Today I mourn. I mourn great services that were blindly misled by venture capitalist off the edge of the world. I am afraid for tomorrow. The tomorrow where lore crushes fact, and value is as empty as smoke in the air.

I am referring to this evil belief that Data is more valuable than service. This practically worthless new product called Programmatic advertising. This false belief that your tiny bit of added value lets you hijack my advertising.

I am sure you are a bit confused about what I am referring to, so let me explain.

Once upon a time there was a great company; I was a very big fan of theirs. They made a great product that let you identify life events based on people’s social interactions, and engage them in a meaningful way around those events. They were called Edealya, and I really like their founders. Their service was less about spamming users with offers and more about sharing in your social friends life events. When a twitter follower had a new baby, you would know and can send them a quick congratulations note. If you were a little more aggressive you could throw in a coupon code. The key was the same, this tool monitored for triggers around major life events and let you automatically set messages to engage them in a meaningful and scalable way.

This was a great service, with great potential, but somewhere along the way they heard that their data is valuable for programmatic advertising targeting. Now, that same great company does something much sneakier. They go to mobile app developers who have users login with their social profiles, and they piggyback off the app to see your entire social history. This means that when you login to a mobile game with your facebook account, this third party automatically sees every post you ever made on facebook, and cookies your mobile device and maps it back to your account. This company now not only knows that your desktop, tablet, and mobile device are the same user, but sees all your social interactions. They pay a few measly pennies for this access.

How do they use this data? They use it to buy advertising from the Real Time ad exchanges, to target you with more relevant ads.

Ok, so I don’t care that much about privacy. Definitely not as much as most people. I believe that more targeted ads are a net benefit for me, and the world.

After all, I am not spending my money unless you provide a value to me, and I want to know about things that add value to me and my life. I am ok with better advertising targeting…

What bothers me so much is that in order to use this data to buy more effective advertising space, I need to buy my advertising through this company that has the data.

This is not new. Ebay has an ad network that lets you buy advertising space targeting people based on their interactions on Ebay. Again, this company turned their data into a way to hijack my advertising.

What do most of these companies do? They simply hide the true cost of the advertising from you, and charge a markup.

For all you know you are paying $3.00 CPM and they are only paying $.50 CPM. There is no transparency.

I understand this desire to squeeze the most profits out of your product. The problem is that it doesn’t work!

The simple truth is that the difference between success and failure in advertising is buying your media for the right price.

Chango is a search display retargeting company. What this means is that if you visit Google, search for digital cameras, click on a website like consumer reports. They buy that cookie/data from consumer reports, and let advertisers target you with retargeting based on your search behavior. In other words, you can retarget someone who never landed on your website. They don’t have transparent pricing, and they won’t accept a media buy under $20k.

Conceptually, this was a great idea. In practice, everyone I know who I asked about buying programmatic advertising from Chango said that it doesn’t work nearly as well as they make you think. That even if it does give you a little lift in your effectiveness, the cost is too prohibitive to be worthwhile.

Chango knows if they sold their data transparently, it would be worth much much less, so instead they force you to buy the media through them. Without transparency, you are basically being ripped off. Before you realize it, you are $20,000 in the hole.

What bothers me is this trend that every company thinks they can become an advertising targeting middle man or ad exchange just because they own a little data.

Today I visited a site that I really loved. It is called dispop, and they used to be a crowdsourced banner design company where the winner was chosen based on the highest Click Through Rate. What a brilliant concept. Instead of letting your ego get in the way, they let the numbers do the talking and the highest converting ads do the walking.

What broke my heart is to see this great concept, that is affordable for most smaller advertisers now sells advertising instead of a great service. They reason that they own better converting ads and if you want to have your cake. You have to buy you cake directly from them. They simply markup your advertising.

This formula might work for large advertisers who are building brands, but for smaller advertisers, who need a simple solution with a fixed cost that plugs into their existing ad buying efforts, where everything works seamlessly, this becomes cost prohibitive.

Zenya, is a company that claims to have the biggest taxonomy of search terms in the world. I once met the founder at a conference and he said that no matter how large my keyword list was, he could do a gap analysis, and would easily uncover an additional 50,000 keywords for me to target.

That sound amazing. The problem is…they decided to become an ad targeting company. Now, they sell search display retargeting like Chango and others.

Every major media buyer I have spoken to has said the same thing about buying data. We tried it. It made sense on paper. It didn’t work. The added value of the data did not justify the added costs.

This really bothers me, because all of these data providers have great ideas. Ideas I love. But, they are greedy, shortsighted, exit-driven, enterprises, with no soul.

Can’t they see beyond the first sale? Why can’t they sell their data in an open marketplace in a transparent auction setting, and let the marketplace determine the true value? Maybe I am old fashioned to think that long term value far exceeds the first sale. Maybe I am old fashioned to believe that the marketplace should decide where the value lies. Just look at Google, arguably the most successful media company online, yet they run an auction for their ad space, and they are really making bank.

Boost CTR, was one of my favorite companies. They had a great service where they wrote PPC text ads for you, and charged you $50 for each ad that had a higher conversion rate than the ad it beat, and paid the writer $25. A great concept, in a great market. The problem is, once they grew large enough, they priced out most of the market. Now, they are an ad testing suite of products with a writer network. They won’t talk to you unless you are spending more than $100k in advertising, and guess what...That’s right, they charge a percentage of ad spend. Maybe their product is still great, I don’t know… But from paying their writers $25 to charging thousands of dollars a month, that sounds like someone, somewhere is getting ripped off.

The bottom line is that every startup that thinks they have some minor competitive edge in advertising wants to own your media buying. They Want to take a bite out of your rightful profits, and hide the true cost and miniscule value they create.

What a shame. If all this data was sold in an open marketplace, in an auction setting, and you had the ability to programmatically pick and choose which data sets to augment each other with and use it all to pick and choose the impressions you buy. The online advertising world would be a better place.

I am all for making as much money as possible, but this unsustainable, smoke and mirrors pony show has only one place to go… Up in Smoke!

By Jeremy Schoemaker

Jeremy "ShoeMoney" Schoemaker is the founder & CEO of ShoeMoney Media Group, and to date has sold 6 companies and done over 10 million in affiliate revenue. In 2013 Jeremy released his #1 International Best selling Autobiography titled "Nothing's Changed But My Change" - The ShoeMoney Story. You can read more about Jeremy on his wikipedia page here.

16 thoughts on “Today I Mourn The Changing Face of Website Monetization and Online Advertising”
  1. Another good read as usual, David. I’m partial to your interjection of comics into your posts. Nice style.

    1. Thanks Adam. I probably spend more time tracking those comics down than actually writing the post 🙂

  2. OMG Tell me that windy-wobbly dude is photo-shopped. It is hilarious but that CAN’T be real with the word funeral on it. I’m dying with laughter over here. If it is real I HAVE to have one at my funeral. I mean come one, how freaking awesome would that be?

    1. Todd, as far as I’m aware, it is real. I dont know where to buy it, but when I saw it, I couldn’t resist not posting it.

  3. David, I don’t usually respond to blog posts, but this one pulled on a heart string for me, because I have been in a situation in the past, that has provided me with reason to understand some of the greed, or need to change something that is working quickly, often with repercussions to the original customers that helped to kickstart your success.

    I totally agree that no doubt greed and looking for the exit does play a role in what some of these companies have, and are doing….. However in my opinion the big issue, is that as the creator of a unique, innovative or even slightly useful ad or customer acquisition platform; You are constantly be hunted. Let me explain. It’s a part of what I consider the Walmart mentality. “I want to do all things and be all things to all people and eliminate all the competition in everything”.

    If you create something unique that helps the market place, how long is it before one of the bigs like facebook, google, etc, come in and use their massive resources to copy what you are doing, improve it and make you irrelevant. This what I believe is often on the minds of creators of valuable platforms. Case in point, Adroll. They are a great resource for re-targeting ads on facebook. They were one of the firsts to do it. Facebook recently started offering re-targeting themselves, inside their ads platform. Having used it…. It is cheaper then Adroll (at least for my demographics). As a buyer of a service, if fb is charging less, why would I continue to use Adroll? So then, how long could Adroll continue to operate before it was time to change models, markets , or shut the lights out and call it a day?

    So from that perspective, of a developer, you almost feel like the race is on to get to the next stage and either be in a space where it is not practical for the bigs to come at you, or Join them and take a big check for your network and data?

    I think the problem is us, the consumers. We too easily accept the idea that it is perfectly fine, even desirable for the company that ships us our books to distribute our website content via Cloud Networks and manage out IT infrastructure. Why the hell do I walk into a grocery store in San Diego and have the exact same selection I do in Punxsutawney? The answer is because as a society we accept the idea that amalgamation and standardization is a good thing, and while in many cases it is…. It often leads to the destruction of unique ideas and thoughts that benefit the greatest number, and not just the large scale enterprise that can blindly lay down 100K on a brand building experiment. As smaller consumers, when we like an idea, we have to support it and the developers so that they feel like a buyout or an escape to consultancy to fortune 500 firms is not the only way to make it, and keep it.

    Over the years so many good companies and ideas have come and been bought up, or destroyed that I don’t even keep track any more. I hope that somehow, some-way the trend changes, or it won’t be long before we have a 2 party system in our online options as well. That is if we are not already there. May the force be with us.

    1. HI Bob, Interesting perspective. I guess I never thought about it from the perspective of a developer afraid of a big fish entering their market.

      However, I do think that the thought process is flawed. Just look at Google offers compared to groupon, or Googles affiliate network. Both are extinct.

      When you build a true brand and focus on your core product, the marketplace will assume you are better than a product from a big fish with a million distractions.

      Regardless, with programmatic advertising, I think it is a crying shame how much opportunity is missed because the company is too short sighted to see the long term vision.

  4. Great post, I have never heard of any of these companies except Chango…shows how much i am missing. Thanks for helping fill in my gaps.

    1. Thanks Scott. There is actually a great visualization floating around with over 1000 tech startups in the marketing space. I only know of about 50 of them.

  5. It sickens me that service is no longer held as the higher than other aspects of doing business. I get that other things are important, but yea just sad.

  6. This reminds me of the series Silicon Valley on HBO. This guy comes up with a product/service to help other people but the bigwig at the company he works for sees the potential to use it in other ways and tries to get him to turn it over to him. Business is just a constant struggle of good versus evil.

    1. I havent seen the series yet, but this is exactly what happens. Some VC who has no loyalty to the users comes up with some money making scheme and destroys the brand.

  7. It all comes down to everyone being out for themselves and being willing to step over anyone and everyone to get what they want.

    1. Gavin,

      That is often the case, but I choose to believe that there is a win-win middle ground that we can play nicely within. The problem arises when one party abuses the fairness of others.

  8. We live in abundance David, so I feel we should all prosper….BUT…you make an awesome point on the greed thing. I intend to pay it forward everywhere I go. I like being generous, as opposed to greedy because karma is always in effect, and the greediness you mention bites you in the butt, in the end. Power post!

    I found it on Kingged(dot)com, and voted it up of course 🙂

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