Media Dojo

Archive for the ‘MD Company Profiles’ Category

Time for the second installment of last week’s Amazon Web Services (AWS) meeting for local start-ups in Seattle. Rounding out the four customers presenting last Thursday were two Seattle-based media plays, nuTsie and Zumobi.

First up was Bob Wise, VP of Engineering of nuTsie, (www.nutsie.com), which allows people to port their iTunes play list across web and mobile platforms, including Blackberry and iPhone.  Basically, nuTsie takes a user’s existing iTunes library and rolls it into a streaming service much like Pandora. They don’t use the actual music in the library but the meta data about the songs and/or a playlist to create a super customized experience anytime, anywhere. If it seems a little disjointed there is method to the madness. Music licensing remains a mess even after a decade of industry tinkering. Like Pandora, Melodeo must make all its music streaming DCMA compliant so legally nuTsie is considering web radio rather than a a formal music distribution service.  The primary outlets are streaming for the web and for mobile phones. The business model is based on advertising for web streaming and subscriptions mobile phones.

For plumbing, Melodeo uses Amazon S3 to store and serve up the audio files (several TB in aggregate) that stream via a Flash player. The web-based nuTsie service gets about 10 million page views per month with about 10,000 hours of streaming music content served up each day between the web and mobile components. Both the streaming service and the mobile play are hosted on AWS. Bob said that for a typical load, it takes about 40 EC2 instances (think 40 virtual servers) that are about evenly split between large and small instances with one extra large instance for the main database. If you do a back of the envelope calculation it works out to roughly $10-15 per hour for pure compute capacity. Remember that nuTsie is also paying for data and certain transfer bandwidth charges.

source: http://aws.amazon.com/ec2/#pricing

One aspect of Bob’s presentation I liked was how he illustrated the effect of business forces on technical design. Chris Anderson of Wired fame used music as exhibit A of his Long Tail hypothesis. Bob said that in his experience the long tail might be long but it’s also thin as fishing line. Basically, this means that ultimately the number of music plays instead of the number of music tracks is what makes or breaks the business. Given the fact that the action stays with a relatively small number of tracks, nuTsie uses Amazon S3 as a content delivery network (CDN). If it sounds strange to use a data storage service to serve up content, take a look at charging. With many other CDNs in the market, a business is charged according to how much data sits at the edge node plus the transfer bandwidth to the end user. Thus, the key cost point is how much you get charged for keeping music tracks in storage which aren’t being played very much. Sticking several TB of music data out there on various edge nodes is an expensive way to do things. If you look at parking data similar to parking cars, loading rarely played music or video on an edge node is a bit like using a parking meter or a temporary lot whereas oft-played content needs the equivalent of a monthly reserved space. It’s an imperfect comparison I know. However, it’s decently clear that some of the heavy lifting for media providers is to figure how thick is the head of their demand model and how thin is the tail. Otherwise, it’s money out the door, cloud or not.

The Mariners were practicing today at Safeco Field where Amazon Web Services held a developer and start-up afternoon. Adam Selipsky and Matt Tavis of AWS covered the business layer as well as what was under the hood. Four customers gave their perspective about how they use AWS. Trains passed by as did the occasional crack of a bat to add background music to the presos.

I came away from the afternoon thinking that cloud computing has shifted into 3rd gear. We’re not yet at freeway speeds but it is clear that a lot of the theory is being hammered into practical application. Adam and Matt’s job is to solidify the current AWS story. Given that I’ve seen Werner Vogels recite the AWS lineage on numerous occasions, I can’t say that I heard anything new. Paradoxically, that makes me feel good. It suggests that AWS is in the midst of the tedious though critical task of truly productizing the offer. It’s easy for snarky analysts to harp about cloud computing being another form of time sharing, something we’ve had since the 1960s. But while it’s one thing to understand what something is, it’s quite a different challenge to make that something work at scale. Kind of like the physicist who can model a fastball. Very good, professor. Now, hit the sucker when it’s thrown at you at 96mph. Thus, I’m not particularly fussed when I hear AWS repeat its basic story with some incremental additions thrown in. Indeed, I’d say their success measure by 2015 is to become as boring and crucial as the power companies they seek to emulate.

To me, the customers provided the more exciting content. Jeff Lawson, Twilio’s CEO, spoke about how they offer telephony as a web service using multiple cloud providers, not just AWS. Strip out the black magic, and Twilio is about making telephony app development accessible to web developers. So if your expertise isn’t SIP, 3GPP or some other exotic telecommunications protocol, no worries. You can add various telecom services to your web app using traditional web standards and tools. Cloud infrastructure, much of which is AWS, enables Twilio to split its internal world into three large domains, continents if you will. There’s a DEV zone in which Twilio’s staff developers access a simple, powerful API that has only five blocks for building voice mail systems, IVR, PBX, click-to-call and other telecom services. Then there’s a STAGE zone that lets the developer test the app. Then there’s a PROD zone which is the only cluster that touches external customers (e.g. web developers). Media providers and marketers need to take note that branded comms is a huge future growth and community building area. Nearly every marketer I know bleats about how they’re fed up with using page views as a negotiating currency for media buys. They want more engagement (whatever the hell that is) from consumers. Nothing seems more engaging than a direct conversation, either between a brand and a consumer or consumers communicating in the context of a branded environment. I can’t say that Twilio solves the engagement problem (let alone how to use telephony as an ad currency). But you don’t get more guts level customer dialog than when it’s spoken instead of written so something is bound to shake out. Cloud now makes it far more likely that a savvy web developer will catch lightning in a bottle by using telephony in a new way. Watch this space.

However, you can bet that serving up telephony or other latency-sensitive applications beg for more robust testing. John or Jane Q Public won’t be thinking, “oh well, the app’s still in BETA. They’ll get it right with the next rev.” Far more likely, ordinary people will think “this sucks!” and move on when they encounter a communications or media app that is late in delivering the goods. Enter SOASTA, which uses the cloud to be an Underwriters Laboratory equivalent for websites and web based apps. They remind me of those demo guys who bring down city office buildings with explosives except SOASTA’s job is to stress test major web sites for latency issues. A case in point is Intuit. Many remember April 15, 2007 when Turbotax melted at 1015pm, not the company’s best day. The problem, however, is that to get a proper test, you need to simulate a proper load. SOASTA uses AWS and other providers to simulate massive traffic loads (eg. 300,000 simultaneous users) in various combinations without the need to construct a separate test facility. According to SOASTA’s CEO Tom Lunibos, the dirty little secret of most Web 2.0 apps (1.0 for that matter) is that they were lit without having done more than cursory load testing. The idea was that you got it out there, had it melt, apologized to the users with some cute stick figure with a hard hat, and fixed your latency problem. Mainstream adoption and recessions are curing that stunt pronto. Tom  declared (rightly) that latency can be measured as lost sales. Outages in 1998 that were reported in PC Magazine of Information Week now grace the front pages of the New York Times and Wall Street Journal. Bottom line for media providers (especially gaming companies) is that latency is money. So blow up your pre-launch site. You’ll be glad you did.

Don’t want to get too long so I’ll follow up with Melodeo (cloud-based music serving) and Zumobi (mobile applications as marketing) in a separate post.

Jokes are among the oldest and most effective forms of human communication. From etchings made by a bored Centurion on Hadrian’s Wall (“A Roman and a Greek were debating in the Forum one day….”) to the latest YouTube postings, the ability to take in communication, make it your own, and pass it along strums a deep cord within people—if it’s done well.

That’s one of key benchmarks for a newer breed of service providers using cloud computing to change how outbound communications via email and text are done by organizations to reach their customers and partners. I spoke with Dale McCrory, a top product manager at Exact Target out of Indianapolis. Earlier this month, Exact Target raised a whopping $70m VC round in the midst of economic turmoil. More about the company here: Media Dojo Tear Sheet: Exacttarget

I found that many of the social rules we’ve learned over time about context, consent and content of a good joke go a long way toward making the social value of it work. What cloud computing does, it allow the infrastructure to respond in tune with what a savvy marketer would like to do.

Media Dojo: Tell me about Exact Target and its DNA

Dale McCrory: We’re a SaaS-based one-to-one communications provider for companies wanting to reach their customers. We started as SaaS marketing to send out messages, primarily via email. We’ve now expanded our footprint to other one to one communications mediums like SMS.

MD: Where does cloud computing fit into that?

DM: There’s a portion of the cloud that allows a marketer to upload files that contain the email addresses that constitute their opt-in customer base. Our service connects to a back-end database on the customer premise. The data goes into the cloud at that point in time.

MD: So what problem are you solving?

DM: We enable marketers of all sizes to deliver direct communication (email, SMS, voicemail) to their customers and have all the tracking and analysis tied back to their goals and projections. We also have a content management landing page so people can build websites in our system. The main problem we’re attacking is that if you can’t find a way to quickly organize, personalize, send and track your marketing communications, it quickly defaults to spam in the customer’s mind. Aside from working the logistics of ensuring the right message to the right person in the right context, we also help our customers maintain their legal compliance with legislation such as the Canned Spam Act.

MD: So where is email marketing going as a business process? As an “art” form?

DM: It used to be only about the message: its content, its delivery, its tracking back to goals and outcomes. That’s still important but we’re also seeing email as a vehicle for allowing the consumer to repurpose good content across social channels. So it’s a customer being able to say, “the content of this email is important or funny enough for me to want to forward and display it on my Facebook wall”. Being able to facilitate that interaction while maintaining the essence of the message is crucial because now you’re introducing your content to people who weren’t experienced it before.

Secondly, it’s the ability within an email to actually change images on the fly. An example would be that you have a coupon that goes out via email that after three days you want that coupon offer to change into something else if it hasn’t yet been opened. We can do that with technology called Live Content.

MD: What cost areas are you attacking with cloud computing?

DM: If you look at a traditional web hosting today, if a SME marketer chooses to build a web presence that relies on regular email communication, most web hosts throttle back emails to about 100 per hour. The reason that most hosting companies limit you to about 100 is that there is a something called an IP address reputation. All spam collectors look at an IP address and ask whether the volume is too great. If the email volume exceeds a certain threshold, the host will start blocking everything coming from that IP address. The hosting providers have to do that because they have their own IP reputation to maintain with other hosting providers and peers. The individual host might have 500 customers sending email through that one IP address and if any one of those exceeds that threshold they can end up punishing the rest of them. So there’s a huge cost to doing that.

Take it up to the enterprise level and imagine that you need to send out 200K emails for a legitimate reason on a particular business morning. if your business is going to make money by getting those 200K emails out that particular morning and you’re on a system that can’t send out those messages fast enough, so it takes you 8 hrs to get those 200K emails out, you’ve lost money. By using the cloud, you’re able to get out your message and not worry about whether you put enough hardware to solve the problem. You’ll also need someone monitoring your IP address to ensure that not only do the sends go through, you’re also complying with your opt-in/opt-out lists. According to the Canned Spam act, you have to process someone within 36 hours who wants to unsubscribe. If you don’t meet that request, then you’re in violation of the law.

MD: Last question, what new things does cloud computing enable you to do from a communications point-of-view?

DM: One thing the cloud enables is for us to become a hub for data. It enables us to interact with other cloud providers, for example Salesforce.com. You can mix data from SF such as support data or it might be sales prospecting data, combine it with the rest of your email marketing data, and do advanced segmentations by bringing together all these disparate sources in to a single system. A key cloud advantage is that you need to bring multiple systems together in a standard way and you need to have the scale to do that.

Another aspect is that having the same communications platform on the cloud allows the customer to explore different messaging types such as SMS without leaving the basic system. So the marketer might want to know the customer’s communication preference, which might change depending on the type of message or even the time of day. It might be better to send a SMS instead of an email to let a customer know that their pre-ordered item is now in stock. That would be a huge undertaking if you needed separate systems.

Publishers have an inventory and supply chain management problem similar to airlines and their seat pricing. The value of the asset changes rapidly, changes according to who wants it, changes according to how it’s bundled with other offers. It’s a whirl of activity right up to the point when the plane takes off or the ad impression is served whereupon the value of the asset plunges to zero. It’s an everyday challenge to practice effective yield management for both online ad spaces and airline seats.

Savvy operators in both industries have long known what they wanted to do to crack this problem: take raw data in the form of server logs or ticket price searches, refine it into information that can be combined with other information in an analytics package, process that information into insight about opportunities to maximize revenue at the margin, and then take action based on that insight. It’s a relatively straight forward process that, technically speaking, requires a shitload of data, storage, processing, and reporting infrastructure. Thus, the “cost-effective” constraint raises its ugly head again.

However, cloud computing is starting to change that dynamic. I spoke with Tom Shields, CEO of YieldEx which is a cloud-based provider of tools for publishers to manage and optimize their online ad inventory, including forecasting of overlapping inventory and best possible campaign allocations. YieldEx became the second company to win Amazon’s Web Services Start-up Challenge, receiving $50,000 in cash, $50,000 in AWS credits and eventual direct investment into the company. For a quick overview, access the MD Tear Sheet. MD-TearSheet-YieldEx

Media Dojo: Why the focus on cloud computing?

Tom Shields: We ran into a number of problems during the 90s and into 2000 that were essentially unsolvable with the compute resources and capabilities we had at the time. The volumes of data we needed to process, the types of analytics that people wanted to do, the kinds of information that people were trying to get out of that data was pretty hard obtain cost-effectively. But we knew what we wanted to do. It’s a combination of yield management and plain old supply chain management for publishing. So what YieldEx is trying to do is apply computer science to and new capabilities offered by cloud computing to advance the state of the art.

MD: How are ad spaces different from airline seats when it comes to yield management?

TS: There’s a couple of things that make advertising impressions unique. Like airline tickets they disappear and the value goes to zero. If you have a physical object on a shelf, it may decline in value over time but it doesn’t disappear. The second interesting thing that so far seems unique to advertising impressions is that impressions can be characterized in many different ways. Those different ways have different values to different people.

So an impression coming in may be a male 25-34 on west coast looking at sports content. You might have some marketer wanting to buy sports content opportunities, others want to buy males; still others want to buy west coast. And these marketers may have different values attached to each one of those things. Part of the challenge here is that what one person considers premium inventory, another considers junk, what works for one marketer might not work for another. So there’s an optimization challenge to figure out how do I as a publisher maximize my revenue given this set of X impressions that expire at a given Y rate and given Z demand from all these different marketer audiences. It ends up being very complex and challenging, especially when you have 10 million ad impressions being served every month and you’ve got 10 thousand potential ad placements. The cloud allows us to economically crunch that kind of data unlike before.

MD: How does this work in practice?

TS: We take in a day’s worth of our publishing clients’ server log files. We process those log files overnight, turning them into clean information sets that you can run queries against in order to surface an opportunity to optimize your ad inventory. We need to be able to start up a hundred instances of significant sized virtual machines, and run them all in parallel for a relatively short period of time like an hour, 30min even. Then we need to shut them all down again and stop paying for them. That’s why our application is particularly well suited to the cloud.

In terms of the amount of server log data we need to process, it ranges from a couple of GB to a couple of hundred GB per customer per night. For some of the larger publishers, their current reporting infrastructure takes them 22 hours to process one day’s worth of server log data into information they can sell against. If you take that same data and put it in a cloud based parallel infrastructure, you can process it sometimes in less than an hour. It’s a huge difference.

MD: Is the nature of impression data changing online? How do you optimize that?

TS: Along with the Facebooks and other social platforms generating mountains of impression data, publishers are going to create a lot of that stuff anyway. How they obtain that data and use it for their own benefit and potentially sell data as well as impressions is probably where we’re going over the next 3-5 years. Publishers will probably also be combining their impression data with 3rd party impression data to get better demographics so that they can generate profile information that they can turn around and sell more effectively than an ad network might be able to.

Then there’s going to be this whole concept of measuring performance. What’s interesting is that for a number of marketing objectives that brand guys typically talk about, clicks are really a terrible measure for those things. For the publishers, the trick going to be about attribution tracking. It’s knowing, “sure that guy went on Google and did a search on the product but he saw five banner ads for that same thing before he searched and wouldn’t have known what to search for without getting the awareness from those display ads”. How does a publisher get credit for that? He won’t unless he can prove his content had an impact. And that requires data.

MD: Why do clicks rule? Should they rule for branding?

TS: It’s easy to optimize stuff you can measure. If you look at optimizing around clicks, it’s actually pretty easy because you can measure the clicks right away. You can promote your site because you can see where people are clicking and where they’re not. Without minimizing the scaling challenges involved, it’s a pretty straight forward problem. If you have feedback, you can optimize rather quickly.

The problem is that it’s hard to get feedback from activities that move higher in the funnel. Take brand awareness. How do I get feedback on brand awareness I can quantitatively measure automatically in software? If I can’t measure it quantitatively, it will be much more difficult to modify the format or delivery of the ad to optimize it quickly. If you can start measuring those things, you can start optimizing them very quick. But part of the problem is that there is this time delay between measurement and feedback because you can’t measure the impact of brand awareness until much later.

MD: Last question, do you see cloud computing as a means to collapse this float between measurement, however defined, and the ability to take action?

TS: Cloud computing offers only the ability to ingest, process and report a lot of data under far better economics. It’s no replacement for common sense on the publisher side. Whether you use cloud systems or what ever the key to optimizing your inventory is to learn what works with the customer, then go after it and earn money. How fast can you run your learn cycle so that you can maximize your earn cycle.

For marketers, learning is the overhead in the overall media buy. You’re taking your hit via lower effectiveness during the learning period of the campaign cycle in order to maximize the effectiveness of the earning period. So the shorter and more effective you can make the learning period, the less overhead you have, the more efficient the overall media buy becomes.

It’s 5pm somewhere in the world and time for a cocktail.

Let’s see. Mix one part Google App or EC2 with one part S3, add a pinch of Salesforce.com with a twist of Facebook, shake well and enjoy. Of course, as many of us learned during our first or second years of university, indulging in exotic tipples at scale often came to an embarasssing and/or nauseating conclusion.

Fortunately, some of the first true mixologists for cloud-based solutions are springing up. Combining products, services and strategic relationships with platform companies like Google or Amazon, enablers like Appirio provide a “middlelayer” rather than “middleware” for organizations trying out the cloud for select business functions. Based in San Mateo, Appirio basically helps its clients fast-track selected business functions onto the cloud by offering them a turn-key proposition. For a quick overview of Appirio, check out Media Dojo Tear Sheet–Appirio.

We spoke with Ryan Nichols, Vice-President of Product Development at Appirio about where he sees the low hanging fruit for media and advertising firms in the context of cloud computing for 2009 and where they should start.

Media Dojo: What are the initial conversations you’re having with media and advertising firms when it comes to cloud computing solutions?

Ryan Nichols: We have more of a functional go-to-market strategy than an industry-specific strategy. We see a lot of companies, media providers and advertisers included, starting with a straight up sales automation solution from Salesforce.com that they soon want to extend into adjacent functions. Practically, this might be extending the work they’re doing with SF.com into a Facebook application to drive word-of-mouth referrals. Another extension for media and advertisers as well as other companies might be to automate some of their lead generation and/or lead nurturing functions. So they might have started at the part of the funnel that’s one or two steps removed from sales and now want to migrate higher up the funnel to more marketing related functions.

MD: What is the relationship between social media and cloud computing?

RN: People have an intuitive sense that World of Mouth (WOM) referrals are the lowest cost highest quality way of building out their business. That’s why people measure things like a Net Promoter Score, which is great if you can get social media users to recommend your brand or product. The problem is that even if they already are prepared to recommend you to their circle, typically you need to put an application in their hands to close the loop. One of the more exciting things is not only does the cloud enable us to quickly build apps but the target platform, Facebook for example, is itself already a cloud-based system. That makes it simple, fast and inexpensive to connect the application to the platform. Going further, it’s possible to tie this platform to another cloud-based platform like SF.com, which would be almost impossible if we were dealing with on-premise software and infrastructure.

MD: Where does this easier integration fit with other published cloud benefits such as lower costs, pay-as-you-go pricing, or flexible scaling up or down?

RN: Those are all important value adds of cloud-based solutions. However, one thing I believe gets missed sometimes is our ability to use the cloud to prototype something rapidly and at low cost. Often, while a client is evaluating one of our deal proposals, we knock together a quick prototype to show them what a custom solution looks like for them. You’d be hard pressed to do that with on-premise technology because the cost of starting up is so high that it’s hard to be agile. Agility is a critical benefit once server cost savings are realized.

MD: What should media and advertising companies start doing in 2009 to get the most benefit out of cloud-based solutions?

RN: I think the key for most media and advertising people is to stop reading and start doing something. Start out with a small, initial project where you build an app for the cloud and learn. There’s no faster or better way to learn what works or doesn’t work for your company. At the business level, it means picking an app for which you were just about to call internal IT to provision and trying it out under an on-demand model. That’s the only way to stay on the development curve and ensure that a year from now you have a real strategy for your company. Cloud computing isn’t just about becoming world-class in your cost control of IT. It’s just as much about finding that innovation path that will take you into the next phase of your business.

[Editor's Note: Ryan came from a retail analytics background prior to joining Appirio. During our talk, he provided feedback and some useful pushback to my thesis below that the future of media lies in a retailer's mindset. I'll chew on his comments some more and then give that presentation another rev.]

When I first heard that ooyala means cradle in Telugu (a South India language), I thought about that creepy flick with Rebecca De Mornay who quotes a riff from the 19th century poet William Ross Wallace, For the hand that rocks the cradle is the hand that rules the world.

Fortunately, ooyala’s CTO Sean Knapp isn’t as good looking nor as psychotic as Ms. De Mornay was in that film. That’s probably a good thing for video content players like AOL/Bebo, Armani, Joost, Electronic Arts and Glam who trust ooyala with managing and helping monetize their video assets on the cloud.  Sean co-founded ooyala with fellow Google and Stanford alumni Bismarck Lepe and his brother Belsasar Lepe. For a quick run-down on the company, check out the one pager. MD Tear Sheet on ooyala

Sean and I discussed the ooyala’s DNA, how it uses Amazon’s cloud, the trend toward clickable interactive video for clients such as Armani, as well as take-aways for marketers about what is possible here and now with interactive online video.

Media Dojo: What lit the spark for starting ooyala?

Sean Knapp: The original catalyst that Bismarck approached me to solve was how do we build a high level video destination site that would monetize better than with pre/post rolls, in-stream ads or overlays. We looked at it and noticed that we had a good bit of computer vision expertise in the company. We felt that if we could use computer vision techniques to mark up a video and make various elements clickable, we could make them more interactive and engaging, which would monetize better in the end. It’s the difference between having a banner ad and having AdWords where users were proactively engaging with the content and looking for more information.

MD: So where do Amazon’s cloud services come in?

SK: The original idea was to build an interactive video destination site. What ended up happening along the way true to Google engineering form was that we needed to solve a lot of different related problems. The first technical problem to solve was ingestion, or how will be take content into the system very easily from our content owners. So we starting building Backlot along with storage and video encoding services. But as a three man team, it didn’t make sense to start trying to build a network storage system even though we knew we needed one to store a lot of video content. It didn’t make sense to start building racks of servers when it was possible to buy instances of Amazon EC2. I could draw a lot of parallels between what we could buy from Amazon compared to the tools we used when we were at Google. From Amazon, we bought S3 storage services. At Google, we used GSS. We buy EC2 from Amazon. We used Google Borg for much the same thing. Basically, using cloud services made it much easier to grow quickly. Our goal is to help content owners successfully upload, distribute and monetize their video content online. The fact that it’s running mainly on the cloud is great but it’s not the ultimate value proposition. The cloud is simply the enabler that helps us innovate faster.

MD: Let’s define interactive video, what do you mean by it?

SK: Our goal is to make online video clickable. We want to find the points in a video stream where people might want to interact with a piece of content. Perhaps they’re attracted to the particular hat Halle Berry is wearing in Swordfish. They want to find out about that hat and maybe where to buy it. You might have an informational video where it’s even more important for people to be able to click on various items to expand an explanation. So the trick to making video interactive is two fold. First you need to populate it with targets that people can click if they want or skip. Those targets need to be discoverable at the points where people are likely to want something extra in their content. Then you need to link those targets to something else, maybe the latest stats for a college hoops player during March Madness, or maybe an e-commerce link so you can find a jersey or something like that.

MD: ooyala was recently involved in helping Armani create an interactive online fashion show. What happened with that?

SK:We got connected to Armani through an Italian online design shop called Shadow. They had used our technology and APIs previously for work they’d done for an Italian professional soccer team. They’d heard about our push into interactive video. So when Shadow got the contract to build Armani’s online fashion show, they pitched the idea of making the video clickable and Armani went for it.

[editor's note: go here to play with it-- http://www.emporioarmani.com/index.asp?ssp=1&tskay=3FD17CD7 ]

Basically, you choose whether you want to see the men or women’s line. As the models parade on the cat walk, you can mouse over their clothes to get a link to that look in the Armani catalog. It’s a pretty straight forward e-commerce implementation. The main point is that it’s entirely up to the user regarding when they want to engage closer to a transaction. No overlays or interstitials are involved. Just watch the video and when you see something you like, you take action.

From a marketing standpoint, interactive video is about increasing the overall engagement time for the user—but on their terms. Most users like to operate on the assumption they are in control so when they feel like their being interrupted or pushed in a particular direction, they tend to bail fairly quickly.

MD: All well and good—what are the potential gotchas with interactive video?

SK: One of the things that we’re finding is that interactive video doesn’t really work as an out-of-the-box solution. There’s not a default user experience that you can monetize immediately and predictably. We’ve found that every implementation has been custom built because everyone’s content is different. What will trigger user engagement in a fashion show is different than a sports event or a comedy or a drama or even an instructional video. So it’s important for content owners to be sophisticated about envisioning how interactivity can enrich the user’s experience, and by extension, lead to better chances at monetization. What happens, the different calls to action, and what is engaging depends very much on the content itself.

MD: Last question, where’s the money in all this?

SK: We’ve concentrated on the bread and butter issues to get to this point with ooyala. Longer term we see the value proposition expanding to look at how to monetize situations involving different users in different context. For example, if you’re running ads or pay-per-view, being able to dynamically price a view of a video direct to the user or direct to the advertiser could be huge. Should this stream price at 0.05 or 0.15? Well, the answer depends on the user, their specific context, and which ad inventory is available at that precise moment. We’ve all got access to much the same ad inventory. But it’s about who will get higher interaction and engagement because they’re showing the right ads to the right users at the right time. Optimizing at the margin to make milk out of that last 15-20% of possible revenue is the difference between a Yahoo! and a Google.

[Editor's hat tip to Alexa Lee for setting this up]

Online advertisers spend an obscene amount of money, time and effort to organize and target an audience, but often revert to a Soviet mentality with the variety of creative that ends up being delivered to the consumer.

We have pork with the rib side up! We have pork with the ribs side down! Choose!

There are a few companies that are trying to work the other side of the equation, namely how to optimize ad creative at the margin.

I spoke today with A.J. Kintner, Director of East Coast Sales with Tumri out of Mountain View. Tumri is blowing up ad creative into its constituent elements and re-assembling it on the fly to present a consumer with a unique ad message.

For a one pager on the company click here: MD Tear Sheet on Tumri

Here’s the gist of our conversation:

Media Dojo: What’s the problem that Tumri solves?

AJ: Ad creative is static for many reasons. Creative executions can be very time consuming to make and just as time consuming to capture and make sense of the data the ad throws off. I spoke with a group in South America working with a big IT advertiser. They needed 33 people for just one account to make the creative, capture and crunch the data, and use that insight for the next rev of the campaign. What we do is enable a team to launch an ad and then change pieces of it on-the-fly as the data rolls in on who clicked where, when, and under what conditions. So instead of having just creative 1, creative 2 or creative 3 that are going to be served up, we take the main elements that go into the execution (the background, the price point, product offer, color scheme, call-to-action) and reconfigure it hundreds of ways to find the best recipe for different customers.

MD: Kind of rapid prototyping for online ads

AJ: Yep

MD: Who are your customers?

AJ: We pitch to agencies, advertisers and publishers. For advertisers and agencies, our solution makes life a little easier on man hours and performance. At the same time, they’re learning about their consumers. So we helped Intel learn about which part of their ad creative that people were looking at, what they were clicking to find out more information. Within a 4-5 month period, Intel learned more about their consumers than in the 2.5 years they had been running web media in that space. It’s because we set up the creative in a way that they could actually learn how their users were interacting with their products.

MD: So Intel gets a twofer with better ad performance with customer research, yes? Where do you see that going where you’ve got rolling feedback between creative and research?

AJ: We were working with a major shoe company and were able to show them that anywhere from 15-20% of the click thrus on the ad originated from the brand logo. The brand logo was very small part of the overall banner. The creative agency wasn’t taking any action to raise the profile of the logo. It seemed that both the marketer and their agency were taking the brand for granted. But once they had the data suggesting that the brand was so strong that people were just clicking on it to go to the home page, they integrated that brand logo into a 2-3 second attention grabber before the rest of the ad started. A lot of advertisers take their brands for granted: “everyone knows who were are” etc.

MD: What do you see happening in the next six months from an industry point-of-view?

AJ: Look, things are changing so fast because of the general economic shifts to where what you knew last July isn’t relevant now. I will say that almost every marketer and agency is focusing on the bottom line and ROI like they were direct marketers. I’ve seen the conversation go at industry events in which a branding person talks about a new ad launch to another branding person, “New banner looks great. What’s the CTR?”

MD: Nothing like a recession to inject a direct marketing mentality into what had been a brand marketer’s world…

AJ: No doubt.