It probably helps to answer that with a little personal perspective. I used to work in what we called newspaper new media back in 1990-91, and then started a company called Real Media in 1995, which was one of the first online ad serving and online ad networks, and then ran that business until shortly before it was merged with 24/7 to form 24/7 Real Media in 2001.
  People got very excited about online advertising during the dot.com bubble for the wrong reasons. People got excited because Wall Street thought there was an incredible amount of money to be made there and a lot of money was thrown at it. And while it is a very powerful medium for advertising, it was oversold to Wall Street investors.
   So it was natural that when the time came for making the business work with traditional advertisers and marketers, people were looking at it under a microscope.
    I think that one of the things that went wrong was that the publishers never put any of the fundamental infrastructure in place as a medium to be able to satisfy the needs of traditional advertisers. 
  By that I mean the systems that were built were all about delivering quantities of pages, but if you're an advertiser or a marketer, you want to buy access to quality of people. 
   I really think it’s that simple. The people in online advertising were selling metrics like hits and clicks and page views, and the people that buy traditional media like to think in terms of reach and frequency, target audience, demographics, psychographics, and they had absolutely no idea how to buy online advertising or what value it represented.

Your company’s product, Tacoda, is what you call an audience management system. Explain what that is and how it differs from a simple ad server.

   What an audience management system does is lets a web publisher develop a picture and a database of their actual entire audience: who's coming to the site, what do we know about them, where can we serve ads to them, who do we have email addresses for, how many of them are registered, what are their demographics, what's the frequency they use our site, what's their loyalty.
   If you were looking at it from a print perspective, it's sort of like a subscriber system on steroids. It permits web publishers to deliver online audience to advertisers with the same kind of metrics that they buy offline audience. 
   It means being able to say, "We're going to deliver 100,000 loyal online readers of active sports content that live east of the Mississippi, and we're going to cume that number in the course of a two-week campaign for you, at a two-times frequency."

   The information comes from the existing systems the publishers have. One of the extraordinary things about the online medium is that the systems that serve the content that serve the ads, that serve the email, all make records of that, and they’re all logged in computer systems. Yet no one ever thought to connect all the computer systems together to extract data out of them to determine who the audience is and what their behaviors are. 
   So what we did is basically built a platform that takes all the data that's normally thrown away, and we extract it from the systems that serve the content, that serve the ads, that serve the email, that personalize the commerce experience – we pull it together from all of these disparate systems, and we unify it around a set of consumer profiles, which represent specific individuals who have interacted with the web publisher.
   For example, say you’re Weather Channel's weather.com, one of the most visited sites on the web in the world. They’re a customer. They know, according the panel data, that 15 to 25 million people a month visit their site. So we start with helping them identify who those people are, and also helping them identify the 5 or 10 or 15 million people that are very loyal to them.
   Then we identify people who have registered and had given them information about their interest in golfing or gardening, or the fact that someone's a business traveler, or the fact that someone visits pollen maps, and putting that together in one place so that they can use it in giving more information to advertisers and selling ad campaigns, or if they wanted to they could actually target ads to those specific people.

   They were overwhelmed with it. It was never organized. The systems were built by technologists, not media people. 
   Imagine building a subscriber list for a magazine and not being able to determine where your subscribers lived.

   There are people who are doing some of it on their own. Part of our inspiration came from The New York Times Digital Group. NYTimes.com has required all of their users to register for almost seven years now. 
   They have been at the forefront of audience management and maximizing the value of their audience, which is one of the reasons they've been profitable for so long. 
   A lot of people are starting to do this, but the problem is that while it seems straightforward, actually finding the right data and connecting it to the right systems is very complex.
   Usually what we find when we talk to publishers is that they start by trying to do it themselves with their own IT departments and then end up getting frustrated and looking for software from others.
    At this point, we seem to be the only software provider with a specific audience management product.

   Not specifically. There're a couple things we're doing that are different from some of the attempts to profile consumers in the past. 
   Number one, Tacoda does not own or take any ownership position in the data. The data is entirely owned by our customers. They house it, they control it.
  So it isn’t like some of the attempts where people have tried to create a data co-op, where a direct marketing company was actually trying to harvest consumer data.
   The second is that the companies that use our systems -- these are half of the top 15 newspaper companies in the U.S., people like Tribune and Gannett and Newhouse and Landmark and Media General and Belo -- they have direct relationships with their consumers, what privacy people would call "first-party" relationships. 
   This information is captured by them with the consent of the user. We’re just giving them the tools to consolidate data they already have.
   I think the issue around privacy is really less about privacy than it is about trust. During all of the years that people were making complaints about privacy, no one ever raised any issue about The New York Times database. 
   The reason was because The New York Times is trusted by consumers. People are comfortable giving The New York Times their home address because that gets the newspaper to them, so they're comfortable giving it information about themselves. 
   They haven't been as comfortable with media brands that they haven't known before. I think one of the big ways to overcome privacy concerns is to establish trust in your brand and your content.

   Yes, but I don't think it's cost-effective to target specific people yet. Unless you’re a business-to-business advertiser where you have a really high margin, the friction costs of doing one-to-one advertising are too high. So I don't think that's realistic for the media world, certainly not for the next five years.
   What you’re going to see is lots of ones clustered into groups of similar people -- for instance, young, single females that are active and are imminent car buyers in the next 14 days, and they just saw "The Italian Job" with the Mini Coopers driving all over everything. Those are the kind of segments that Mini Cooper wants to hit.
   Those are the kind of marketing opportunities that are going to be possible, and I think that marketers are more and more going to want to find. 
  It’s efficient doing it online because the friction costs are much lower than in traditional media. I think the idea of one-to-one marketing is oversold. I just don’t think it’s efficient.

June 5, 2003© 2003 Media Life

-Jeff Bercovici  is a staff writer for Media Life.

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