Also, anyone else notice that the hackernews community seems to either a) not understand or b) not care as much about the ad tech world?
Targeted advertising tech seems to be the big winner when it comes to being acquired. There have been several extremely high payouts in recent years for companies similar to this one. I'm surprised there aren't more people working to that end. (Maybe there are and you just don't hear about the swathes of companies that don't get acquired.)
If that's true, I'd recommend they (and anyone who has a distaste for advertising) watch Art & Copy: http://en.wikipedia.org/wiki/Art_%26_Copy.
I think I have very good reasons for disliking advertising, things like one or more of the following: it's taking up my limited time, attention and cognitive abilities to tell me about things I don't want or need or can't use. It's uglifying my surroundings. It's interrupting and distracting. It's telling me about things I do want but can't afford, or use, or don't have room or time for. It's telling me about things I didn't want, but now do, which is annoying. It's telling me about things I do want, and already know about. It's deliberately misleading. I feel bad that an advertising company is paying money to a service provider because I saw an advert for something I will never buy.
There is a hypothetical "targetted advert" which shows me just what I want, right when I want it.
I think this is a mirage they chase to avoid facing up to how ridiculous an idea it really is.
I feel that ads represent a big problem to be solved. They suck so much that people intentionally block them. It's going to take some serious hacking of the system to fix that, it's a huge challenge.
And yeah, this is big news in the space. Google is clearly making a move into online display advertising, having all but conquered direct-response. It'll be interesting to see how they do. Display advertising has a vastly different set of challenges associated with it -- brands care first and foremost about the safety of the pages they run on, which means Google will need to be a lot more selective about the publishers they partner with for display, and brand lift through display advertising is a lot harder to measure than direct-response conversions.
(Obligatory plug if you're also one of the exceptions (or interested in being one): SAY Media, my employer, is hiring engineers! Check us out at http://www.saymedia.com/.)
Is this accurate?
One of the big divides is serving advertisers vs. serving publishers. The Kawaja/Luma Partners slide that is oft cited shows how various companies fit into this divide. Advertiser (or buy-side) tech generally tries to optimize on ROI ... driving revenue per ad dollar spent. On the publisher side, tech tends to be about driving higher impression prices... finding the right buyers for the impressions you serve.
Another divide in my mind is tech that is designed for brand advertising vs. tech designed mainly for direct response. Brand advertising is typically what you see in national TV ad spots or in the full page adverts in magazines. The SuperBowl ad spots are emblematic of this. On the other hand, you have adverts that are more about offering a particular product or service with a concrete offer (Two for one, 10% off for referring a friend, etc.).
AdMeld was a pub aggregator, a company that offers ad optimization to a large number of publishers (relying more on scale than technology imo). There are several other pub aggregators, including PubMatic and the Rubicon Project. It's a growing segment within the overall online advertising industry and google needed to be involved in it to stay competitive strategically. So they chose to buy AdMeld. I wouldn't be surprised if one of the other major pub aggregators is acquired or merges in the next few months.
At one point I had laid out the strategic online advertising market on a map from the board game Risk. It has a level of depth and complexity that I think is really interesting.
Here's an illustrative graphic:
The display advertising world is structured differently. Display ads are obviously those pictures you see plastered all over the sites you visit. There's less raw intent so individual impressions earn a lot less money -- typically the amounts are measured as cpm, cost per mille, ie cost per 1k impressions. It's also important to understand the structure of the market a bit -- in the beginning (90s), people pretty naively bought ad impressions in units of 1k. Performance was often evaluated based on ctr or click through rates. Ads were often sold on the basis of quantifiability -- you could, for the first time, measure how many ads were seen (in the sense that a user loaded the page), who clicked, how often, where he or she went, etc. As search advertising evolved, I think a lot of the people chasing quantifiable advertising moved to that, while display became more about branding. This, btw, is the value of facebook -- brand advertisers want to be able to precisely target age, gender, income, and other demographics; on facebook, users freely and generally accurately share this information.
The display ecosystem has a bunch of moving pieces. If you look at jbooth's link , you'll see:
Agencies -- these are the (7?) big advertising agencies that most large accounts go through. Companies like Toyota, GM, General Mills, etc, will give these companies 10s to 100s of millions of dollars to run ad campaigns on their behalf. The ad agencies weren't really capable of managing digital campaigns. That is, when ad agencies came about, your media outlets were maybe 10 national TV networks, radio stations, local newspapers, and a couple national magazines. The media buying process was pretty simple -- the agencies would send out an RFP that said eg we want manly men in their 40s who buy outdoorsy cologne and the aforementioned publishers would respond and say how their audience matched that profile. Compare this to the online world -- there are thousands of premier publishers such as the NYT, ESPN, online magazine versions, etc. Trafficking ads is an order of magnitude more work -- buy what, where, on which site, when, with what creatives, etc. So the agencies built or bought companies that have the capability to build digital media, traffic campaigns, etc. Eg Vivaki is Publicis, b3 is WPP, etc.
Ad Exchanges -- these are remnant ad sources. Basically, there is premier and remnant inventory. Premier inventory is something like display ads on high quality reporting on ESPN or ads on articles on ars technica. These are often sold by in house salespeople in a process remarkably similar to how everything used to work, though people mostly email pdfs instead of sending faxes. Every ad impression that isn't sold as premier is referred to as remnant, and these remnant impressions are offered to ad exchanges such as Right Media -- rmx, owned by Yahoo -- in exchange for a cut. So the way this works is I can buy, with some rules, 1MM impressions on rmx and rmx will put these impressions on their publishers such as ESPN in ad impressions that ESPN didn't sell. These impressions go for an order of magnitude less money than premier. RMX is one of the more technically sophisticated. The benefit for publishers is they get some money for inventory they didn't fill. Just to be clear, a good ecpm for premier might be $20-$40 and a good ecpm for remnant might be $3-$5.
DSP -- demand side platform -- well, there isn't necessarily a common definition of DSP. I'd say they are more technically advanced ad exchanges that are starting to blur the lines between remnant and premier ads. They also help you manage line items and creative and everything else. The other thing DSPs do is they help advertisers that aren't big enough to go to one of the big 7 agencies. This might be advertisers spending $10 - $50k / month, like your local Toyota dealership instead of the national dealer chain, etc.
Ad Servers -- these help publishers. See eg OpenX, DoubleClick Dart, etc. Particularly for larger publishers, coordinating all these ad purchases is complicated. Your advertisers want to give you rules, such as user bleaching rules (only so many impressions to a given user per some amount of time), time of day, what pages an ad can run on (few people want to run next to naked folks, etc). They also want to be able to update and optimize their creatives or even change the creatives or the landing page they go to. Advertisers, or their agencies, also demand reporting -- how many times was an ad seen. On what pages did users click on the ad. etc. Within publishers the ad sales or monetization folks don't want to be releasing the site every time they tweak ads. Ad servers are internal or external software that manages all this and can be quite complex.
Data optimization -- this requires some explanation. In the beginning, people basically bought broad swaths of display ads. The value to optimization is the more targeted you can make your ad, the more value it has. My favorite example is espn -- say 10% of their online audience is female. Say you're an advertiser that wants to sell female sports jerseys, your ctr amongst women is 5%, your conversion rate is 5%, and a conversion is worth $50, your value per 1k impressions is 1000 * .1 * .05 * .05 * 50 = $12.5, so your cpm has to be < $12.50. However, say I could pick out the women (with some error, obviously), but say I can enrich the demos so that women are 50% of your impressions. Suddenly advertising on espn is worth 5 times as much for the advertiser and hence espn can charge 5 times as much. This is the value of data optimization. It's performed many ways -- from things as simple as geo targeting, day parting, to more sophisticated demographic estimation, retargeting, behavioral retargeting, etc.
Retargeting is a simple idea -- say that I see cookies going to a site like a bmw forum. I might reasonably intuit that these cookies are interested in bmws and choose to show bmw display ads to these cookies as they browse the internet. See eg criteo.
Behavioral retargeting is the next step of retargeting -- retargeting is nice, but it suffers from a couple flaws. First, it has limited reach, ie there are only so many cookies that go to a bmw forum. BMW probably wants to reach more purchasers than just those. Second, it doesn't really help generate intent -- if you're going to a bmw forum, you're probably already pretty interested in bmws, so that may not be the best person for bmw to advertise to. Behavioral retargeting means any of a variety of ways of trying to figure out cookies to advertise to to get broader reach or cheaper acquisitions than retargeting.
The other big movement going on in the display world is the evolution of how people buy ads. In the early days -- 90s -- people tended to buy online ads in a high touch process with salespeople. Ad networks started which brought more buyers and fewer salespeople. Companies like Right Media -- which Yahoo bought -- started and allowed you to create bidding rules that run on their servers so advertisers can buy ads. So I can say that I want to, across many websites, target cookies that have visited a site or set of sites (retargeting), or show them so many ads per day, etc, and based on a variety of characteristics of a cookie and the site which that cookie is visiting and the web page they are viewing, $X is my bid for that cookie. RTB or real time bidding is the new new -- now, instead of giving limited rules to someone like RMX, you register with Google (the largest RTB platform) or Yahoo's RTB, and their servers, for each impression, send you a bid request. Your computers located in a server farm near their servers are given typically 100ms to respond with a per impression bid for that cookie on that page and that impression. See . Also, this is obviously an enormous tech investment. DSPs also help with this; most companies aren't capable nor is it worthwhile to build this out in house.
As to why Google cares about this: Yahoo used to have a big chunk of the display advertising market. Google owns search advertising and are looking for the next big market. They've set their sites on display advertising and are whooping Yahoo's ass up and down (Yahoo owns RMX). G has the premier RTB platform, etc. They want to do whatever it takes to help publishers adopt them. IMO, Y is in trouble.
NB: I work for qc. This is just my uniformed view. HN whiners -- my posts are not now, have never been, and probably never will be the official opinion of my employers nor endorsed by any of them. You should not infer anything about my employers from anything I write. Seriously.
Also apologies for mistakes or rambling.
This is consolidation in the traditional sense- Google is trying to commoditize display inventory and end up as the monopoly provider of display inventory. Interestingly enough, Yahoo! sells a boatload of inventory through Admeld... I'm curious to see what changes in that relationship, and if Yahoo! really is going for more of a content strategy while Google goes for the advertising tech play.
While it was a pretty dumb comment and off topic, the top comment on the TC article got the gist of it: "this is why android is still laggy and fragmented, because google cares about ads more than software quality."
which summarized the IAB breakdown of online advertising revenues:
1) Google pretty much owns the search advertising area which accounts for 45% of overall revenues.
2) Facebook is making good inroads into display advertising, which accounts for 25% of overall revenues.
From this we can surmise that this acquisition might be related to fending off Facebook.