Halogen

From NYTimes.com, last time around.

These rules apply to anyone buying media from an ad network – even a luxury ad network. We think that all networks need to be transparent – about their publisher sites, about HOW they have built their audience and about the other advertisers on the network. We also welcome Comscore’s improved network ratings standards – more work for us in the short-term, but will allow the credible networks to demonstrate their value. And the jokers – with inflated numbers and dubious sources of traffic should fall by the wayside as media buyers wise-up to their exaggerated numbers or puffed up reader profiles.

Ad networks offer the potential for great media buying efficiency for luxury marketers – and will provide  some real audience alternatives to the usual suspects – nytimes.com, wsj.com and forbes.com. But the media buyer needs to trust the network. This is why we are investing in industry-standard DART for ad serving, Neilsens Net/Ratings for audience profiling, and Quantcast and Comscore for audience measurement.

Luxury marketers have always cared about how sites ‘look and feel’, to make sure their brands would not be out of place. Now, with transparency and third-party audience measurement, luxury advertisers can get scale in their online media buys, without losing confidence in the quality of the sites or their readers.

Publishers need ad networks. Publishers with unsold ad inventory that is, and in this economy, you would be hard pressed to find many without a significant number of impressions still left unmonetized.  In fact, an IAB study conducted by Bain & Co. indicated that sell-through rate for most publishers averaged at roughly 53% in 2007.  Conservative online industry experts are forecasting a 4% decline for the online advertising market in 2009; the doom and gloom mongers at The Business Insider (a Halogen Network Publisher) are coming in at 10-20%.

Why does working with an ad partner make sense?

If you’re the typical publisher, you have roughly 50% of your ad inventory sold (which means you have 50% of your ad inventory unsold).  Working with an ad partner allows you to monetize that unsold inventory and obtain incremental revenue that you likely would have lost.  Yes, ad partners tend to take 50% of the gross revenue that they sell on your behalf, but the cost of sales theoretically makes no difference to you because that revenue is incremental.  All you need to do is set a threshold level of sales that you hope to garner from this relationship that’s worth the management time and resources it takes to maintain, and give your ad partner 90 days to ramp up your sales pipeline.

Why technology-driven ad networks are a strategic conflict for premium publishers

1. Rate Integrity: Most technology-driven ad networks that allow for a plug-and-play solution generally offer CPMs in the range of $0.25 to $3.  Although this option may seem exceedingly attractive to the typical publisher given the ability to quickly plug in ad tags and get a check at the end of each month, the use of a remnant ad network presents a clear strategic conflict for a premium publisher who would otherwise sell its inventory directly for $12-20 CPMs.  Why?  Ask the Mercedes Benz media buyer why he or she would buy premium inventory for the high, high price of $12-20 CPMs when the same inventory could be bought through Google or another remnant solution for the low, low price of $0.50 to $3. Sure, that’s not completely fair because these technology-driven networks tend to only allow buyers to buy in on a blind basis, but the mere fact you’re running Google AdSense in premium ad units on the site says something about the CPMs you are willing to take.

2. Brand Adjacency: Luxury advertisers are protective of their brands. Running an Abercrombie & Kent ad next to the belly ad featured here on the International Herald Tribune is simply the easiest way to ensure you won’t be getting a renewal.

At the end of the day, as a premium publisher, you need to weigh whether the short-term cash gains are worth the inherent strategic conflicts of building a premium ad business.

How we are solving the problem

1. The Difference between Media Representation and Ad Networks

At Halogen, we experimenting with ways to blend the two, so premium publishers get the best of both models.  Media rep firms know your products and can create custom engagement advertising solutions, which command higher CPMs, but do not tend to offer the run-of-network impressions of a scaled network.  Ad Networks tend to offer higher sell-through but at discounted CPMs.  At Halogen Network, we believe that we are successfully blending the two models, keeping both rate integrity while maximizing sell-through for our publishers.

2. Trust

Trust is under-rated in today’s world of high-tech-etry, but we cannot overemphasize its importance in chosing the right partner.  Trust is needed among all stakeholders.  Can you trust that your ad partner will not under-cut your direct sales advertising rates?  Can your ad partner trust that your direct sales team won’t circumvent the sales process once premium advertisers are brought to the site?  Will luxury advertisers trust that you and your ad partner are attempting to run the most optimized campaigns that ultimately perform for them?  We’d like to believe that we’ve built a team that you can trust.

…and for cynics that don’t believe in trust, there’s always Transparency

We work on a completely transparent basis.  We allow luxury advertisers transparency into which sites they will run.  We allow publishers to approve all campaigns prior to run.  We know that this slows us down, but for a luxury publisher network, we believe a high-touch approach is exceedingly appropriate.

-Wendy Nguyen, Director of Marketing

Do you remember the days of the full banner ad? 468x60s were a product of a new medium, limited by the 56kbps (or slower) modem downloads. They — and the other smaller ad units — were replaced by the revolutionary standardized Universal Ad Package. Do you remember when that was? Shortly after the last time the DJIA was hovering at 7000.

At the IAB’s kick-off of the second annual meeting this past weekend, Wenda Harris Millard issued a plea for more art in online advertising, and I agree. Show me more creative ads like the ones Apple ran today on CNET and the New York Times home pages — non-standard display ads that were “standardized” across a couple of sites. These are impactful (and not because it showcases the Apple brand), get the message across and compel me to engage with the brand and its products.

Of course, these ads are not per the IAB standards, and according to the “process whereby these new units are reviewed”, they won’t be accepted for at least two consecutive quarters. By then, the creative-thought leaders are on to their next project.

Technology has made leaps and bounds between this recession and its predecessor. Yet as an industry, we have only managed to make the medium rectangle into the half-page ad, and repurpose video assets into the pre-roll. Even now, what’s old is new, and the full banner and its kin are back en vogue (on my iPhone browser).

Have we lost our innovation with display ads? Right now, due to standardization, it is par for the course.

-Spencer Lee, VP of West Coast Sales

Late in 2007, as we realized the scope of our opportunity, we raised $5 million from Kohlberg Ventures, a new venture fund founded by Jim Kohlberg. Jim has a long and successful track record in private equity, and his fund will focus on consumer products, digital media and clean energy investments. More than the capital, we have found Jim and his team to be smart, patient investors that blend a VC-like belief in the ‘big opportunity’ with a disciplined attention to operating fundamentals and the path to profitability. Needed now more than ever.

We decided to announce the funding now, as we wanted our partners, publishers and clients to know that we have the resources and commitment to continue to invest and grow through the current environment. VentureBeat (a publisher in our network)  has their take here.

The capital will be used to invest in building out ad operations, the sales team, and network-wide custom ad products. As luxury advertisers continue to  shift their media budgets online (creating a big hole in the revenues of magazines like Robb Report, Departures and others), we think that they want more options than just the NYTimes.com or WSJ.com. Halogen will be one of those alternatives.

All publishers are scrambling to shore up ad revenues, and one quick fix is allowing blind ad networks to sell ads – enabling the publisher to get at least something for their unsold inventory. But it creates longer term problems for the publisher that are hard to quantify – but probably outweigh the short-term revenue gains. Here is one problem:

I would not want to be the sales rep. for the International Herald Tribune calling one of my luxury brand clients, knowing that my publisher is dumping unsold ad inventory to an ad network that has flooded the web with these ‘belly ads’ over the past few weeks. Luxury brands worry about adjacencies, and the belly is not a good one.

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It’s undeniable that luxury has taken a beating this past year. With American Express Black card transactions declining for the first time since inception, no one – not even the very top – has been left unscathed.  Even Michelle Obama’s choice to decorate the White House in Pottery Barn (albeit with the help of Michael Smith) speaks to the pervasiveness of the trend.

Here at Halogen, we are grappling with how to redefine luxury.  Does luxury have to be exclusive? Is it about sumptuous art and living or can it be more basic? What does “luxury” mean in a world where most people have seen 40% of their wealth evaporate this past year?

Here are the core tenets of what we believe is the appropriate upgrade to luxury, and we would love for you to weigh in.

Luxury 2.0

Innovation vs. Stagnation
Socially conscious consumption vs. Excessive ostentation
Experiential value vs. Status
Accessibility vs. Exclusivity

We are unveiling our new affluent lifestyle site – Halogen Life – in April, and are working to find a voice appropriate for our times. Let us know what you think. What’s missing (or soon to be missing given the implosion of print) in your daily/weekly reading material?  Who do you believe is innovating in this space?

More to come on Halogen Life as we get closer to launch…

-Wendy Nguyen, Director of Marketing

No doubt the PR firm for Zegna was pleased when a reporter for the Financial Times decided to test drive the new Zegna Globe Trotter sneakers – although the review was less than enthusiastic. And of course, thanks to Google, if you search on that product name, you quickly find the review:

But no paid search ad for Zegna – although their own website comes up first in the natural (unpaid) search results. In fact, on a bunch of Zegna searches, I could not find any paid search advertising by Zegna – perhaps because they want to not compete with their online retailers. But how about a paid search campaign that directs consumers to product pages – and then hands that traffic off to their online retailers?

And NYTimes stock closes below $4.

Lots of stories recently about how as the aspirational luxury market evaporates, only the true wealthy will be left buying:

-from a marketing panel at Wharton, it’s time to pamper your most loyal customers, not sort-of-rich Russians.

-according to Prince and Associates, there is a shift to real elitism, and the rich seem happy about it.

-Kiton opening a store in Saks in NYC and selling $7,000 suits.

-Brioni selling their $43,000 suit

So, nothing too surprising here: luxury is contracting to those that can afford it. But how will luxury brands and retailers engage and retain this even  smaller, more elusive pool of customers.