advertiser’s website and use standard creative templates that do little to extenuate the advertisers brand.

Not only is Yahoo! able to compete by offering re-targeting with dynamic creative optimisation, but Yahoo!’s reach, data and technology ensures we hit existing users and that we maximize the pool of new users that can be targeted. Y!DR also offers better creative solutions; we give advertiser’s plenty of choice when it comes to creating the ads to retain the right look, feel and integrity of the brand – and all that at scale across our entire network!

What’s your view on re-targeting as a standalone business? Is it enough to just offer the ability to re-target existing users?

NH: Certainly companies have made a success of this in the last couple of years. The question is how long will agencies and advertisers continue to place value at the bottom of the purchase funnel - with last click/last view attribution modeling. With technology as it is, this is arguably the easiest point at which to drive sales and it is much harder and therefore much more valuable to do what Y!DR has been doing which is influencing users at all stages of the purchase funnel at a scale not possible when you do standalone re-targeting.

In terms of Yahoo! inventory, are you offering Yahoo inventory in real-time? Are you just selling to agency trading desks? Are there restrictions on those who can buy Yahoo inventory?

NH: We see the blend of Yahoo!’s media and core audience insights as a key asset to our Y!DR promise to deliver best ROI. Over the last year we started piloting with a selection of preferred partners the ability to connect with the Y! DR network and access Y!DR’s audience by taking a seat on the Right Media Exchange and leveraging its RTB capabilities. Whilst it’s still early days it’s so far shown encouraging results.

We don’t allow any ad network to access Yahoo O&O as we see O&O to be a key differentiating asset in our value proposition for our Agency partners.

What big trends are we likely to see in the European DR market over the coming months?

NH: Firstly Dynamic Media & Data Acquisition: Exchange-Traded Buys accounted for 8 % of the US Display Media Spending in 2010 and will grow to account for 14% of the Display pie in 2011. We can assume a similar trend to follow in Europe with some countries (UK, Germany and France) being naturally ahead in terms of market adoption. This will then pave the way to more effective ad matching and help more advanced networks stay ahead of the ones that aren’t leveraging this technology.

Dynamic Ads: In very simple terms this is a way of driving better performance for display campaigns. As opposed to serving a user a generic flight to New York the ad gets tailored to the individual and will serve an ad for a flight from London to Barcelona based on previous browsing behaviour on the advertiser site. This is particularly powerful as it offers a way to help advertisers target their current site visitors who haven’t converted and deliver a dynamic ad based on their specific interests.
Specifically we do two things:

1. Look at the users who are on your site so you should know what they are looking for

2. And specifically target them across their journey online with a dynamically optimized ad

With Y!DR we help clients reach and convert new users and existing users to the point of sale.

Brand Safety: With the exponential growth of exchange-traded media and RTB much of the attention is now in ensuring that ad are delivered in brand-safe environments which protect brands from dubious media.

Whilst the IASH certification has paved the way in creating quality standards and helped the Network industry gain credibility as a ‘safe’ source of media - it won’t be enough in 2011 – the industry is moving to a more dynamic and scalable solutions.
Contextual /semantic technologies that have emerged over the last couple of years allow companies like Y!DR to detect, scrape and understand the content of a page and make smart decisions around whether to serve or not to serve an ad on that page.

As a Tier 1 network Y! DR has invested in brand-safety since last year and are busy developing in this area – we have been talking to our agency partners and publishers to ensure we meet their needs. You’ll hear us talking about our solution later this year.

Improved attribution: we’re reaching a point in the industry where there is much greater understanding of the limitations of the last click / view model, and how that can incentivese the wrong behavior. We’d expect to see the buy-side valuing activities higher up the funnel using improved ‘path-to-conversion’ reports so that ultimately there is no one-size fits all, but that the attribution is more dynamic and suitable to that specific campaign.