Feature: Spotlight: Ad-serving technologies - beyond the banner

The traditional banner ad has long been under attack. Nothing has changed. According to a November report from AdRelevance, while four out of five online advertisers use full banner ads, 63% of all ad impressions are grabbed by alternative formats such as buttons, animated GIFs, static JPEGs or different sized banners. Now, a number of alternatives are also challenging and the ad-serving players are having to respond.

Revenue-hungry search listings providers are keen to emphasise the branding potential in paid-for listings. GoTo, the most aggressive player in this area, recently flourished results from the NPD Group claiming that in tests of unaided recall, search listings out-performed banners and buttons by three to one. The GoTo-commissioned research also claimed that more than twice as many people gave a more favourable opinion of companies in the top three search positions than those featured in ads.

Even if you don't take these claims at face value, the underlying message is clear enough - traditional banner ads are living on borrowed time and with average click-through rates flat-lining at around 0.5%, many observers are ready to pronounce the patient already dead.

Providers of ad-serving technologies and networks are under pressure to come up with improved response rates. There are two obvious ways of doing this - more accurate targeting and more compelling content.

Who's who in the ad-serving world

In the UK at least, the big players are obvious: DoubleClick, Engage, 24/7 and Real Media. These companies were recently joined by Avenue A - which doesn't run a network for publishers as such, choosing to concentrate on media buying and distribution services for advertisers - and L90, which offers services to both advertisers and publishers, like the big four.

CMGI-owned Engage has the fattest network of the big four - the Engage Media division claims around 4,700 sites worldwide. The company's offerings include a database with more than 84m user profiles, generated by its proprietary ProfileServer software. The firm's corpulence is partly due to acquisition, having gobbled up marketing firm AdKnowledge and Flycast Communications.

DoubleClick has around 1,500 sites served by its proprietary DART (Dynamic Advertising and Reporting Technology) system, which selects and serves ads on the basis of user-profiles. In addition, the firm sells ad space across its network. Increasingly, Doubleclick's heavy-duty inhouse technology developer, the Techsolutions division, licences DoubleClick software to third parties.

Real Media claims around 1,400 sites worldwide, using its Open AdStream ad management software. The company, part-owned by print ad sales firm PubliGroupe and Advance Internet - a subsidiary of magazine and newspaper publisher Advance Publications - has targeted established offline media players like the New York Times and the London Times.

24/7 Media has more than 750 web site operators across North America, Europe, and Latin America. Additionally, 24/7 Media offers opt-in e-mail marketing services, 24/7 Connect - an ad serving system developed by 24/7 subsidiary Sabela - and e.merge, a campaign management system.

Target the user, deliver the content

All the major players support tiles and interstitials, as well as banners. Applications such as ShockWave, Java, JavaScript, and RealAudio/Video are usually supported.

The move to richer media formats received a boost in March 2000 when Unicast released its Superstitial, a Macromedia Flash application that downloads sequentially to a user's browser and plays back a movie in a window when triggered by a user action such as a mouse-click.

Typically, Superstitial files are up to 100K in size and play back for around 20 seconds in a window sized 550x400 pixels 450x450 pixels or 500x380 pixels. DoubleClick, Engage and L90 all offer Superstitials on their networks. Avenue A and RealNetworks recently conducted a trial of streaming ads that they claim resulted in click-through rates of 5.6%, with conversion rates five times higher than RealNetworks had previously experienced with banner campaigns.

If there is one issue that has stirred up controversy in the ad-serving industry, it's user profiling. Moreover, it's an issue that has to be tackled effectively by the players - pressure to deliver ROI is inseparable from reaching the right audience.

The traditional approach - and the one that brought lawsuits down on the heads of DoubleClick, and more recently Avenue A - is cookie-based profiling.

According to Avenue A, cookies can reveal whether or not a user made a purchase, and if so, the frequency, value and item. Apparently, return visits can also be logged, together with the route a user took into the site - for example, by clicking on an ad or by typing a URL.

Although Avenue A stresses that the information it receives is anonymous, in general, cookies have provoked concern about what other information might be collected and whether this is combined with information obtained offline.

However, there are alternatives. L90, for example, claims not to use cookies for profiling at all, relying instead on opt-in programs that offer participation in online games or reward schemes in return for user-registration. “We could use profiling, but we don't because it still hasn't proved its worth and because of the trouble that DoubleClick got into. In the end advertisers really need to know what the response to a campaign is,” said Michael Lel, L90 VP business development.

Serving the target

Serving a targeted ad is no mean feat. The Sabela system - of 24/7 - uses a multi-stage process. It kicks off when a user types in a URL requesting a Web page from a publisher, triggering an ad request from the publisher's website to a Sabela ad server. While the publisher compiles the page, Sabela checks the user ID and decides which ad best matches the user, based on information held in a database and data from the user's browser, such as time of day, browser type, and geographic location. According to Sabela, this can be completed in around 0.080 seconds.

Sabela serves the ad to the user while at the same time the publisher serves the page minus the ad. If it all works, both appear simultaneously in the user's browser.

Sabela's SIGMUND user-profiling system, developed in collaboration with Sun and Oracle, attempts to gain speed and specific results through parallel processing. Instead of matching user requests with a database of profiles sequentially - which is slow and can result in a ‘lowest common denominator' match - SIGMUND searches all profiles and assigns a score to all possible matches with the user, with the highest score winning. In practice, this means the difference between profiling a user as ‘male under 30 who likes sports' or simply ‘male.'

Time-critical delivery, rich media, and congested public networks equal distribution headaches, so it's no surprise that ad-serving players have formed partnerships with heavyweight distribution providers. L90, for example, has an agreement for Exodus to host L90 content at 3 data centres in the US, and Akamai to intelligently route the content.

Engage has longstanding partnerships with RealNetworks - which gives it access to RealNetworks' overlay network in the US - and iBEAM, which provides satellite distribution via SES/Astra satellites in Europe.

Reporting results is increasingly time-critical too, with ad-servers under pressure to do better than a weekly email in a fixed format. L90 has been keen to emphasise the speed and flexibility of its reporting tools - reporting is offered as an application service and provides instant feedback, according to the company. L90 customers are offered reports live online, as downloadable Microsoft Excel, or emailed in HTML or Excel format.

Rich media rules - ok?

The major players are always keen to emphasise the uniqueness of their own technology. In the past their efforts have spilled into the courtroom. Last year in the US, DoubleClick, 24/7 and Sabela settled a bunch of interconnected lawsuits for patent infringements relating to their profiling and serving technologies. The final settlements were conducted behind closed doors, with prejudice - meaning that the claims cannot be revived at a future stage.

According to Lel, most of the important technology issues are past: “Most people in this market now have technology that is consistent and reliable - the question now is how to monetise ads,” he said. “The people who can offer continuous product development will win,” he added.