Knowledge Bridge

//Kevin Anderson /September 28 / 2012

Schibsted finds ad success through data-driven targeting

News organisations need to compete aggressively for digital advertising or risk ceding valuable revenue to search engines, social networks and other digital competitors. But forward-thinking news groups like Scandinavia’s Schibsted are demonstrating that success is possible by embracing new technologies that deliver better targeted ads to audiences and better results to advertisers.

Schibsted have made strategic investments in digital advertising, building an international online classifieds business and buying ad network Webtraffic in 2007. They have also invested in services and technology that leverage audience data across their own network. These investments have been key in allowing the group to generate meaningful digital revenue that is offsetting the declines in print revenue.

Not all news groups are in a position to make acquisitions like Schibsted, but no matter how large or small your news organisation is, strategic investments in digital advertising, whether in staff, technology or services, are essential in order to win in the fierce competition for online and mobile revenue.

Explosive growth in digital advertising

Many news organisations have only seen a glass half empty when it comes to digital advertising, bemoaning the fact that digital revenue for news groups has not come close to matching the revenue from print.

The World Association of Newspapers and News Publishers (WAN-IFRA) recently announced that only 2.2 percent of total global newspaper advertising revenue comes from digital. This is against a backdrop of rapid growth in digital advertising revenue. In the last five years digital advertising has risen by 55 percent from $42 bn to $76 bn. The wider challenge for news organisations is that there obviously is money to be made from digital advertising, but that news businesses aren’t the companies making that money. Search advertising – dominated by Google globally and regional players such as Yandex in Russia and Baidu in China – now captures 58 percent of global digital advertising revenue, according to WAN-IFRA.

This isn’t a phenomenon isolated to Western Europe and North America. In Russia, internet advertising grew 56 percent year-over-year in 2011, but Yandex and social networking sites such as vKontakte and Mail.ru are winning the digital advertising battle. Yandex saw its advertising revenue grow by 60 percent in 2011, and Mail.ru sold 56 percent more display ads in 2011 than the year before, according to paidContent.

Fundamentally, this raises the question: How do news organisations compete for digital advertising revenue, especially when successful forms of advertising, search and social media, are not tied to the traditional content that news organisations produce?

To compete for digital advertising revenue with these new competitors, news groups need to compete with them on relevance, delivering ads that match people’s interest. That is what has made Google rich, delivering ads based on what people are searching for, and building up a rich store of data about your audience so you can deliver the most relevant, clickable ads possible to them is key to competing effectively for the ever growing pot of digital advertising revenue.

Disrupt or be disrupted

Shibsted is facing the same declines in print advertising revenue that many newspaper groups are in Western Europe and North America, but the group’s response has been very different. In its second quarter 2012 results released in August, Schibsted reported a 9 percent decline in print advertising revenue, but unlike so many other news groups, they offset that decline with a 10 percent growth in digital advertising revenue, driven by an increase in their global online classifieds business. They reported a decline in single-copy sales of their newspapers, but they also reported strong growth on mobile platforms, not only in traffic but also in terms of revenue. As digital strategist Ken Doctor noted about Schibsted earlier this year:

… 36 percent of its revenues come from digital offerings, a percentage more than three times that of the average newspaper company.

This is what a successful transition to digital looks like, with digital revenues helping to either add to print revenues or offset declines in print revenues as audiences shift their reading habits to digital platforms. Shibsted has looked beyond its traditional competitors in the news business to invest in disruptive technologies including online classifieds and the Webtraffic ad networks.  “We weren’t afraid to cannibalize ourselves,” Schibsted CEO Rolv Erik Ryssdal told Businessweek.

Relevance: The key to digital advertising success

Schibsted’s digital advertising strategy isn’t simply about a large news organisation making smart acquisitions, a strategy only possible for groups of the size and scale of Schibsted. They also recognise that digital advertising strategies rely on data and precise targeting to deliver relevant advertising to audiences.

Search-driven advertising has been successful because people are shown advertising based on what they are searching for, and social media advertising uses the information you share and information from your profile to deliver targeted ads.

Schibsted has been improving the relevance of its ads through behavioural targeting techniques, better audience data and a relatively new technique called dynamic targeting, according to Halvard Kristiansen, the head of product development at the Schibsted owned ad network Webtraffic. Webtraffic sells unsold advertising inventory from 155 partner sites.

Using technology from a US company called Audience Science, they gather detailed information about the user behaviour on Schibsted sites including the online classified sites they own, such as Blocket.se in Sweden. Using small files called cookies, they track how many page impressions a user has on specific sites and specific categories, the type of content they read and also what search terms they use. “Using all of this information, we can extract some target groups,” Kristiansen said.

Using that data, they can target the user with specific ads based on their behaviour across sites Schibsted owns and has a relationship with. For example, when someone searches for “safe cars” and “crash tests” on a Schibsted site and then searches for “Volvo” on a Schibsted cars section, they can make the ads for Volvo stand out on that section, he said.

In addition to delivering more relevant ads to audiences, Kristiansen also is looking for more effective ways to measure ad efficiency than click-through rates (CTR). Click-through rates on advertising have declined to the point where the average CTR is now a measly 0.07 percent in Sweden.

It would not be too strong to say that Kristiansen hates CTRs as a measurement. He even goes so far as to believe that it was one of the original sins of digital media development. He sees a host of problems with using CTR as a measure of advertising efficiency:

1. He doesn’t believe it actually gives you an accurate measure of how many people clicked on the ad. It measures clicks not people in the same way that circulation differs from readership.
2. CTRs don’t tell you anything about the person who clicked the ad.
3. Half of online time is spent at work. Your boss probably doesn’t want you clicking on an ad at work and, in effect, go shopping, so you may have seen and noted the ad but circumstances make it impossible for you to click through.
4. CTRs do not measure offline activity. What happens if an ad impression leads to an offline sale?

“If we continued to talk about CTR, we realised that we would be in the same swamp [of low ad returns] as everyone else in a half year,” he said. Instead, with behavioural targeting campaigns, they were able to charge ad rates dramatically higher than the industry average.

To deal with the last point, Kristiansen developed methods to combine measurement of online and offline effects of advertising using technology that Schibsted has created in-house. For each ad impression, they dropped a new cookie, a small tracking file, onto a user’s computer. After showing the ad three or four times, they would show the user a small pop-up survey. They asked the user if they had seen the ad yesterday or the last week. If they said, yes, they asked if they liked the ad, if they would search for the product and whether they would buy the product. For instance, if they have an ad for a car, they might ask whether the person would like to test drive the car. They now had a lot more data about the ad impression, not just about what the person is doing online but what they might do offline as well.

Based on their survey data, they know that almost one in three users say that a relevant ad has been delivered, and Kristiansen now has the data to tell advertisers that they delivered an ad to a defined, measurable group of users and that a certain percentage saw the ad as relevant. That rather than CTR is how Schibsted is measuring ad efficiency, and that kind of data and detail can justify charging much higher rates than the industry average.

How have the audience responded to the pop-ups? Kristiansen includes his email address in each pop-up to allow people to comment or complain about them. He says that he gets about one email a month, but he says about ad-supported news sites:

“Basically, people have to understand that there is no difference between a freesheet on the subway and internet (news) sites. For internet sites, the only revenue they have is ad impressions. We can either show you a random ad or we could try to ask you the type of ads you want and make an effort to show you a relevant ad.”

Schibsted’s efforts to deliver relevant advertising don’t stop there. Kristiansen is very excited about a new product, dynamic retargeting. “I love this product. We are going closer to our customers,” he said.

If you are a retailer selling shoes, and an internet user comes to your site. The retailer may not know much about the user, but the retailer can record when she puts a women’s red Adidas shoe size nine in her shopping cart. However, she doesn’t buy the shoe but rather closes the window before going home from work. He describes dynamic retargeting as:

We have developed a system that when we see this user coming into one of our network sites without our customer creating a lot of ads, we could dynamically enter into our clients site the picture of the shoe, size of shoe and colour of the shoe. … This is customising every ad impression in real-time.

It works much the way that Amazon recommendations works but not just on Amazon but across the web. After creating a profile on Amazon’s site, you will notice how you will receive emails from Amazon letting you know merchandise related to what you have searched for recently.

Dynamic retargeting works much the same way but goes beyond simply showing ads with a category that you were searching and instead shows you ads of the product you almost bought. The data is anonymised to protect the user’s privacy, and the data is only stored for 24 hours because afterwards the information is probably not relevant for that user.

He sees this as the future of digital advertising. “The ads are so relevant to you that you can’t help but click on them,” he said.

If Google, Facebook and Amazon are winning the online ad wars by delivering higher performing advertising by delivering more relevant advertising, then techniques like behavioural targeting and dynamic retargeting are two techniques that can help you as a news organisation begin to compete effectively for digital advertisers.

The key to both techniques is data-driven relevance, and improving your ability to capture information about your digital audiences and deliver ads based on that information are important first steps in building material digital advertising revenue. Invest in technology to deliver more relevant digital advertising, and you’ll see see advertising revenue that will allow you to grow your digital editorial business and prepare you for the future.

You don’t have to be as large as Schibsted to start taking advantage of better ad targeting. Just as Schibsted uses third party services such as Audience Science, many companies can deliver behaviour targeting or dynamic retargeting services.

Article by Kevin Anderson