Sunday, June 21, 2009

Opportunities For Entrepreneurs, New Venture Intermediaries

If AdSense is in decline, that leaves open a big market for
entrepreneurs. Publishing is not a winner-take-all market. Google will
not control all online inventory. Advertisers and their agencies like
choice. And users click on whatever is relevant.

We see two plays in this environment:

  1. Match relevance. Match relevance means parsing
    content to deliver more relevant ads. This is easy to say and hard to
    do. A lot of smart semantic tech ventures are focusing on this problem.
    This is smarter use of search technology than Quixotic tilting at
    Google's search bar dominance.
  2. Connecting CPM to CPA. This is another hard
    problem to solve but promises a huge payoff for the winner. Publishers
    like selling CPM (cost per mille): it is easy for them, and the burden
    of performing lies with the advertiser. Advertisers, on the other hand,
    like CPA (cost per action or acquisition): it is easy for them,
    and the burden of performing lies with the publisher. Both parties look
    at the CPC (cost per click), because that is trackable from both sides
    of the transaction. But CPC is just a proxy for what each really wants:
    CPM and CPA, respectively. Any venture that brings publishers and
    advertisers together with a deal that satisfies the needs of both will
    do very well. There is a huge opportunity here. High-quality websites
    that really engage with their audience will certainly do well by CPA
    metrics, but the solution will have to be really easy to implement.
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