Q&A: Don Kennedy, SVP of network sales, AOL Advertising

Don Kennedy, SVP of network sales at AOL Advertising, discusses how advertisers are dealing with oversaturation in the display advertising landscape and how online publishers are dealing with remnant inventory challenges.

Direct Marketing News (DMN): This has been a big year of experimentation in the display advertising space. Looking back at this year, what’s the big story you saw in display?

Don Kennedy: I think it’s been an incredibly exciting and interesting couple of years. There’s been certainly an influx of capital in the market at an unprecedented level. There’s start-up after start-up bringing new and different things to the market. One of the things we’ve been talking about on the nonreserved side of the business from the Advertising.com side is how do you take that concept of premium content combined with premium creative and premium consumer experiences and turn that into not just a reserved media unit, but into a nonreserved media unit and nonreserved marketing experience as well to scale those relationships or campaigns across thousands of sites simultaneously, versus just one or two properties. That’s definitely an area where we are focused, both on the buy side working with our publishers to not only develop the placements to help them think about the way they’re monetizing their inventory, but also then bring those opportunities and the functionality that came along with [AOL’s Project Devil ad product] to advertisers on a nonreserved basis.

DMN: From ad networks to demand-side platforms (DSPs) to data management platforms (DMPs), it feels like there’s oversaturation in the display space. Based on what you hear, what are advertisers looking for in an ad network?

Kennedy: To your point, it is tough at times to just keep up with the acronyms that are thrown at us every week, and even for those of us that live in the space every day you sometimes have to take a couple seconds to figure out the new acronym of the day. While I think there’s definitely a lot of shiny new objects out there – and I don’t mean that from a negative perspective because I think there’s a lot of cool stuff out there that people are doing – in the end the way we look at it is: Is it a product or is it a company that can be a scale business?

When we talk to advertisers, we want to make sure – and they’re very clear with us – that regardless of all the targeting options that are out there, regardless of the platforms, regardless of how [real-time bidding or RTB] impressions are bought and sold, at the end of the day there’s a meaningful quantitative result that advertisers are looking to hit. Whether that’s something as defined as for every dollar I spend, I need $100 in revenue or I need to see the following lift in brand, one of the things for us over the years has always been that there’s that level of accountability after the impression is served or after the action takes place. We really want to know what good looks like after the campaign. Regardless if there are 10 or 1,000 acronyms in the space, that will not change. And I think there’s a lot of interest in advertisers to test new things, to look creatively at their marketing problems and try new ways to solve them, but again those have to scale.

There’s this dichotomy where you have thousands of new entrants into the market but also the need for the big marketers to work with fewer partners. It’s an interesting dynamic that they’re looking at, as they look at the upfronts for 2012. As they look at their plans for Q4, they can only test so many things and work with so many partners. So the folks that come to the table with the most compelling, accountable, holistic solution in the end are going to be the ones that get the lion’s share of the dollars.

DMN: How savvy are today’s marketers when it comes to dealing with everything from the data to the placement to the formats and capabilities?

Kennedy: I think they’re very savvy actually. I’ve seen some panels recently where the savviness of the marketers is called into question at times, and I don’t know that I agree with that. I think that, going back to the example of the acronyms, for those of us in the space every day it’s a challenge to keep up on that and to find out what are the differentiated points within one acronym. To expect a marketer to not only know everything that they need to live and breathe about their client or consumer on a day-to-day basis, and then expect them to know everything about this space as well, that’s just not a realistic expectation. I think they do an exceptional job of staying up on trends, and some of them have unique challenges. Some have challenges of creative, of scale and performance and trying to merge all those together. Some have challenges of online to offline attribution and trying to desperately get more share for digital from the TV folks or the print folks.

DMN: I’ve been hearing that companies are experiencing challenges in selling remnant inventory. Is that what you’re hearing or seeing, and how would a company go about addressing that challenge?

Kennedy: I think it’s critical for publishers to have a cohesive strategy around their nonreserved, or remnant, inventory. Every publisher can look at that space a little bit differently. Every publisher can say, ‘I’m going to just let my external sales force sell everything, and if I don’t sell it, I’ll put a house ad here because I know that I make more from the house ad than I do on putting it into the RTB market.’ There are others that say, ‘I’m going to put it on the RTB market, and I will let technology take over and let the economies of that technology decide who drives the highest yield for me.’ And there are others that will sell it to third parties. And then there are a lot of folks who will do a combination of all three. I don’t think it’s a problem if folks have realistic expectations on what that inventory is worth. I think that’s one of the key pieces.

I think where advertisers need to be careful is in equating all impressions on a nonreserved basis as being created equal. Even within the same publisher or the same section or the same creative size, there are very key differences in the value of those pieces of inventory for advertisers and publishers. I think having those expectations up front is absolutely critical. And I think working with partners that can not only make money, but do it in an above-the-board way with quality advertisers and quality creative that actually drive results relative to the value of that inventory.

DMN: To me, the Project Devil ad unit represents much of the interactive experimentation we’re seeing in the display space. Since it’s a premium ad unit, how do you communicate with your advertisers in terms of being able to use it?

Kennedy: The tricky part with making Devil analogous to the owned and operated AOL side versus the nonreserved Advertising.com side is that Devil is purely a 1050 [pixel] advertising unit modularly built with the ability to put in all kinds of stuff through our Pictela platform. If you look across the universe of publishers and then segment it down into that nonreserved bucket, the abundance or lack thereof of 1050 [pixel] units is clearly a challenge to launching a nonreserved strategy around Devil.

The way we’ve chosen to look at it is what we refer to as our premium format strategy – premium formats meaning a mix of 1050s but also 600s and other larger sizes where we can still integrate a lot of that functionality that is still prevalent in Devil into the unit 100% above-the-fold inventory on 100% site-disclosed publishers and with great content adjacency and great functionality within the creative, whether that is for retailers, a store locator or sections of catalogs that are integrated into the creative or, down the road, commerce modules to be able to transact in the unit as well. There are a lot of things we can do to provide a ton of value to the advertisers and to the publishers that we work with. I think that’s a key piece because so much of the ad network space is focused on the demand side of the business, and Advertising.com has really been trying to lead the efforts on the publisher side of the space as well. I think that Devil and premium formats as a whole represent a great opportunity for both advertiser and publisher.

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