Last week, we covered some of the basics of display advertising, including some basic information on ad formats and creative, and an overview of some of the major concepts in ad serving and ad networks.

This week, we want to cover an exciting new development in the industry: the rise of dynamic display. What is dynamic display? The term refers to technologies which allow ad creative to change in real-time, based on the ad audience. For example, users from different cities could see ads with local, relevant content, embedded within a generic ad template. Or, visitors to an ecommerce site could later be retargeted with ads that dynamically show product content based on what that user viewed.

Dynamic display offers huge advantages compared to static creative. Primarily, ad relevance is a key factor. Showing a user a truly relevant ad will vastly increase click through rate as well as conversion rate, and the overall performance boost afforded by this improved relevance can make dynamic display vastly more efficient than traditional, unchanging ads.

A Dynamic Display Overview

Banner ads have been online since the dawn of the web. In many ways, the banner was first step towards the monetization of the web. However, because they’ve been visible for so long, banners have lost much of their effectiveness. The concept of “banner blindness” has been around for a while, and it basically states that web users looking to perform tasks have learned to ignore banners in favor of text areas, where they automatically assume the relevant content will be.

Average display click-through-rates tend to bear out the banner blindness issue. Stats by Google show that the classic 468*60 banner only captures a 0.07% CTR for images, and an even lower 0.05% for flash.

Dynamic display is poised to solve this problem. Take a quick example from Teracent: in building a display campaign for Travelocity, a combination of retargeting and dynamic display was used to hit surfers with a hyper relevant message.

The example above shows the type of precision dynamic display can offer. For this specific example, CTR was improved by an amazing 651%!

From the example above, we can also take a general understanding of how this type of creative gets built. Much like any display program, some initial creative is generated. However, instead of a fixed image, aspects of the ad are coded to be easily changed. Obviously here the text has been edited to meet the user criteria. But dynamic display isn’t limited to just text – any aspect can be changed.

The travelocity study is an example of retargeting-based dynamic display. This type of advertising can be extremely effective at delivering a message to users who have already been to your website. However, dynamic display isn’t limited to just retargeting. Dynamic display can be done based on general user data as well.

For example, given the IP address of a user, a dynamic ad can automatically adjust to deliver a locally-relevant message. This is a technology that offers amazing power for local-national brands that rely on getting customers into a physical store. Simply taking a generic ad template, and swapping in information about the location of a visitor’s nearest store can drive hugely improved relevance.

Dynamic display can also be adjusted based on contextual signals from websites. As Google describes in their Dynamic Ad Innovations beta test page, someone who manages an ecommerce store can build a generic ad, and leave a space for product information to be pluged in. Then Google can automatically adjust which product is shown based on the content of the publisher website – an outdoor site might display sporting gear, while a mommy blog might display baby clothes. Although the subject of the ad is very different, the changes are all achived from within a single ad template.

The Dynamic Display Landscape

Display in general is a cluttered industry, with hundreds of companies operating within dozens of individual niches. The graphic below, from Terence Kawaja of the IAB, covers a few of the major players within the general display space.
With respect to dynamic display specifically, some of the most significant companies include:

• Teracent. One of the original dynamic display companies, Teracent was founded in 2006 and acquired by Google in 2009. Teracent offers a complete dynamic display package – using a an advertiser’s database, they can take a stock creative and create an unlimited number of creatives. Each dynamic ad is built in real-time, for each impression. Beyond the basics, Teracent also employs sophisticated machine-learning optimization algorithms to determine which dynamic creatives have been most effective.

• Dapper. About a year after Google’s Teracent acquisition, Yahoo followed up by buying Dapper. Dapper has since been rolled into Yahoo’s “Smart Ads” system, which bases dynamic creative  on Yahoo’s impressive amount of user data. Smart Ads can run across the Yahoo network, and offer demographic and interest-based dynamic advertising. An interesting case study shows how this works – an ad for Macy’s was customized based on what Yahoo knows about their users. This is a great example of how DD can leverage user data to improve relevance.

• Tumri / Collective. Tumri, another dynamic display player, was acquired by Collective in July of 2011. Tumri applied the usual dynamic display stack – including collecting large amounts of user data from various sources, and using this data to make real-time dynamic creative matching decisions. We can see some of Tumri’s work in Collective’s “Ensemble” plaftorm, which offers dynamic creative optimization for brand marketers.

• Dotomi / ValueClick. Continuing the acquisition trend, DD firm Dotomi was bought by ValueClick in August of 2011 for $295 million. Dotomi’s focus was on “Personalized Media”, which is essentially detailed, individualized audience targeting. With a platform geared around retargeting, Dotomi is able to guide a consumer through purchase cycles, dynamically presenting the most relevant creative as a user progresses through a pre-defined advertising flow.

• Mediaplex. Mediaplex is a full digital marketing suite, including dynamic messaging. As with the other major competitors, Mediaplex collects user data like past behavior, and geographical location, and combines this information with client databases, to produce dynamic ads. Since Mediaplex offers offers solutions other than just DD, some interesting options open up. For example, they note that, “You can also dynamically pass information from past behavior into the next creative or landing page you serve, including keywords from a previous paid search click.” This sort of creative application of DD is just one example its huge potential to deliver relevant messages based on personal user data.