Burst Media CEO: Will Google + DoubleClick Fit?

Now that the pairing of online advertising industry giants DoubleClick and Google is receiving extra regulatory attention, both in the US and abroad, the question arises once again: Does a merger of two giants lead to the creation of a single behemoth that can carve out a lion's share of the Web audience for itself? One of DoubleClick's long-time competitors - Burst Media CEO Jarvis Coffin - believes it won't.

In an interview for BetaNews a few weeks ago, Coffin espoused the merger, as well as the Yahoo + Right Media deal reached later, as smart and sensible, creating new efficiencies rather than lumping together databases or audiences.

Last week, in the first part of our interview, he pointed to one of the key reasons he sees for these companies coming together: a shift in the underlying dynamics of the Web, away from colossal portals and toward audience distribution to smaller, more specialized sites.

Now in Part 2, Coffin presents the counter-argument to that of Microsoft and others, who say lumping giants together is bad for both the advertising and online publishing industries.

SCOTT FULTON, BetaNews: You mentioned the fact that these companies are looking for efficiencies, especially in Google's case, they're quite capable and proven themselves quite adept in being able to generate and create efficiencies. So I'm wondering, with 99% of ad dollars spent on the Top 10 properties, why it thus becomes necessary to whittle that number down, and make 99% spent on the top eight properties. Why couldn't it be possible for Google to simply continue its quest, from a technological standpoint, to find efficiencies where efficiencies were not there before?

Burst Media CEO Jarvis Coffin

JARVIS COFFIN, CEO, Burst Media: Well, that's what it's doing. To be clear, 99% of all ad dollars on the Top 10 Web properties is unsustainable. So what they're coming to terms with is, if you've got X number of elephants balancing on the head of a pin, and you're going to double the number of elephants on that same pin, it isn't going to work. Not without just absolutely corrupting the environment.

So Google could build it, or they could buy it. And they bought DoubleClick, which has one of the world's finest display advertising systems - and I'm making a distinction between what Google has, which is the ability to manage and distribute lots of those paid search boxes all over the place, which have multiple text links in them, and DoubleClick's display business, display advertising technology, which allows them to use things like Flash and rich media and EyeBlaster and PointRoll, and be able to scale that on an equal basis across tens of thousands of Web sites.

That's the same thing that Yahoo did with Right Media, more or less. Right Media operates its Yield Manager technology platform, its Exchange, wherein it can manage, manipulate, serve lots and lots of advertisements across lots and lots of Web sites, and it can do it very efficiently. Yahoo has its Yahoo Partner Network; Yahoo also has countless pages inside the Yahoo family of Web properties, countless pages that go begging. All these guys do a very nice job selling the top 10%, 20% of their inventory, but when you get down into the n-th page, you've chased half a dozen links, there's no more advertising on those pages.

So what do you do with it; how do you monetize all of that excess inventory? Again, these guys are thinking in terms of, how do we start to scale our business, how do we start to exploit all of this inventory, how do we position ourselves to be able to accommodate the growth in ad dollars?

SCOTT FULTON: You mentioned earlier the fact that consumers have the tendency to want to push back against advertising; and I've always believed that the reason for that is because they push back against what, to them, appears to be relevance. The more relevant advertising becomes to them, the more the message comes through and meets the eyeballs that matter, the less they're going to resist that.

JARVIS COFFIN: You're absolutely right, and it has never been otherwise in the business of advertising.

SCOTT FULTON: I would think, based on the vision you've given me, you would seem to suggest that it would be better off for Yahoo going forward to concentrate on the breadth of its network, and the fact that its thousands upon thousands of individual sites reach specific classified types of individuals, rather than building up some great, peak portal that reaches two billion users with news on Silverlight, Paris Hilton, and dog grooming.

JARVIS COFFIN: These are the prejudices and biases built up over a couple of generations, that need to come unwound. And they are coming unwound, and Google's acquisition of DoubleClick, I think, will contribute to that starting to unwind at a bit of a faster rate, and indeed, it wasn't ten days later that Yahoo bought Right Media, and shortly thereafter that Microsoft and Yahoo started to tempt the marketplace with what that transaction would look like. But that transaction failed...I would certainly say that, if it doesn't happen, it didn't happen for the right reasons. Which was again, combining those two is of no incremental value to a distributed media universe. That's just two people trying to get bigger, and what's that going to do? Nothing for them long-term. They don't have the tools each other needs to scale their businesses as Google has just done with DoubleClick, or Yahoo's just done with Right Media.

SCOTT FULTON: If this were a broadcast industry, it might make sense to say, "Here are two networks coming together, they're joining their O&O [owned and operated] stations, they now have a combined audience reach of so many million viewers, which makes them more powerful, they're putting their schedules together."

Here, [with Microsoft and Yahoo] we would have two mega-corporations which don't see eye to toe, let alone eye to eye, and here they would be in a best-case scenario, joining just their Web services divisions in order to create the appearance of an amalgamated institution, to put itself higher up on the ladder of those Top 10, in an industry in which it doesn't matter to be higher or lower on the ladder because the end goal is not the ladder but where it leads. Hopefully, where it leads is the connection with the customer.

JARVIS COFFIN: You got it. In the short term, certainly Microsoft plus Yahoo would create more capacity for advertising, but at the end of the day, it will still run dry. They will still fail to be able to scale...You can't do that too many times. How many times in a row can you do that and hope to compete with a marketplace that sees...40,000 [or so] blogs per day? The virility, the organic power of the Internet marketplace, trumps even Yahoo and Microsoft, and they're figuring that out.

SCOTT FULTON: They're hopefully figuring out that the power of this type of network is the ability to reach a dozen people, but exactly the dozen you want.

JARVIS COFFIN: Right. Now, having said that, there are two media planning principles in the business of advertising that can't get trampled on. One is reach, and one is frequency. So the fact that you can reach twelve left-handed Canadian carpenters is terrific. And I'll sell one hammer to that group out of 12, and that doesn't make it worth my time.

To put that into a broader, more genuine context, Procter & Gamble has to move probably 500 million cases of Tide detergent this year. They do business by train carloads, so the fact that Procter & Gamble can reach the dozen conscientious consumers whom they know want their product, doesn't help them unless there's enough scale, unless there's enough reach.

SCOTT FULTON: We hear a lot about trying to create relevancy to bring an advertiser closer to their customer. When the advertiser is, in this case, Pepsi-Cola, you can't hardly imagine a person putting in his user profile, "And oh, by the way, I like sweeter tasting soft drinks."

JARVIS COFFIN: But you know this as well as I do, right? Trust me, Pepsi-Cola has those brand profiles, they have consumer profiles for each of their products, and there's not just one kind of Pepsi any more. There are dozens of kinds of Pepsi...The whole economy has become increasingly segmented and customized and personalized over the 25 years that I've been in the marketing/advertising business. And so has media.

The great irony of the industry, however, is that media buying still hasn't quite caught up with that yet, that we're still 49% invested in broadcast television. Part of that is just because advertisers are not in the business of taking risks. They're not running high-growth companies. TV still does reach a lot of people...

So all of this is to say that the Google model and the Yahoo model - and my model, for that matter, the Burst Network - our vision of the marketplace is [that] advertisers can come here, they can say, "What'dya got in left-handed Canadian carpenters?" and we can say, "We've got these 52 Web sites that are going to do a fine job," and in an aggregate, it'll get the kind of reach that you need against that audience. And they go, "Great, perfect, where do I send the order?" And they have to do it once, and they get one bill, and everyone goes home happy. That's the theory.

Next: A better understanding of consumer sentiment?