Avenue A/Razorfish SVP Jeff Lanctot helped spend $750 million of his clients’ ad money across the Web last year — while adapting to a new owner. Jeff talked to SAI about life as a Microsoft employee — the result of MSFT’s $6 billion purchase of corporate parent aQuantive — and about online marketing trends in general. He says that social networks are still challenging for marketers, that online ads don’t have to be pre-rolls, and that the TV strike didn’t move ad dollars to the Web.
Silicon Alley Insider: Social networks such as MySpace have been a conundrum for marketers. Have you figured it out?
Jeff Lanctot: The traditional display business on MySpace is not very valuable right now. The targeting has not been utilized [on most pages], and sub-$1 [cost per thousand] is not uncommon. If you’re MySpace or Facebook, the way to monetise is to find new ways to connect to the brand. Well-targeted banner inventory can support existing pages within MySpace or groups within Facebook–we’d like to see that. One of our clients, Victoria’s Secret, has a MySpace page with 350,000 friends.
SAI: What do you say to clients that want to buy online video?
Lanctot: The first thing we do is take a step back and talk about the options: It can be in-page video ads, it can be pre-roll, mid-roll, or post-roll. It can be overlay ads, a la YouTube, or a branded skin at Heavy.com. If they come to us and ask what kinds of pre-roll can I buy, that’s when we ask, “Why do you want to buy pre-roll?” It’s more limited inventory and tends to be higher-priced. There is a misconception that video advertising online equals the pre-roll, and that’s the misconception we want to break down.
SAI: Has the writers strike had any impact on online spending?
Lanctot: We saw a significant spike in interest. A lot of clients asked for contingency plans. What would plans look like if they increased budgets x per cent? We saw a handful of clients that shifted budgets but the strike ended before there was any significant wholesale shift. It sort of ended just in time. It’s been sort of a slow shift [from TV to online] anyway. Will there be a permanent and noticeable drop in TV advertising because of the writers strike? I don’t think so.
SAI: What’s it like being a unit of Microsoft? Is there any downside?
Lanctot: Everything you probably heard about us being managed at arms length is quite true. We have the same management team, the same reporting structures; it really has been business as usual. What’s the negative? It’s really a conflict of interest. If our clients think for one minute that we are favouring Microsoft over AOL, we would lose that client tomorrow. Likewise if the MSN sales team is thought to be favouring us or providing us with information at the expense of other agencies or advertisers that business would go somewhere else. So, it’s really high-risk for really no reward.
SAI: If it’s so high-risk, why do it?
Lanctot: I think the benefits of having that close customer contact–at a time when they’re trying to make the shift from a product-focused company to more of a client-focused business, is really valuable. I think they will continue to monitor how effective that is and if what worked at aQuantive continues to work for all parties as part of Microsoft. It doesn’t feel strange. It feels as natural to be part of a technology company as it does a holding company.
SAI: How does this change if Microsoft takes control of another big client, Yahoo?
Lanctot: There’s a perspective that going from three portals to two is bad for buyers. But spend is actually moving away from portals and much more broadly across the web, so I’m actually not concerned bout moving from three to two, because we are really moving from 3 to 800.
SAI: What about the inevitable consolidation of ad networks; won’t that lead to higher prices?
Lanctot: Ad network spending is increasingly being consolidated among the top 5 players. The more ad placements you have, the better you are able to match up with advertisers. The bigger the top players get, the more efficient they become. It’s difficult for the big players to make arbitrary decisions on price when it’s a more performance-driven model.
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