Category: Opinion

Being a startup shouldn’t mean starting from scratch

shoulders

In an open retrospective, Eden Shochat, from Aleph VC, asks what they could do better to help the companies they invest in. I really appreciate the openness of the Aleph VC blog and if they are willing to ask what they could do better, I’m willing to make some suggestions.

One of the key points that resonated with me was when  Eden notes, “…what’s not represented here but is disappointing is the usage level of our “Welcome Kit”: the special deals we negotiated (spent a lot of time doing) for our companies.”

Having negotiated many deals and made use of similar VC provided “Welcome Kits”, I understand their disappointment. Startups don’t always have the resources/knowledge to make use of services when they aren’t core to the problem they’re solving. As a result, they ignore or poorly implement them.

From the startup’s side it’s like handing a baker a plow and wondering why he didn’t make bread. They want to handle customer support, they want to send marketing and retention newsletters, etc. but they don’t have the people to answer the support requests and they don’t have someone to write the copy.

In my humble opinion, VCs would be better off providing more full service platforms on which startups can build. Most of the work is very generic and problems more or less solved. No need for each startup to figure out how to host a highly available, high performance website. Basic customer support, social marketing, copy writing, etc. should not be taking the company’s focus away from their objectives.

VCs could be parents dropping their kids off at the mall with $200 or they could be the shoulders of giants, upon which budding companies stand.

 

I Confess and Apologize, the really annoying ads – partially my fault.

sorry

You know those really annoying popup messages you get on your phone when you’re browsing? They aren’t easy to ignore like popups on your desktop. They are really, get in your face, make it hard to see the site you wanted to see, annoying. Well, I confess. I helped make those and I’m really sorry.

It was maybe two years ago and someone came to me with a new gimmick (That’s really all of AdTech summarized in one word: Gimmick ). It wasn’t the first time. I’d done a lot of work building affiliate marketing programs and ad servers. It was, however, possibly the most evil thing I have ever done and I apologize.

I tell myself that if I hadn’t done it, it would still have been done. I’m also sure that the company I built this for was not the only company to build it. AdTech is an industry flooded with companies doing exactly the same thing, all constantly copying the latest gimmicks from one another.

As a bit of penance, I offer to you the insider’s guide to what AdTech companies are selling you.

AdTech Gimmicks

There are four main categories of gimmicks:

  1. Tracking – These companies claim to (and possibly do) have some new and better way to know who saw their ads.
  2. Targeting – These companies claim deliver their ads to the people that you want to see them.
  3. Optimization – These companies claim to be able to determine which of your ads will perform better for the people seeing them.
  4. Positioning – These claim advertising real estate on the most expensive, well traveled properties on the Internet.

Most companies today will claim to give you at least 3/4 of the above to attract your business. If they don’t, they might suggest that you integrate their service into another to provide a more well rounded package.

Tracking

This is the ugly and dark, privacy invading, side of the business and the basis for almost everything else. The key to advertising is conversion and if you can’t connect the ad to the acquisition, you aren’t making money.

In the beginning, there were cookies. When people started denying or erasing cookies, there were super cookies – evil, twisted, perversions of technology that would store your tracking information in flash storage and rewrite that tracking information into your standard browser cookies at any chance. For some time now, AdTech has graduated to device fingerprinting (in addition to all of the above- that’s right- in many cases advertisers will use as many options as possible to make your acquaintance).

Recently, I read an article about over seven different methods for fingerprinting a user, many of which do not require cookies.

Targeting

Targeting is the next gimmick. The idea is that advertisers should show you ads that interest you. They do this by paying attention to the sites and content they see you browsing and connecting that information to your tracking id. If you browsed a site for men’s clothing, they should show you ads for men’s clothing.

Why is this a gimmick? The funny thing about targeting is it comes in at least two varieties: targeting and re-targeting.

Re-targeting more or less means showing you ads for sites you have already been to. The theory is that if you didn’t buy the first time, I should keep pounding my brand into your subconscious until you come back and buy something.

The reality of re-targeting is that you basically have an equal chance of seeing ads for something you decided you would never buy or seeing ads for things you already bought and are not going to buy again in the near future.

When the first happens, the ad companies call it targeting and that’s what their system is supposed to do- get you to buy something you haven’t bought. When the latter happens, they call it re-targeting. You already bought something, there is a great chance that you will buy something else.

Either way, it is a feature that they do better than everyone else. Definitely not a bug.

Optimization

Studies have shown that even experts with years of experience have trouble making accurate predictions about user behavior. For that reason, marketers have turned to science to decide what users like best.

On the simplest level, that means showing two or three versions of an ad (A/B testing) and after some time deciding to show only the version that got the most desired responses. On a more complicated, gimmicky, level companies will use a proprietary version of a Contextual Multi-Armed Bandit algorithm to pick which ads to show you.

While there is some real science and mathematics behind all this, and each company will have a PHD if not several to stand behind their algorithm, the facts of life are that we don’t live in a vacuum. What worked yesterday, because J Lo tweeted X on American Idol, will not necessarily work today when Amazon is not serving your ads in under 300ms. There is simply no way to prove that these algorithms are working in real life.

As a result, AdTech companies will push their optimization technology like there is no tomorrow. If you try them and get good results, all credit will go to their amazing tech. If things don’t go well, they will blame it on one of a hundred factors which they couldn’t control and maybe you will move onto another provider who will also have a 50/50 chance of getting your business with a similar gimmick.

Positioning

Positioning is one of the tried and true practices in advertising. Since the dawn of the billboard, putting your ad where more people will see it is the best way to get more customers, regardless of your conversion rates.

“How could that be a gimmick?”, you ask. On the simplest level you have the popups, the pop-unders, the transition ads, drive-by downloads and on mobile, the ever annoying and unescapable alert box. These are all positioning gimmicks. I’ll be there on top of your content. I’ll be there when you close your content. I’ll let you see your content in a couple seconds. I won’t let you see your content.

There are some more complicated plays on the positioning gimmick with the media exchanges and real time bidding (RTB). The idea behind them is simple. A site has demand for an ad in a certain location. They put that demand up for auction for exactly 100ms. Whoever bids the most inside 100ms gets their ad shown to the user.

Theoretically, when the demand is put up for auction, all sorts of information (tracking id, targeting information, etc.) is put up with it. Your favorite AdTech company will tell you that they have partnerships with all the best exchanges and that is the only way to get your content into the best positions.

In reality, everyone wants to be on the premium sites whether the ads are targeted or not so there is no point in using RTB there. The AdTech companies just buy impressions outright and split them between their campaigns (even if you think they are using RTB to get you there).

They will also tell you that their super algorithms (see optimization) will get you the best positioning for the best price and targeted at your users. It would be awesome if it worked.

  1. Even when there is RTB involved, the traffic is mostly lower quality traffic which just helps the AdTech companies beef up their click through ratings.
  2. There is no proof that the algorithms, supposedly buying only the impressions you want for the least amount of money, are working at all.

Buyer beware

They say “The proof is in the pudding” (originally “The proof of the pudding is in the eating”). It means that you don’t know if something is good until you try it.

If any of these AdTech companies really worked, would there be so many of them? Wouldn’t the super algorithm have devoured all the ad spaces on the Internet by now?

In my opinion, everyone is eating the same, mediocre pudding, these days and no matter what combination of the four AdTech gimmicks they try to push on you, don’t be afraid to be skeptical. Make them explain and prove why they are better (showing with a test campaign is not explaining or proving anything).

If you are planning on opening a new AdTech business yourself, please reconsider. There are many other areas of technology which could be measurably improved upon. For the most part, we are all using AdBlock Plus anyway.