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The Ad Business

Saikrishna Chavali posted the following question on my blog post about Data & UX being two ends of the product spectrum:

I’ve got a question: how did you understand the user when you were in the ad business? Did you ever meet real users? In PM theory, one is instructed to empathise with the user by actually “getting out of the office”.

Since it’s quite an important question, I thought I will take a shot at giving it a detailed point of view, and provoke some conversation.

While building the Ad Network at InMobi, we had 3 key stakeholders to take care of and deliver value to:

  1. Advertisers & Agencies – who had ad budgets, setup and ran the campaigns, and looked at reports & analytics to measure ROI of their ad spend
  2. Publishers & Developers – who had lots of traffic from mobile phones – mobile web, apps etc, and wanted to generate revenue by advertising
  3. Users – who were primarily using these mobile web sites and apps to get their work done, or for entertainment.

When Publishers or Developers say

I want to monetize traffic

they’re basically saying

I have users who use my sites and apps, and I want to make money from them, so that I can sustain my business, and grow it

As an ad network, you have business relationships with Advertisers, Agencies, Publishers & Developers. And as product offering, you build user interfaces and APIs for these people to use. So, by definition, you have to have ongoing dialogue with users from these customer segments. I believe products are for users, and have blogged earlier about it.

At the same time, an ad network makes money when the users (consumers) engage with the ads in some applicable manner – Viewing, Clicking, Playing etc. The effectiveness of the network is increased if we can understand the consumers well enough that we deliver the right kind of ad experiences to them in every context. That bodes the question

How do we understand the consumers effectively?

For a large part, we understand consumers from the data generated by them in our system. Ad businesses typically talk of metrics such as requests, impressions, clicks etc. If these metrics represent a user’s intent in some form, here is how they would play out.

  • Ad Requests – “There’s some space in the screen, can you show me an ad that I might like and click on?”
  • Clicks – “This ad seems really cool and helpful for me. I want to see what the product/service it is showing.”
  • Play (a video) – “I am curious about what this video is, and hence going to watch it.”
  • App Download – “I want this app.”

 

Remember, for every advertiser that wants to run a campaign on your network, the campaign will certainly reach a bunch of publishers (say 50 or thereabouts) who each have access to a few million users (say 1 million each). Assuming there’s a user overlap of about 50% (multiple publishers’ sites or apps being seen by a user), that’s an overall reach of 25Million users (50 x 1M x 50%).

Now, how many days or surveys or phone calls or chats will it take for you as the product manager, to be able to talk to 1% of this target user base?

Come to think of it, the Ad is really the “product” of the “Advertiser” that’s targeted at a “User”. On the other hand, the Advertising System / Interface is the product of the Ad Network for the Advertiser. So, in the strictest sense our loyalties should lie and stop with our customers (Advertisers, Publishers etc).

Clearly that’s not good enough, because the effectiveness of any advertising business is based on the consumers engaging with ads being shown by the advertising system. So, we have a clear objective to improve ad effectiveness with the consumers. Here’s how that gets done.

Let’s say there’s a campaign with 1 ad in it. When these campaigns get setup, and the ad starts getting served, pretty soon, the ad servers start computing answers for questions like

1. How many times did this user click an ad that was shown a few times

2. How many times did this ad get clicked when it was shown a few times, across many users

The first question gives you an indication of whether a particular user liked this ad or not.

The second question gives you an indication of the percentage of people that liked this ad, from the overall population of people who saw this ad – CTR for the ad.

With these two metrics you’re able start understanding if specific ads work for specific users or not. You then architect and instrument your systems to iterate on what ads to show a given user, based on the expected effectiveness of the ad for the given user. So, while on one hand you can design your systems for your customers, based on meaningful real world interactions with them, on the other hand you end up being highly data-driven and experiment-driven to design serving systems that deliver some kind of content to millions of users. No wonder folks with data+tech chops are in high demand among tech companies.

What do you think? What other experiences have you had?

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Changing user behavior – Cardback

This time, we feature Cardback a Delhi based startup, focused on helping today’s retail consumers discover the best deals and offers available on their credit, debit, loyalty and prepaid cards across merchant establishments. Its first product, also by the same name, is a location-aware mobile app that is currently in public beta for Android and in an invite-only phase for the iPhone.

What inspired you to build such a product?
We ourselves have always been sensitive to saving as much as we can while spending. While faced with a peculiar challenge of figuring out which one of our cards is best suited to use at a particular place, we identified it as a business opportunity that could be addressed using modern day computational techniques and the power and ubiquity of smart phones. That was, essentially, the genesis of Cardback.

Who all make up the core team at Cardback?
Nikhil Wason and Nidhi Gurnani started Cardback in July 2012 after months of brainstorming on the fundamental challenge faced by today’s credit and debit cardholders. Engineers by profession as well as by passion, both Nikhil and Nidhi are technologists, but with a business sense. While Nikhil, a graduate of Columbia University, was previously working with Adobe, Nidhi contributed her bit to the Aricent Group for a while. The core team got expanded with Ankita Garg joining a couple of months later to handle marketing. Ankita, a social media expert, has in the past helped several start-ups acquire a considerable user base during their initial days.

Can you tell us a bit about your product roadmap?
We currently have an Android app, while the iPhone app is in private alpha testing. We made a conscious decision to focus our initial energies on Android, as India’s mobile user base is more Android-oriented. Since its beta launch in Nov 2012, we have analyzed enough user behavior on the Android app to make fundamental decisions on its user experience on other platforms. We plan to ship a public beta of our iPhone app in January 2013. Cardback for Windows Phone and Blackberry are currently under development.

One very important aspect of our future roadmap is to build a partnership with banks and other card issuers. Using our platform, they will be able to push their special deals and incentives to cardholders at the right place and at the right time. Meanwhile, they will be able to gather valuable analytics, which will help increase the repeat usage of cards issued by them.

What challenges have you faced in your journey so far?
The biggest challenge that we have to address is changing user behavior.  While many people today claim to be tech savvy and gadget comfortable, they’re still very averse to making changes to their credit and debit card usage habits. Even though they would be interested in discounts, they rarely remember they have several excellent entitlements by virtue of holding certain cards. With these cards, many discounts become their “birth right” or so to speak. Cardback provides them the tools, but those tools won’t help unless people make use of them.

As a mobile application, another major challenge that we have to face is discoverability. With millions of products out there on every mobile platform, it becomes very difficult to make users notice your app, even if it solves a genuine pain point.

Are you collaborating with other startups?
At Cardback, we do not believe in re-inventing the wheel. We realize that the challenge we are trying to address is so specialized and requires such clinical execution, that if there are specialists in the periphery zone who have proven solutions, we will happily bring them on-board.

We have recently partnered with dineout, which is India’s premiere restaurant booking service, to allow our users to make table reservations at their favorite restaurants through our application itself. Our application already helps users save money, now with this feature, they save time too. And they even get discounts with every table booking they make.

How would you rate yourself in terms of achieving the targets you set out to achieve so far and what are your targets for future?
Being engineers ourselves, we are very data driven in our approach towards everything. Setting targets and evaluating our performance is no different. We have defined metrics that we’re tracking ourselves against and so far we are very satisfied with our performance.

Qualitatively, we set out to achieve two things by the end of the year. First, technological proof of concept, and second, basic customer validation. We’re proud to say we’ve done very well on both those fronts and we will be starting 2013 with a brand new level of excitement due to these accomplishments.

For the near future, our target is rapid expansion of our user base and scaling our platform to support that rapid expansion. We will also be adding new and innovative features as we get our apps synced across all operating systems.

As a long term goal, we would be partnering with card issuers such as banks, as mentioned previously.

How do you cover the operational costs?
Cardback is currently being bootstrapped. Several investors have expressed a keen interest in what we’re doing and we are evaluating the right time (and the right investor) to infuse additional funds into Cardback’s mission.

Wishing GoodLuck to the Team!!