Interview | Brian McAndrews of Madrona Venture Group - Part One
Posted on Tue, Jul 06, 2010
We recently asked investor and new board member Brian McAndrews of Madrona Venture Group, a series of questions on the digital media industry, investing and "why Searchandise?" Here's part one of three of the interview.
What trends are you seeing in the digital media space?
Display advertising acting more like search (both cost and performance). While online display advertising has grown tremendously in the last decade, its growth rate and ultimate size have been outstripped by the growth and size of search. And during a downturn search tends to hold or grow its relative position even more. As a result, many players in the display world are looking to search to see what aspects of search can be better leveraged in display. I think there are three key areas where display is working to become more like search.
First, in the area of data. A tremendous amount of the power of search comes from the fact that the consumer's intent is largely declared by their act of searching. Clearly that is of great value to an advertiser. By gathering data that better approximates current intent - for example, by incorporating an anonymous user's recent queries from an e-commerce site - display advertisers can come closer to search in this respect. The rise of data exchanges like BlueKai and Exelate is intended to help address this need.
The second area of historical "search advantage" is creative. Search "creative" has historically been text, which is easy for even the smallest advertiser to create and change. This means a broader number of potential advertisers. Companies like AdReady and Tumri make the real-time assembly of display creative much easier and lower cost. If companies can generate display creative on the fly inexpensively, the ability to better target display ads is significantly enhanced.
Finally, display advertisers are becoming more like search in the area of real-time bidding. Search has allowed advertisers to bid for keywords and calculate their return on investment relatively easily. With the rise of Demand Side Platforms (DSPs) such as MediaMath and Invite to help advertisers interface with ad exchanges, the display advertising world is similarly helping advertisers efficiently access quality inventory at a competitive price.
New local advertising models. Traditional avenues of advertising for local businesses - newspapers, radio, and, to a degree, local television - are struggling, and while there are many new approaches to local advertising, no one has fully cracked the code yet. Large players like Google, Bing and Yahoo are competing for potentially significant stakes in this area. The media that are most challenging newspapers and radio - online content sites, classifieds and online radio - no doubt see great opportunities in local advertising. Daily offer sites like Groupon are driving a great deal of traffic to local businesses. Companies in the location-based arena like Foursquare are still in their early days, but are partnering with some big brands. It will be interesting to see how "real-time" mobile offers will ultimately be. The directories and click-to-call businesses like Whitepages.com and Marchex are also vying for an important seat at the table. The big breakthrough will be when someone can effectively leverage technology to reach out to local businesses broadly without needing a big sales force and feet on the street.
E-retailers want to monetize traffic that doesn't buy online. As any e-retailer knows, the vast majority of visits do not result in a sale. These visitors could be comparison shopping versus a competitor, doing research to buy offline, or browsing and later return to buy. In any case, there is a tremendous missed opportunity if these visitors are not monetized each time they visit. Many retailers are turning to different forms of advertising to solve this problem. Of course, Searchandise Commerce is one way for online retail sites to monetize traffic they otherwise would not. I write next about some of the specific merits of Searchandise Commerce. I also discuss WildTangent in my section on companies to watch. They utilize advertising to monetize the online gaming community better than anyone else in the world.
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Brian McAndrews, Managing Director, Madrona Venture Group
Brian McAndrews joined Madrona as Managing Director in 2009. Prior to joining Madrona, Mr. McAndrews was Senior Vice President at Microsoft Corporation, leading the Advertiser and Publisher Solutions (APS) Group, where his team was responsible for approximately $3 billion in revenue and for building and marketing the Microsoft Advertising Platform. He successfully integrated aQuantive, Microsoft’s largest acquisition ever, into the company to help create APS. Previously, Mr. McAndrews served as CEO of aQuantive Inc., one of the fastest-growing global digital marketing companies in the world. He held executive positions at ABC Sports, ABC Entertainment and ABC Television Network; eventually becoming executive vice president and general manager for ABC Sports. He also served as product manager for General Mills Inc., a leading consumer products manufacturer. Mr. McAndrews earned a bachelor of arts (A.B.) in economics from Harvard University, and graduated from the Stanford Graduate School of Business.