Notes from the Gridley Conference: How to Better Monetize the Internet

Includes: AAPL, BBRY, GOOG, HPQ, T
by: Yankee Group

By Carl Howe

This week, I’ve been in New York City at Gridley & Company’s Ninth Annual Internet, Marketing, Financial Technology, and Information Services Conference (whew! try saying that three times fast). This is an invitation-only event largely for the investment community, but Gridley was kind enough to invite me to participate on their mobile technology panel.

However, I got to listen to several other sessions and tweeted many of my findings yesterday. Recapped and expanded from their 140 character limits, my big takeaways were grouped into two major categories: online advertising, and what the event said about the overall economy.

We’ll start with online advertising, which comprised most of the events I attended:

  1. Advertising needs to be one experience. Tumri’s best sound bite of the morning was that successful online advertising must marry the pre-click and post-click experiences. That means that landing pages shouldn’t be generic; they should complete the experience started by the ad that brought the consumer there.
  2. Some ad targeting is working. A case study by ad targeting company Tumri drove HP’s(NYSE:HPQ) display ad ROI (measured as click-through rate) up to approach Google (NASDAQ:GOOG) search ad ROI. While a credit to Tumri, that result demonstrates just how tough the online display advertising business is. Expect mobile to be even tougher.
  3. Online ad opportunities are smaller than you think. According to targeting company AudienceScience, most consumer time online is non-search and non-contextual. Said another way, most of the consumer’s time online is in places where contextual and search advertising don’t reach.
  4. Ad targeting raises ad costs substantially. AdScience also claimed that targeted ads are fetching CPMs of between $6 and $10. That’s about a factor of 10 higher than the average online ad. Now the big question is whether that audience is bigger than 1/10th the generic audience; if it isn’t, then the return on an advertiser’s targeting investment isn’t going to pay off.
  5. Facebook advertising is a disaster. According to AcKnowledge, Facebook ads have 3% of the advertiser ROI (measured in ad clicks) of Google search ads. Yikes that is bad.
  6. Video CPMs are high, but falling. Forrester’s Shar VanBoskirk has been seeing some $30 to $50 online video ad CPMs; those numbers are huge compared to average Web CPMS and higher than most video CPMs I’ve seen. The bad news: those CPMs are falling rapidly.
  7. Ad networks are only going to get more powerful. Vivaki’s David Kenny: more than half of advertising dollars will flow thru ad networks (but fewer of them) in three years.
  8. Retaining customers remains the best strategy. Merkle cited one client whose customer acquisition average cost was $300, and ranged as high as $3,000. Their cost to retain a customer? $11. That equation should be stenciled on every CMO’s forehead.
  9. Mobile advertising will be a tough nut to crack. Despite all the excitement about mobile advertising, I polled the audience from my mobile panel with two questions: “Have you ever clicked on a mobile ad?” and “Have you clicked on a mobile ad in the past week?”. The results were telling: only about 1/3 of the audience had ever clicked on any mobile ad, and only about 5 people out of 100 had clicked on one in the past week. Mobile advertising companies thinking of billion dollar IPOs should keep those numbers in mind as they chase today’s mobile advertising dollars; even by 2013, Yankee Group forecasts only about $533 million in U.S. mobile ad revenue.

The attendance at the event itself had its own message. Measured in terms of investment bankers per square foot (ib/sq.ft., a useful metric for economic excitement in Manhattan), the Gridley event scored highly. Specifically, I found myself watching the crowd and concluding that:

  • The financial recovery is underway. The conference boasted something like 485 attendees, its largest ever. The financial crisis? That is so 2009.
  • Online ad companies still need help with fundamental presentation skills. Some companies completely demolished their polished presentations by projecting slides with 10 point text that no one past the front row could read. Presenters—particularly those presenting to an audience of investment bankers and older advertising executives—should hew to Guy Kawasaki’s 10-20-30 rule: No more than 10 slides presented in 20 minutes with no text smaller than 30 points.
  • Strong copy still trumps clever metaphors.. One session on ad targeting was titled “Ad Targeting Will Take Us from Mad Men to X Men”; it’s the title of a Gridley white paper too. The problem: it evokes an image of Don Draper turning into Wolverine and in the process, losing any Madison Avenue street value. It was a clever title, but a more straightforward “Ad Targeting Will Save Online Advertising” would have been much better.
  • Apple’s gaining ground in the investment banking crowd. Despite investment bankers being the bullseye of Blackberry’s (RIMM) market, I was surprised to see about 50% of the audience carrying Apple (NASDAQ:AAPL) iPhones, and many carrying both an iPhone and a Blackberry. When I asked some of the financial members of the audience about that, they said the decision was simple: the Blackberry was for their work email, and their iPhone was for the rest of their lives (apps were also mentioned several times as a deciding factor). Given we were in the heart of one of AT&T’s (NYSE:T) most troublesome service areas (over the holidays, there were a couple instances of AT&T not even selling iPhones in New York any more), I found that result surprising. With the rumored Apple tablet on deck for this month and the 4G iPhone looming in Q2, we may see another glowing Apple logo down near Wall Street as well as on Fifth Avenue.