Before you nail me, I absolutely agree that there ARE a lot of great and innovative digital things going on in Canada, which is why I’m happy to take the time to run a non commercial blog like this to showcase some of it. The issue here, as was raised a few times last week through some very prominent channels is if our current level of digital innovation is enough?

As reported by the CBC on Sept 24th, Nikesh Arora, Google’s No. 4 executive, said that Canadian companies aren’t grasping the full potential of the web to grow their businesses. He went further to say

Based on the technological savvy of the market, [Canada] should be in the top quartile.

but we are far from it. Given that Google rarely makes as critical a statement as that of a whole country without some solid empirical evidence (although not necessarily disclosed) we should take this as seriously we would an evaluation from any international economic institution (even if there is an obvious bias with Googles perspective).

Then on Sept 25, the National Post’s Hollie Shaw declared “Slow progress in digital marketing“ siting industry powerhouses such as Quizative’s Adrian Capobianco and Capital C’s Tony Chapman (both candidates for my Canadian Digital Power 20 list in November) whom agreed that market fragmentation, poor ROI modeling methods and unfamiliarity amongst the 30+ marketing decision makers were contributors to the problem. That problem being the significant gap between digital media consumption (estimated to be 30%+ of our time) and advertising money spent on digital marketing (estimated to be less than 12% of all media spending in 2009).

In the early to mid 90′s Canada was well known international for early successes on the internet (I’m sure people are going to send me reminders of whom some of them were). The rapid growth of the independent ISP market, a technology rich k-12 education system as well as an affluent and educated middle class allowed young geeks to start early and fast. The results were evolution of institutions like U of Waterloo and an explosion of Canadian companies that went global with their abilities, services or intellectual properties.

However, over the last two years (even before the economic meltdown began) we’ve seen a slowing down and in some cases regression in our global leadership. In August we saw the contraction of Sympatico, Canada’s largest portal as MSN left it to go alone. Yahoo Canada earlier this year shed half it’s Canadian staff and handed editorial control mostly over to the US operations. Other traditional Canadian portals dodge rumors of being on the ropes and have shown little if any innovation beyond superficial interface clean ups.

Additionally, non media companies seem to be stepping backwards. Over the last year we have seen retail giants such as HBC and Canadian Tire abandon their eCommerce programs, while many others have chosen not to pursue the development of new ecommerce strategies at all. This can only be leaving Canadian business vulnerable to a growing number of international organizations that have taken the chance to restructure their business with eCommerce as the core from which both on and offline revenues can be maximized.

But enough complaining, if you are to believe that there is an issue from my little sample of anecdotal evidence, then the question is what is going wrong and what do we need to do about it? Most people I have spoken to on the issue of getting organizations to be more aggressively digital fall into one or more of three causes; shortage of knowledge, shortage of talent, shortage of financial resources.

Shortage of knowledge is probably the most common issue we see causing digital business initiatives to be stalled, shelved or killed. A lack of solid Canadian market research that leads senior decision makers to believe the results of new digital investments can exceed the current ROI’s from activities that are already in use are rare. Although many organizations have this data at hand most don’t have the tools or skills to materialize it.

The first step is investment in appropriately sized metrics strategies. Far too many businesses invest a disproportionate part of their online budgets on design or user experience and then treat measurement as an afterthought. What little is invested in measurement often stops at the software, leaving analysis and insight as a part time task of unqualified marketing or web staff who don’t have the analytical or mathematical backgrounds.

What we need to do in increase the level of understanding and accesses to information about what can be done with metrics and how effective a tool they can be when implemented properly and analyzed professionally in dramatically increasing ROI, not just for online, but offline as well. More of our industry conferences need to create more robust metrics and analytics workshops with deeper dives into how to choose, plan, implement and resource online measurement strategies

Shortage of Talent has been another issue that has dogged this industry from day one. The challenge facing this industry has been that a vast majority of practitioners are self educated and continuously self educating. This creates a large gap between those who have been around for a while and those just enterning the market. There are really no “softmores” with a solid base who are working their way up to create a continuous ramp of talent to draw from at all levels. Newcomers to the digital industry either have to find a mentor or jump into the deep end and try to swim. The result is a wide range of actual skills levels that are not related to time spent in the industry.

Although organizations such as The IAB, The CMA as well as a few colleges have come a long way over the last few years in providing better training programs, digital media still lacks a national institutional base from which to grow and incubate talent. If digital media is to move to the next level of maturity as an industry, it will need to have an academic base the ensures a standard and consistent base of knowledge for digital media professionals as is created in other industries such as broadcasting, journalism, etc.

Shortage of financial resources falls into two issues; access to money and access to digital transaction services. In the case of access to online transaction services, many small and medium business have complained that the lack of online banking and transaction support from our few major banks has made it very difficult and in some cases prohibitively expensive to develop low cost or new non standard transaction models.

Although several startups have attempted to offer interesting aggregate transaction applications for these companies, they lack the reputation and credibility that is needed in Canada if you want to get people to trust you with their money. What the community wants is a highly accessible and flexible self service platform provided by one or more of the major banks that allows easy of set up for small companies and also has a sophisticated API for developers to create new transaction modes.

Access to money isn’t just an issue facing the digital media industry. Recently there have been a number of concerns raised regarding the condition of the Canadian Venture Capital industry and it’s ability to support Canadian innovation. Gregory Smith, President of the Canadian Venture Capital Association said earlier this year in response to the January 2009 Federal budget

Unfortunately, the budget has failed to address the current shortage of venture capital financing, which presents a significant challenge to near-term job creation and to Canada’s future prosperity in the important knowledge-based economy.Read more

According to the CVCA, venture capital investment and fundraising levels have been declining for years and are now reaching critical lows. In the fourth quarter of 2008, venture capital investment was down 40% from the same period in 2007. Although Digital media is not alone in this shortage, it is one of the few industries that can easy seek funding in other jurisdictions without changing their business models. This results not only in a drain on Canadian ideas, but limits the economic returns back into Canada.

What is needed is not only a revised tax credit and policy program to help investors better mitigate the risks of getting involved in these kinds of ventures, but a program that encourages a more active mentoring participation from these investors.

Back in1968 the Canadian government created the Canadian Film Development Corporation (later to become Telefilm Canada) followed by a growing program of production tax credits through the 70′s that contributed to Canada becoming recognized as a leader in international film and cinema up until this day. What the government should be exploring is the same kind of agency that is mandated to work with the digital industry, investors and leaders to create a unified digital industry in concert for the world stage.

The digital media sector is one of the fastest growing industries in the knowledge economy, expected to reach US$2.2 trillion worldwide in the next five years. Although Ottawa recently invested $10MM in The Corridor for Advancing Canadian Digital Media (CACDM) a regional research and development centre based around Waterloo, the remaining $50MM came from a small group of organizations with vested interests in the region. Relative the the scale of the opportunity this is a good start, but still seems like a drop in the bucket compared to the scale of the opportunity and limited in it’s value to the larger national community.

As a nation with the luxuries of a highly educated and affluent middle class, extraordinary access to internet connectivity, an innovation oriented education system and an almost unlimited access to technological information and resources, there’s no reason we should be lagging behind the world with digital innovation.

If we wish to remain a country that can afford such luxuries, we can not afford to fall behind other countries who have made digital innovation a core principle of their economy and a point of national pride In fact, as our ability to rely on traditional industries fades, we should endeavor to be the worlds “GO TO” nation for digital innovation.

Imagine a world where website publishers never have to deal with digital display advertisers and those advertisers never have to deal with website publishers, where publishers could sell 100% of their display ad inventory and get paid with a single payment once a month. A world where advertisers have the choice to run campaigns on as many sites as they can, but only have to make one payment a month. That world got a lot closer last week with the launch of the DoubleClicks AdExchange a.k.a DAX.

When DoubleClick was acquired by Google back in April 2007 there was a lot of speculation as to what they were going to do with it. DoubleClick was responsible for delivering more than half the third party display ads in the world and Google had developed the largest text ad marketplace in the world, so together they were bound to create something big.

Last week DoubleClick announced the long awaited roll out of it’s new display ad marketplace with some significant implications for the global digital marketing industry. The most significant feature of the network is that it now brings together Ad Sense, Ad Words and anyone with a DoubleClick Ad Server into one network creating the largest digital display ad network in the world.

So if you are a publisher you can now simply release your inventory to the Ad Sense network auction and a pool of highest bidders. You won’t need to worry about trafficking individual orders or collecting individual payments…Google will take care of that for you. However, to ensure control over yields, larger publishers with their own DoubleClick servers will be able to manage how that inventory is released to the network and how it is priced and monetized.

Advertisers will now be able to go to Ad Words and bid on a huge network of available display ads in all shapes and sizes with granular content, geo and demo targeting. Advertisers will be able to access this network via traditional AdWords controls or via their own DFA (Dart for Advertisers) servers if they have them. Using (and paying for) the DFA solution will allow additional reporting and campaign controls above and beyond the free interface…like we didn’t see that one coming.

The biggest impact to the industry will be the end of the ridiculously outdated and inefficient practice of building media plans then sending separate IO’s to each publisher, then hoping that they all traffic your ads properly and then waiting for each site to send incomparable delivery reports back to you. Over time this dramatic reduction in ad sales and operations processes will allow publishers to reduce or even eliminate ad sales, ad operations and ad finance teams. Advertisers will also be able to reduce staff costs as much less time will be needed to handle the administration of campaign booking and reporting.

This will also give rise to new strategies and methodologies for building campaigns and websites. No longer will media plans need to preemptively speculate on the best mix, automatic yield management will execute that for the client based on immediate market conditions. Publishers will have to create more dynamic content programs with a focus on audience composition over volume as well as embed editorial agility allowing content to be developed quickly to meet market demands.

The most interesting new feature that comes with this network is “Real Time Bidding”. This is how DoubleClick describes it:

Real-time bidder. The Ad Exchange has a new real-time bidder feature that allows buyers to use their own data, optimization and ad serving technologies to bid on their desired inventory on an impression-by-impression basis, choosing only the sites, audiences, or particular type of ad space they want to reach.

For those that were just getting the hang of the quantum complicated dynamics of the PPC text auction, figuring out “Real Time Bidding” is going to create a boom of bleeding nose excel sheets. What we can expect is a whole new world of opportunity for math geeks and consultants as the network begins to gain momentum.

What has been curious about the launch is how quietly this roll out has been handled. Likely because neither Google nor DoubleClick need or want immediate attention for what some might see as another monopoly in the making. The dramatic economic and operational benefits will be extremely difficult for publishers and advertisers to ignore, especially the larger older media publishers facing growing fiscal pressure. The depth to which both organizations are entrenched as utilities within the industry almost ensures that the question is not “if” DAX is going to become the industries single ad platform but “when”.

But as all things this large in the digital marketing industry, there’s no threat transition will happen quickly. Ad inventory is the life blood of many online publishers and shifting their ad processes is a slow painful act that is going to depend on the development of a body of testing which verifies consistency, stability and upward monetization before any big publisher trusts anyone with their ads, even Google. At the same time, over a mere 5 years Google has been able to single-handedly create the largest global marketing revenue shift with PPC Text with no track record…so this one should be a piece of cake.

Over the next few weeks (and months) as more information rolls out I’ll be doing a series of articles on DAX and what it means for both publishers and advertisers, especially in the Canadian Marketplace

Last June a little bit of research quietly slipped out from the consulting gurus at  McKinsey& Company with some very bold statements:

“June 2008 McKinsey digital-advertising survey of 340 senior marketing executives around the world shows the breadth of the gap between what’s needed and what’s available. Hobbled by nascent technologies, inconsistent metrics, and a reliance on outdated media models, marketers are failing to tap the digital world’s full power.”

They went further to conclude

“Unless this problem is addressed, the inability to make accurate measurements of digital advertising’s effectiveness across channels and consumer touch points will continue to promote the misallocation of media budgets and to impede the industry’s growth.”

Interesting enough “Attribution” was a hot topic this year both on the AdTech and SES circuits for this very same reason. As marketing budgets have been squeezed many media buyers are being forced to defend each part of their marketing investments as isolated activities. However, without the appropriate means of measuring the complex channels of consumer persuasion, attribution of marketing impact is assigned to the last known contact point. The assumption often is that if someone buys in the store, it must be a result of location targeted marketing, if they buy via telesales it must be the result of media directly promoting the phone number, and so on.

The reality, as we and a fair amount of research know, is far more complicated. A recent B2B survey by Enquiro Research showed that 39.7% of buyers did their research online and bought online, but 26.8% did their research online and then bought offline. Although consumer side research varies by category, the relationship between online engagement and offline sales are very similar. Just because a buyer doesn’t use the internet to buy a product, doesn’t mean the internet didn’t engage them in the product. And if people are starting their engagements online, understanding the impact of that engagement on in store, telephone, and other sales channels is critical.

Unfortunately, most of us that have chosen digital marketing as a profession may have done so partly because we didn’t dig high school math. But times are a changing and the new power tool for killer digital media campaigns isn’t some hot Flash dev plugin…it’s math. Now more than ever true digital strategists and marketers must be masters of the spreadsheet and learn to navigate by numbers for maximum value.

BUT HOW

• STEP 1 – Google Analytics. At the risk of over hyping this product I have to say it can do more than most paid systems can and at a much better price…FREE. Not only can it provide analysis on paid and unpaid sources of traffic, there is an increasing body of tools out there that let you track other activities such as inbound telephone calls using the Google Analytics reports. Granted, it’s not a complete solution, but it’s a start.

• STEP 2 – Attribution Software. There are an emerging class of tools that capture and allocate value to a broader variety of online channels beyond your website, including affiliate, syndicated content, etc. An example of this is Storm Pixel Carrier Pro from DCStorm.

• STEP 3 – Direct Research. Some relationships simply can’t be tracked electronically . What is needed is a little bit of research design to come up with some basic metrics that can be translated into allocation. At the simple end, basic “print and visit” couponing for web only discounts can give you local or limited samples of the relationship between web and in store or on phone sales. At the more comprehensive end you can engage a company such as Dynamic Logic to design a multi channel tracking program.

Regardless of the method, it is increasingly critical that those responsible for online strategies ensure that underlying any and all plans for audience acquisition is a sound methodology of value allocation. Companies that fail to leverage metrics and find the opportunities hidden in between consumer actions will inevitably fall victim to those companies that do.

According to the IAB Canada’s recently published 2008/09 Canadian Online Advertising Revenue Survey internet media spending in Canada increased by 29% from 2007 to 2008 overtaking Radio spending in 2008 by more than $55MM making online media the third largest after television and newspapers.

Although Radio did gain 5% from 2007 to 2008, the lack of accurate accountability and the proliferation of mobile music technologies continue to reduce it’s attractiveness as a media spend option for shrinking marketing budgets burdened with higher expectations.

As media planners start to work on strategies for 2010 spending this fall, many will, or should be asking, is anyone listening to these spots? For the same production price, couldn’t I just create a Youtube clip, or improve my brands SEO situation and get better, measurable results? Once I create content for the web, won’t it last way longer than a 12 week air blitz?

Although much of the media community will be watching what the big newspaper outlets groups do to survive in 2010, it will be the radio networks that have to step up and get creative next year or slowly fade to silence.