It’s a sick thing to call a hobby, I guess it’s really more of a pastime that I can’t stop doing even when I’m surfing the Web not for work (online advertising). And that’s to be on the look out for PSA’s, or public service ads, or any other type of advertising anomaly.

For the uninitiated, a PSA is something that is served typically when an adserver has nothing else to show - usually it is a mistake since the person who is called on to serve the ad impression has typically paid for that ad and having to show a PSA means they are wasting money since PSAs are, by definition, free and unpaid.

I saw this on IMDB (owned by Amazon) - it looks like not only are they showing a PSA in this ad spot, but it’s showing the wrong size ad in this spot. Double mistake - and looks like the network serving it is Turn due to the image call being from http://img.turn.com/img/server/ads/ps/300×250.jpg (click to expand)

I’m excited about what Michael Singer and the team at InternetEvolution.com are doing - and my first post for them came out today, check it out here.

a.ka. crappy free wifi….

On a trip over the labor day weekend, stuck at the airport a little longer than expected and had the wonderful experience of using some free wi-fi. Now you may ask, how can free be bad. Unfortunately, sometimes a bad ad-supported “free” product is far worse for many users like me who would pay a few dollars for a non-adsupported paid version that:

1. Doesn’t break pages I’m trying to load, unable to deal with ajax, flash etc.
2. Slows down the page via two- or three-hop adserving that ends up in an unpaid PUBLIC-SERVICE AD
3. Have some kind of weird tracking/logging of URLs I’ve visiting

Also, I’ve seen lots of PSAs in my time (occupational hazard in looking at a lot of ads and websites for ads) but at least they could be rotating among different ones instead of the very same one. The service doesn’t let me upload a screenshot right now because it clashes with wordpress here. I blocked the ads but still have to redirect through their proxy to get online.

Ouch - looks like the service is called Freefi, and I can’t link to them either because their system (seems to be iframing the page) and breaks the wordpress links javascript as well. Joys! Hopefully these guys can at least get some paying ads up - don’t annoy people and not even profit yourself!

In online display (banner) advertising, over 99% of advertising impressions do not lead to a click. Some percentage of impressions (let’s say 5% in lieu of more rigorous analysis just yet) are probably noticed by user and have some impact on their subsequent behavior. But that still means at least 90-95% of the advertising that is put out there can be judged by the advertiser to be “waste”.

My company, CPM Advisors, is in the business of helping advertisers reduce that waste and find media that will perform for them per their goals. We are usually able to do a very good job in limiting waste through a variety of techniques that i will not expand upon here at length, but encompass choosing the correct sites and types of placements on those sites, turning things off quickly that do not work, aiming for the right user frequency, etc. etc. and doing this in a rapid and coordinated fashion using technology. It is true, however, that some waste is always going to be necessary for the advertiser to be sure they are maximizing their potential to find their target customer.

If everything seems under control, you’re just not going fast enough. - Mario Andretti

Unfortunately there is no perfect information about what users want or are likely to buy. Thus every presentation of a good or service that is put before a consumer is a probabilistic question - what is the likelihood that this person is interested in my service (or, to be more clear - start with - what is the chance this person is going to see my message at all?)? This applies to search keyword purchases too - though there is a lot more “signal” that the user provides about their intentions and state of mind. Many companies make a living by analyzing and exploting the differences between things like someone typing “car insurance plan” and “car insurance plans” - each one may have a very different probability of click and conversion. And so, really the story of advertising is a story about estimated probability of action, and the margin of error of those estimates.

When you slice and dice your campaign - I want to show these different ads with different messages, on different sites, at different times, you cut up the data and you then require more time (and usually, more money) to be able to gather enough data to be able to say something conclusive about performance outside of the margin of error. If you cut things up too many ways too quickly, you lose a lot of signal and are awash in noise.

Don’t get me wrong - we see REAL waste all the time in advertising that we fight against and work to stamp out. Ads that are never seen by a user, or are in a bad place that never gets any clicks  (we literally had one wellknown top-20 site that we discovered never gets any clicks on its ads — never, no exaggeration, and we checked if it was a technical issue and it wasn’t — so our system won’t buy there anymore). There is enough of that inefficiency and waste to be driven out of the system to keep us all busy for a good deal of time, but we won’t be able to get rid of all waste since that will mean we’re not doing our best to find customers for our advertisers.

We now need to apply our minds to thinking about how we can figure out what the “right” amount or an “allowable amount” of waste might be, to set client expectations accordingly and work to build on top of actual performance, meaningful data that can cut down future waste not just for a client in specific but across all companies that advertise online.

OptMD.com serves a LOT of the popunder ads you may see on a variety of sites. Their website allows you to opt out of receiving their pops, which is laudable given the way many popunders have no regard for the wishes of users (even though, they still work for a lot of advertisers). What I found interesting on their opt-out page was the following language beneath:

WARNING: by choosing to opt out you are taking an active position not to support the publishers whose websites you visit and whose content you consume free of charge. In doing so you threaten the long term viability of their operations.

Also, if you were to choose to opt-out, you would see opt-out cookies being placed from a domain called “casalemedia.com” - which of course is one of the big ad networks. It appears they don’t want their name associated with delivering popunders, which is why they use an alternate adserving URL. You won’t find their name anywhere else on the OptMD.com website which is written as if it is a separate company. However, the address given in their privacy policy is the same as that of Casale Media’s LA office. Fun stuff indeed.

I joined Jupiter Communications in 1999. In June 2000, the company was acquired by/merged with Media Metrix to become Jupiter Media Metrix. Later the company would not be allowed to merge with Nielsen//NetRatings, have parts sold off etc. etc. We tend to think of companies as having lives of their own and persisting - in fact in some way or another, Jupiter Communications had existed since 1986. But companies merge, change, and it is rare for one to exist for the length of an average human life. These tend to be some of the largest companies around who have survived, gobbling up lots of other companies as they have grown and evolved.

I found it funny to do a search for Jupiter Media Metrix and be directed to a LinkedIn page about the company, that had a mix of correct historical information and some strange new information about another firm:

J-M Manufacturing Company, Inc. produces plastic pipes, fittings, and tubing products for water, electricity, gas, and communication. It offers polyvinyl chloride and polyethylene products; and PVC pipes, PEX pipes, PE pipes, and PF frames.

Ooops kind of a mess there. Anyway, for large companies there is a survivorship bias naturally. According to this BusinessWeek article from a few years ago, “The average life expectancy of a multinational corporation-Fortune 500 or its equivalent-is between 40 and 50 years.” Those are the most successful companies - other things I’ve seen say average company age expectation in Europe and Japan is 12.5 years, and that I’m sure excludes micro-businesses that disappear before getting onto the radar screen in a formal way.

The notion of what a company is, of what the fundamental aggregated currency should be of human output, creativity and production, is going to change over the coming years immensely. I could easily see loose collections of independent contractors with working relationships fashioned on-the-fly - already it is possible to build businesses like this; so perhaps it is useful to draw the distinction between a business and a company. You don’t need a company, to build a business (and apparently some people try to prove that you don’t need a real business to start a company and raise money!).

Y Combinator’s FAQ page makes for interesting reading too… new ways of funding and supporting businesses, but even this is not different enough to what exists today. For now, the inflexibility of corporate and tax law in most jurisdictions and other bureaucracy is probably what will prevent any innovative new structures from growing and thriving — they still have to fall within the limitations of the current system. But time will lead to changes as it inevitably does.

So the multi-state Mega Millions jackpot will be up to $252 million or so on Wednesday. The odds of winning the jackpot are 1 in 175,711,536. But actually doing the analysis to figure out if it makes sense to buy a ticket needs to also take into account the chance of others winning based on the number of tickets sold for the drawing… here are further details. As they point out, they don’t typically give out the number of tickets sold as a statistic, but given that there were 1.9 million winners in the last drawing of lesser prizes, and it is said there is a 1 in 40 chance of winning, 80-90 million tickets seems fair. Also, if the jackpot went up from $207 million to $252 million expected this time, assuming 50% goes into prizes that’s about 45 x 2 = 90 million tickets ($1 each). So let’s say 90 million, so chances of someone winning are 90,000,000 / 175,711,536 = 51.22%.

Thus calculating the Poisson distribution, and using the cash payout instead of the overall jackpot we get:

W = $159.2 million x ( 1 - e ^(- 0.522)) / (0.522)

W= $124,582,387

So then we look at your expected prize winnings in relation to your chance of winning, which gives you (when you include the chance of winning one of the smaller prizes, which by the other estimate are around $0.20 for every $1 of tickets purchased, we get this:

$124,582,387 / 175,711,536 + 0.20 = 0.70901 + 0.20 = 0.90901 or …

For every $1 ticket you buy at this level, you can expect to make about $0.91 (today).

I have restarted this blog, and will use it both as a testing ground for blogging in general and using Wordpress in particular, and also to play around with and give voice to various ideas clanging around that don’t neatly fit into my day-to-day work at CPM Advisors (though it is quite likely there will be overlap/crossover since it is difficult to maintain any kind of separation mindwise when you are working in an online startup).

My posts will align around my interests in economics and finance especially behavioral economics, mathematics, computer science, psychology and many things inbetween - and I encourage discussion and interaction in the comments section, on twitter and elsewhere!

Long but worthwhile article about the risk meltdown on Wall Street:

All the incentives — profits, compensation, glory, even job security — went in the direction of taking on more and more risk, even if you half suspected it would end badly. After all, it would end badly for everyone else too.

Moral hazard is the prospect that a party insulated from risk may behave differently from the way it would behave if it were fully exposed to the risk. Moral hazard arises because an individual or institution does not bear the full consequences of its actions, and therefore has a tendency to act less carefully than it otherwise would, leaving another party to bear some responsibility for the consequences of those actions. (wikipedia)

I was chatting with Scott Rafer this morning and his observation was, we are not in a cycle, this is a sea change. Everything has changed, and we all need to realize that. It’s not going back to the way it was. Not only in the online advertising world that is my day job, but everywhere ->

There are very few riskless islands in business and life anymore; everything has a profound degree of connection to many other things. Every risk- and leveraged action banks and investors have taken on has a consequence as we have seen, and will unfortunately continue to see. One of the things I’ve started to think a LOT about is the incentives that  each person and company I deal with has in any given context. While we are all connected, we each have a slightly different frame of reference and that shapes how we react to situations.

The point of this ramble - beware of things that look too good to be true. The costs will get parceled out eventually; and the timing and magnitude of that is what might really hurt.