Getting Out of the Weeds: A How-To Guide for Compliant Cannabis Online Advertising

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Introduction

Host: All right, welcome to the MediaJel podcast. We're going to be talking about programmatic advertising today. We have three gentlemen with us — want to introduce yourselves?

Jake Litke: Sure. I'm Jake Litke, I'm the CEO of MediaJel.

Ted Montanez: I'm Ted Montanez, I'm the director of business development at Smart AdServer.

Stan Longwood: And I'm Stan Longwood, chief digital officer here.

Host: Wonderful, wonderful. Well, let's start from the top — if we forget about you tonight —

Co-Host: I'm the chief evangelist here at MediaJel.

Host: Perfect. All right, and we're going to talk about programmatic advertising. We're just having a little bit of a debate on whether we should call it that, or — what's your thoughts on the subject?

Defining Programmatic and Display

Ted Montanez: Well, tying that into the subject at hand, right, cannabis and programmatic advertising — I think the industry, being cannabis specific, is very much geared towards display. But we were just having a conversation about this a few minutes ago at the table over here, and I personally think, with a lot of the consolidation happening, saturation that really started in California is now starting to migrate west, there's going to be a large emphasis on brands dealing with that, given that brands are really at its core a CPG product. I personally think that it's not just display anymore, it's also video and other forms.

Host: And that's kind of what we're talking about — the words that we use, right. We've worked — I know the three of us have worked at this for a long time — it has its own vernacular, and sometimes people use the same word to mean different things.

Stan Longwood: Right, so we've kind of tried to use "display" as the general category — display, and putting video and native under that — so that we can separate it from search, right, so paid search and organic. So we just lump everything under display. But many people would think of display as just banners, right, that's display, video is not display. And we're already not using the same words in the tech industry, and now we're bringing this to the cannabis industry, which is just going to create further confusion, right.

Ted Montanez: Yeah, I think that's a fair point, and there probably needs to be a little bit more consistency across the board, just in how people are talking about the idea. You know, no longer are the days where you call somebody and you're dropping off reels and tapes and plugging them in and stuff — advertising is now technology, and even television advertising is now bought programmatically. We talk about "programmatic," and then "display" — to mean, in this sense, it's displayed to you, it's visual, but it can be everything, and for somebody outside the industry that's confusing. And then we always have to take it in advertising one step further and make it more complicated — you go to shows and you hear the same buzzwords and topics, and those always give rise to a bunch of different companies.

Host: Yeah, there's viewability, transparency, and then now we have a lot more regulations and buzzwords, and blockchains all around data. Data's important, but for the cannabis industry, that is still in its infancy when it comes to — let's say the more advanced display ads — this topic that we could almost just call "advanced advertising" instead of paid search or social, because for digital —

Ted Montanez: Yeah, because we're including not just video and display — you have in-app, mobile web, desktop — and now we're going to be adding in connected TV and streaming services, and there's going to be a lot of overlap too with esports and gaming and streaming and integrations into that, because we're already seeing programmatic engulf what I guess advertising's traditional brick-and-mortar is — which is digital displays. You know, you can buy a video ad, a digital display, a mobile ad, and they can be rich media, and the next thing, with streaming, we're going to have it in games, I would say.

Video, CTV, and Pricing

Stan Longwood: Right, and that's why it's funny you mentioned display — for us, at least, we have our entire OTT store network, and we actually categorize it as digital and programmatic technically, so that we don't confuse people, even though technically they're both digital display mediums.

Host: Yeah, you've got your display network, and that's running mostly video, right — is there still interstitials that happen at all, or —

Stan Longwood: Yeah, our network can take static and video too. We recommend that people run 15-second, 30-second — there's been a ton of studies over the last two years or so where video really has a higher conversion rate. But a lot of marketers in the cannabis ecosystem just can't afford to make videos, that's another thing we're talking about — we found that, with a lot of the retailers we work with, you get your display network, but we've got publishers on there — like Hulu's not there yet, but you know, like Sony Crackle and some of the other, kind of second-tier CTV channels — but the brand isn't as well known, for the most part, right, because they haven't been aware that they could even get on there.

Host: And connected TV video constantly comes up, and I think it's, one, the price point that scares people, and then, two, it's, "oh, well, I can't run ads on Facebook or Instagram or whatever, the social platforms, the big platforms that everybody's used to, so that means I can't do CTV" — that's just not accurate. And then the pricing — what's the difference in regular versus video? It's a lot more expensive, video ads have a much higher CPM.

Ted Montanez: For — what is CPM, because that's common for us, we know what that means, and many marketers here, but not everyone.

Host: Right, so, CPM is your cost per thousand — "mille" is thousand, not a million.

Stan Longwood: But the question remains, the pricing — for your network, you've got your display network, which is pretty special inventory, so I imagine the CPM is high, right?

Ted Montanez: Yeah, I mean, it's fairly comparable to most digital out-of-home mediums. We're fortunate on that inventory, so we can control the pricing, we own that, so I have flexibility depending on who the partner is, what they're trying to communicate, and what their dedication is going to be to us long term. You know, for us — I'm sure you guys are dealing with this on a daily basis too — we want to create long-term partnerships. It's not about, "hey, we're just going to throw this thing called programmatic, or digital out-of-home, at you, try it, and then never talk again." We want to educate cannabis marketers that this is a tool, or a solution, that they should be using pretty much every day of the year, as support for every other marketing mechanism they've been activating.

How Programmatic Bidding Works

Host: It's the foundation to hit cannabis consumers and — cannatarians, or something similar — and having that always-on approach where you can reach a vast audience, then ultimately, with all of the other things that you have in the market, that's how you create that funnel that's going to ultimately let programmatic work for you. Let's define what part of that is.

Ted Montanez: Yeah, and to your point too, with programmatic, in its simplest form, it's real-time bidding on inventory and location, and there's — it's simple supply and demand, but it's automated, and it happens in real time. All of us can log onto the same website at the same time, and on the market —

Host: Yeah, so, you know, if you ever find yourself at a dinner table, and you have that one aunt that's like, "oh, what do you do" — the easiest way to explain programmatic is: on one end, you would buy shares of a company, and that company, in this case, in programmatic, is a publisher, and you are buying shares of their advertising — you're buying ad location — and on the other end you have advertisers, or a brand, that want to buy and have a need for that. And there's many ways to do it, a little bit different because there's a lot of self-serve now, we've seen the rise of the Robinhoods of the world, but traditionally you would go to a brokerage, you would go to a bank, and they would invest for you — Schwab, Merrill Lynch — and they'd build your portfolio. And in this case, those are advertising agencies, like those financial institutions I named — in programmatic they're named Omnicom, IPG, Publicis, WPP — those old traditional ad houses that have armies of programmatic traders. And you buy shares, you can day trade, but in programmatic, you're buying an impression, so you're buying that ad space, and it can be anything, from video, display, digital out-of-home, advanced TV, audio — all of that now — and you're buying it, and you're in a competition, and it goes to the highest bidder.

Ted Montanez: Now there's some variation in the — the second —

Host: Yeah, let's keep it above —

Ted Montanez: Yeah, let's go to the — and that happens within a millisecond, so that ad call goes out, brand bids on it, and what they're bidding on is a CPM, and that's basically what they feel comfortable paying for that spot. Now there's a floor price, and that's the lowest that publisher will take, and then you can use the "buy it now" —

Host: Right, yes, that is the "buy it now," yeah, if nobody else wants it. There's a lot of people that will buy those, and, where our business gets complicated, where the buzzwords come in, where the congressional hearings and all of this nonsense that have scared people away from real digital programmatic — that comes in, is what happens in between them, and how we value that impression, and that's all data driven, because your inventory might cost a dollar, but the person that's logging on, that you've previewed, is your ideal customer, so you might be willing to pay 20 dollars for them — they've got something in their cart that they just haven't checked out yet, that customer's worth so much more than the other billion impressions that are in the same hour.

Why Hyper-Targeted Cannabis Audiences Cost More

Stan Longwood: Yeah, so basically, advertising now is a large-scale marketplace, and in the cannabis industry, talking about data — I think one of the things to point out, we were talking about price earlier, and video, and how that scares away a lot of cannabis marketers — is, hey, you're buying a very hyper-targeted audience, and until that audience is the massive audience in this country, it's going to be expensive to buy that audience. So that's what you're paying for — you can either go out and blanket-target people that are 21-plus (your fundamental regulation), sure, you may hit your consumer, and you'll probably drive some sales, but what you really want to do is target that cannabis consumer that you know is in a dispensary, that you know made a purchase, that you know checked out a website that aligns with your brand's lifestyle — and that's the audience you should be buying, that's what you're paying for, and that's why it's going to cost twenty dollars if it's video, or eight or nine dollars if it's display.

Host: And although — let's categorize display as a — actually, this is — I was going to wait on this, because you were talking about price, and you're asking a question, "how much is it," and the scale can be whatever — you could spend $100, or spend a million dollars. And I think what many people get hung up on, when you start talking about video or rich media, is there is a differential in the price, right — video could be $20, or, if you're on connected TV, like linear, digital, that could be like $40. But it's priced like that for a reason, right, and I think a lot of people get hung up on CPM pricing versus their budget, because you can spend the same amount of money on either thing, right — is your budget a thousand dollars, is it ten thousand dollars, that's fine. If you're doing something that's a $10 CPM versus $20, you'll have half the impressions, but the value is usually priced — and the market does that, we don't control the price, the market does — and so, connected TV video is four times the cost of very simple display, but you have a 96 percent view rate versus being one ad out of twenty-one on a page.

Ted Montanez: You basically just printed out the "Aunt Carol" speech I understated about earlier — because you'll go to one of these big institutions and they'll say, "yeah, we're going to put it in bonds, or your 401k," and you can either just do that, and have it slowly chug along for 40 years, and you get your portfolio as a pie chart and you're diversified in that, or it's the same thing with your video — if you're spending a million dollars online, you could buy into a mutual fund that's going to return steadily, or you can buy a single, more risky stock. The stuff that's going to be consistent and drive results is much more expensive than maybe taking a gamble on these mass-scalable, cheaper shares that you're buying — penny stocks, if you're buying really cheap inventory. And that goes back to what a lot of them were talking about, your media mix. But I have a question for you too — there's a big difference I'm starting to see in cannabis between the top players and everybody else, and video being expensive — if you're a local dispensary, you know, that's got two drivers, they're delivery, they just want to target locally, they can't do video yet — is there going to become a gap between, let's say, the top five, ten percent of cannabis companies and brands that are investing in video, and they're going to leave everybody behind, because their product is already nationwide, so then they control the video market?

Host: Well, I think that's fair, especially in an industry where there are really only a handful of players that are actually spending enough to make a difference. And this kind of goes into what you were asking about before — what does it actually cost — and at the end of the day, we'll take any budget, we'll give a recommendation, our team is excellent about being transparent, trying to guide buyers through the process. And we tell them, sure, you want to spend a thousand dollars, that's fine, but it's probably not going to move the needle for you — you get a few impressions, you get in front of a few people, maybe one or two people actually recognize your brand. On average, we're seeing brands enter the digital advertising programmatic market at five to ten thousand dollars a month, and they're maybe comfortable spending that for about three months, and if you can't prove out a return on investment in that period of time, they get scared. And then you have everybody else — these few larger brands, the MSOs, a few select brands that aren't owned by an MSO but are distributing — that are comfortable spending six figures, seven figures a year, to really drive that outcome, because they can really afford that type of inventory that's going to move the needle, especially when you're hyper-targeted and building at scale.

Cannabis Ad Inventory Has Grown Fast

Ted Montanez: It has been much less of an issue for us now on display programmatic that we're doing, and that's largely thanks to — I just wanted to get the broad numbers — in general, unless we're in a little tiny market and someone wants to do something hyper-targeted, we don't usually have a problem being able to buy all the impressions that you want.

Host: Yeah, what was the number you gave me — was it like, in the US, about 40 billion?

Ted Montanez: Yeah, probably 40, maybe a little bit more now, but 40 billion monthly ad opportunities for just the — the highest regulatory bar, THC-explicitly-approved cannabis inventory, meaning every single impression that would be bought is going to go through a deal ID connection that says "this is cannabis," and the publisher has been vetted and approved for cannabis.

Host: It's pretty unbelievable, if you think about that, right, 40 billion — I mean, we first met about two years ago, and we were talking about that there was nowhere close to that. It's just amazing how, over two years, the market has come from —

Ted Montanez: Well, a lot of it has grown because we've been doing this for a while now, right, and we've proven that we have good advertisers, we understand brand safety, we understand compliance, and it's a new revenue source, and, you know, publishers have had a couple of bad decades in terms of revenue, right, they've been beaten up by this whole programmatic shift that's happened, and so having a new industry of advertisers — there's a tremendous, once we prove ourselves, that these are safe dollars — and I think the publishers are getting on board quicker.

Host: Very much so, especially maybe not with THC, because there's going to be a lot that can't do that, or it just doesn't fit into their brand, on the CBD side. And a lot of the other products, there's still going to be a lot that are going to do the THC side as that market develops, but they're going to be interested in it — now we're seeing them start to accept it, but we're seeing some start to report back on it and produce content, because it's becoming interesting to them.

Ted Montanez: Yeah, there was an article that just came out in Digiday, which is a very traditional advertising institution, and something about cannabis, and Business Insider too — there's something this morning, I didn't read the article yet, but I saw it. And CNN had something too, about the industry as a whole.

Big-Time Sports and Cannabis Activations

Host: And speaking of big activations, like CBD MD — I mean, I don't know if that makes people healthy — but if you watched the US Open this year, in between the broadcast they had a large, branded video segment with Bubba Watson, and then they had bookended creative, a 30-second, 60-second ad spot, and that was on-air on NBC and the streaming service.

Ted Montanez: Yeah, I think a really good prime example is major league sports, right — this is kind of taking a little bit away from digital advertising, but the Savannah Bananas had their fall event starting in Colorado, it was the first time a major sports league had a — a pillar event tied to cannabis, right around a baseball stadium. It's just a great example of tying into something organically, maybe not necessarily working directly with the league, but they're doing it in Colorado, right around the stadium, basically baseball had to know about it.

Host: Yeah, that's a good example, in my mind, of big-time sports, and that's a thing that's really starting to ease. And the content is really important too, because we do a lot of contextual targeting.

Contextual Targeting Explained

Ted Montanez: Contextual targeting — let's use the words — okay, so, contextual targeting is when you insert ads, or you target media, on a specific topic — the content, whether it's written or visual, is of a certain category, and in our business, our benchmark for categorization is usually given to us by the IAB, and there are two levels.

Host: And what is that?

Ted Montanez: So, it's a traditional internet — there are categories, and when we're talking about bidding on impressions, one of the pieces of data you get as a buyer from a publisher is what category the content is, right. And there are two levels — the first level is very broad, like you have entertainment, lifestyle, news, sports, categories, the majors — and then maybe a sub-category, but that translates to what they're categorizing, it doesn't translate to who the consumer is, because "entertainment" can be celebrity gossip and your Real Housewives watcher, but "entertainment" can also be your comic book nerd who's really into Marvel and DC, and they do not buy the same products. So now contextual advertising gets more granular, adding in AI —

Host: Like Britannica, or an encyclopedia, and it's like, "CBD will make you feel like this" — that's not where you want your ad to be, you want it to be around something that's talking about, if you're Adidas and you're selling a soccer boot, you want to be around Champions League content. But that content — the old way marketers thought about it was, "I want to target the soccer, football site," but there may be someone with a personal blog that normally writes about lasagna, but they wrote something that's about that particular topic that's relevant. And so that's where this targeting comes in — it's similar to AdWords a little bit, in the sense that you're now talking about what the person is looking for, what their engagement is, and it's more detailed than the particular website or category.

Ted Montanez: And this is going to become ever more important, in a world where the IDFA is going away —

Host: Yeah, I think it's the ID for advertisers, in Apple.

Ted Montanez: And then, at the end of next year, the cookie in Google Chrome is going away — the cookie is basically this little piece of code that follows you around from website to website, and historically marketers have used it to place advertisements knowing where you've been online. And with that going away, contextual advertising is going to become extremely — like, you remember Bob Barker, "The Price Is Right" —

Host: Yeah, it's the same thing, that's how they followed it along — but yeah, contextual is kind of the next big thing, and it's a cookieless solution, and personally, my opinion on it, is that it's a call to action back to marketers — to be marketers again, be creative again, and think about where the content is, because content has always been king, or, in this case, "context."

How to Build a Programmatic Campaign

Stan Longwood: What's the process from getting to — building an ad campaign?

Host: I would say that the important part is the beginning, which gets forgotten a lot, which is: what is your marketing goal, and what is the actual campaign? A lot of people think, "I'll have to do an ad campaign," and that means a banner, and hitting certain people, but if you go back in advertising, a campaign is like a whole story you're going to tell consumers about your product. You need to figure out who they are, and you know, in advertising there's something called "shared value," right — there needs to be something that you do with the consumer, where you're giving them something they're interested in, whether that's a brand identity, or education, or whatever, and in exchange — what are you trying to tell, what is the story, and what is the outcome, other than "I want people to buy?" It brings that full circle right back to video that we were talking about earlier, because, especially in this world, that's the clearest narrative for being able to tell your story.

Ted Montanez: Yeah, and that's one thing that comes up a lot at a lot of the cannabis shows I've been at, where perception on cannabis is important, and now, when you come with video, how are you going to deliver that message? And it's ever more important, delivering that message individually.

Host: Well, let's take a quick break, and we'll continue on and talk a little bit more about that. Enjoy this message from our sponsors, Verano and Cookies.

Case Study: A Cannabis Brand Doing It Right

Host: All right, well, continuing on, let's talk a little bit about an actual campaign, and a case study we want to look at — one that's really doing a great job. You know, I don't have to think about what I can and can't say in terms of names, so let's sign these names —

Ted Montanez: Someone is doing a good job, executing things — I'm just going to be biased, because I have a little skin in this game, but Ballistic Industries and their suite of brands — retail's a little bit different, I think it's its own beast — but they had a new "Jetty Varsity" event that just launched last year, they had two hundred grand, two drops of stuff, all different messaging, all different lifestyle segments — obviously everybody knows who Jerry Garcia is — but they do a really good job. They really started with display, but they're spending enough money to be able to make an impact and actually start to see some outcomes, and garner some data and intelligence about who their audience is. I know when I was looking at their end-of-year reporting, which we just got back, I was actually shocked to see some of the data segments that were coming back.

Host: That's the beauty of programmatic, right, that you can get all of these insights and continue to refine who your customer is, target that customer, and learn things that you probably didn't expect. And when you're talking about data segments, are you talking about the targeting side, or the success side, of who's buying?

Ted Montanez: So it's a combination of both, right, in terms of actually using that data. That's a really difficult hurdle to get over for a lot of people in this industry — you have the obvious GDPR, California Consumer Privacy Act, which makes people outside this industry extremely concerned — and I think you guys all agree it took, what, 10, 15 years for most major advertisers to get really comfortable actually using point-of-sale data to better target their consumers, to understand what their consumers are, make various different profiles of who they are, and be able to actually execute on that. And then there are some brands who you could say were either afraid to use that data, or they were sitting on so much of it that they decided to create their own platform — CVS, right?

First-Party Data and Identity Graphs

Host: Yes, and I know, from personal experience, a similar company of their size didn't do a good job about that, because their whole customer care and loyalty program — you had it on your keychain, when you would sign up for that, it was the teller checking you out, "oh, do you want to sign up," and that person was just barely entering in a lot of that information, so they had years and years of fragmented data — maybe they had a phone number and an old AOL email or something, and it wasn't complete. And now they're realizing, because of everything we just mentioned going away, that we're now building identity graphs, and that first-party data is so important.

Ted Montanez: Yeah, first-party data — what does that mean? First-party data is data that is directly — typically in the form of, you can go and acquire that in many different ways, mailers, someone that's coming in, incentivizing them, whatever — but essentially it's typically a person's name, address, birthday, some kind of personal identifier. And you hear the words "personal identifier" and all of a sudden you probably get freaked out — "oh wait, that person has my name, they know where I live, they're targeting me." In the world of advertising — we were talking before about California Consumer Privacy — it's mandatory that any platform like ours has to work with an intermediary, or bring on certain types of technology, to do what's called "hashing," which is basically anonymizing that information so that we can actually use it, and putting it in a group, so that we don't know exactly who that individual is — we don't just want to target you specifically, you're not important to us individually, but you at scale is always important.

Host: It's funny with that, and people don't realize — going back to my "Aunt Carol" speech — it's like, when you're in the bar and you hold your phone up and go, "I see, I told you it was Katy Perry, I knew it," and that's not how they make money, they don't make money off of you not knowing who's singing the song, it's the data. Your phone is paying attention, they have that device, they know your location, they're following you around, building a profile of the type of music you like — it's integrated now into the different streaming music platforms, but yeah, they're not a "cool business" just because you're holding it up and being like, "I told you this was true."

Ted Montanez: Yeah, it's the collection of data, but you have opted into getting that, and that's one of the knocks against Facebook and all this stuff — that when you sign up for something, it's impossible to understand, and that's part of what a lot of legislation says — no, it has to be easy to understand what you're doing with it. And this is what we're doing, and that linkage of — the financial transaction is a very murky business, cannabis is very different because it started with POS data, because of regulations, it started with that — it's actually going to pay off for them in the long run. Bank data, when you sign up for a debit or credit card, you don't see that little disclosure online that says, "we might use it for," you know, if you sign up for a loyalty program, we might use it for marketing purposes. This is something that you know a lot about, yeah.

Host: So it's murky, on the first-party data side. The other thing that happens — and this is dependent on the brand or the retailer — it creates an opportunity to have a one-to-one relationship with the consumer, it's up to the brand to decide how they're going to present the cookie acceptance, or whatever that portion is, but if it's done in a clear way, you can explain what you're doing with the information, and then you have an agreement between the brand and consumer that bypasses all these issues around third-party data and cookies, because that consumer has said, "I like your brand, I want to hear from you" — that's amazing, by the way.

Ted Montanez: Oh man, yeah. Maybe it's a mobile advertiser ID?

Host: Right, so there's a few terms — IDFA, ID for Advertisers, and then there's AAID, Android Advertiser ID — commonly referred to as MAIDs, and these are basically the serial number of your phone. Now Apple has taken a chainsaw to the whole thing, right, we talked about that, we talked about Google and Facebook —

Apple's Privacy Changes and Publisher Inventory

Ted Montanez: Now, even someone who's worked in advertising for a long time, a little thing pops up on my iPhone, "ask app not to track," and the other option, and I just press "no."

Host: I mean, well, now that they got away with it for so long — you'd hit "no," and then your app didn't function the way you wanted it to, so you went back and opted in — which now they're starting to shy away from, which I think is a good thing. But as far as running these campaigns, what are some examples of the publishers — where does the inventory come from?

Ted Montanez: Well, now, I mean, it's a lot — I think the big number is like 45,000 publishers, but many of those are small ones, so it's more like, in the five to ten thousand range, of quality content, and we're at the point now where the larger media companies are accepting cannabis. If you're a company that can demonstrate — I shouldn't say "demonstrate," I mean, once you understand why — then we can now run ads on — and, as a new brand, being able to put your brand right under Rolling Stone or Variety, there's a lot of value to that, right, for consumers, because you're getting validation, and for cannabis it's a seat at the table — like we explained, in programmatic it's a competition, and no matter your value or your customer, there will still be the Procter & Gambles and the Progressives and the Home Depots that come in and outbid, because they pay a ton of money — like we've said before, you get what you pay for — but you still have the same seat at that table as they do, to bid on that media in real time.

Host: That's true, and now that hits home for a brand, understanding, like, okay — I think we should also clarify, one thing about the cannabis industry, we've stepped into this point, is that this has really been a platform that allows buyers to actually control that — so I think the one thing that marketers, especially cannabis marketers, should really understand, is that they can control their buying, they just need to understand what they're getting, and they need to work with platforms that they're choosing to work with effectively. So, you may quote them a seven-dollar eCPM, which is an "estimated" or "effective" CPM — that's it, whatever, you buy that media, but you can also be upfront with your buyer and say, "I want to try and hit that, but if inventory prices are going up, I want a good quality audience, and I want that data, sure, go ahead and give it $15, or whatever that price may be" — don't just go and bid on the seven-dollar-or-less inventory to try and get that effective CPM, because it's crappy inventory, it's not where my audience is. But you can still have that large pool — you want to keep your targeting as open as possible if you're going with a data-driven strategy, because I've seen this a lot, where people say, "we want to go heavy data on this, and here's our whitelist, we only want to run on ESPN and X, Y, Z publishers" — and that might not be where your consumer is, because all of a sudden you might realize, "oh, they read this website too," you learn a lot of interesting things, because we'll run prospecting campaigns across tens of thousands of apps and publishers, in different regions, and there are specific ones that drive sales for cannabis brands, and it's funny, because there are definitely brands that look at that domain-level report and go, "I don't want to be there" — but if the number's above one, that's actually really good, that means your audience is there, so why wouldn't you want to buy that?

Building a Deal With Data Layers

Ted Montanez: And that's one of the things we're really trying to do, and I think you guys are too, is being transparent in that process, really showing people, "hey, these are all the places" — through Smart, one of the big things we came out with is a UI called Smart Buyer Connect — it's a free UI for any buyer who wants to get up there, it's technology built on our ad server, built on our exchange, or a large global exchange, and you can go in and curate these deals. So if you're going to go heavy data, keep the content as broad as possible, to let what you're paying for do its job, or if you want to go the contextual route — what the platform does is, it says, "okay, I want to add in these cities, and I want to buy these formats" — display ad sizes on the page, in these areas — and this is before you add data. You can then see a dropdown of all the publishers in that category, and when we say "publisher," a publisher isn't just one website — like Hearst, some of these bigger companies have hundreds of websites, and most publishers have tons of domains that you'd be surprised the publisher owns — and then you say, "oh yeah, I know that one's different from that one," you can pick and choose those domains, and see what those prices are, because they'll all be different, and that way, if a lot of them are cheap, I'll sprinkle a little data on, and if there's one that's key, like Variety, that comes up, I know it's expensive, but if my audience is there, pay that much, but I'll take the rest of it cheaper.

Host: And when you say "sprinkle some data on," what is that, exactly?

Ted Montanez: That's a data layer that you can add on — behavioral, location — you know, or, like you're ordering on Chipotle, and you're picking and choosing the things you want, that's kind of what you're doing there. Some of the other data you can add in — something we haven't talked about that should be very important to brands — is brand safety, which is a whole other scary side of our business. Compared to Chipotle, you know, "no double meat" is like, "nails, red hair, freckles, left-handed" — so you can add in a lot of these, and, with us, you can see what those prices are, tacked on to what the publisher gets, and if you're on a platform that doesn't show you that, run away, go somewhere else.

Brand Safety and Ad Tech Transparency

Host: That's one of the most frustrating things to me in this industry — when I got started in this industry, just hearing all the horror stories about platforms that were acting like the old AOL-internet-era, carpet-bombing, black-box platforms. That's not okay, you should know how your dollars are being spent, and that's where it's important — viewability, brand safety, transparency.

Ted Montanez: You said "brand safety" — what is brand safety?

Host: Well, underneath cannabis, you have the ad verification side — the ability, the request for transparency — but that's also a for-profit business, so it tacks onto that CPM. That ten-dollar CPM you have, you've got the publisher's cost, the data cost — we kind of call it "ad tech tax" — and there are ways you can audit that and cut out some of those things, by working with more trusted, transparent partners, and once you understand what you're doing more, you'll know what to look for, and that will help save you costs. But brand safety is a different category — when we were talking about semantic and contextual targeting, that's always been important in digital, but the technology around it was built originally to target away from certain content — "I don't want to be on heavily political articles, or news, or I don't want to be near this" — that was a very defensive strategy, and now we're using contextual targeting as an offensive strategy. But for cannabis brands, brand safety is very important, not just verifying the age of the person receiving the ad you're deploying, but it's something every brand should be thinking about in their digital investment strategy — making sure it's built into the platform, and the regulatory aspect should be built in as well.

Ted Montanez: And I'll take it one step further, this is something that's really come up for us — maybe it's the time of year, maybe it's the category — but in addition to just having that layer in there, I've started to recommend that our buyers even go out and partner with a company like DoubleVerify or Integral Ad Science, and wrap their tags, so that we can actually get the domain-level reporting to see where the fraudulent traffic is coming from. And if you have to pay an extra few thousand bucks for it, it's worth it — there are a lot of bad ad tech companies out there that do a lot with pricing, and it's not just about the advertiser, it's the publishers too — we talk so much about cannabis brands, and, you know, we do the brand awards and stuff, but it's also the content, and the next big venture for cannabis is the content that will help drive the identity of the brand — if you're a sports brand, you advertise on sports, that's your content, if that's your nature — so we need more cannabis content, and there's brand safety, there's very strong transparency issues for publishers themselves, who don't have a lot of control — on some of the bigger platforms, their data is sold without their knowledge too, and your data, as an advertiser or a brand, can also be sold the wrong way too. So going out and getting those partners — it's like car insurance, it's health insurance, it's not something you're going to be upset that you paid for, it gives you peace of mind, but it's so important, because it only takes one tweet, it only takes one person — we all heard the story about the father who got upset because Target's ads revealed his daughter was pregnant before he knew — that turned out to be true, it's probably just a legend we all get told to be responsible with data, but, like I said, it only takes one tweet, one person having a problem with your brand, about the content you were on, or how the ad was used to redirect, or something even more malicious, and it can really hurt your brand's perception. And especially with cannabis, where you've got some very serious age-verification issues, right — you can't do household retargeting for cannabis, because you don't know what the household is like, and there's a high likelihood there are kids in the house.

Cannabis, Federal Law, and Mainstream Advertising

Host: Right, so people are afraid to connect with TV — we've talked about doing dynamic ads on advanced TV, that are clickable, that maybe at some point you'd be able to order from a delivery service, if that was the ad, or find where the dispensary was you could go to — but then you realize, what if this is a family's shared point, and the kid is at home and orders — so that's a big concern, and that's adding into why cannabis brands aren't doing as much large-scale television advertising.

Ted Montanez: Especially with legalization where it is, we've obviously made tremendous headway, and there's a ton of new states that just came online — New York, New Jersey, Connecticut, some of the other states in the Midwest — and that's going to obviously help push the needle forward, and those bills going through the House right now, there's actually a Republican bill that just came out, which tells us there's a lot more people on board than we think, but until there's wider federal adoption, it's going to always be an issue, because there's always going to be that federal risk that brands are afraid of, that somebody's going to come along and shut down the next Facebook group.

Host: Well, and it's definitely a double standard — let's just take the legal market, and even take broadcast television, which is FCC-federally regulated — cannabis being terrestrial —

Ted Montanez: But on TV, I mean, there's all kinds of ads for beer, right, fundamentally the same issue, also gambling, DraftKings is all over everything, and every other one, like the most interesting man in the world could have a cannabis product, right, from us probably —

Host: What do you think the Super Bowl would —

Ted Montanez: I know, with some level of certainty, that you can buy some of the networks where the Super Bowl airs programmatically, and they will take cannabis dollars — it's not all the networks, so it's going to depend on what network has the Super Bowl that year — but I do think someone will realize that, and will advertise programmatically during the Super Bowl, and it will probably be one of the big MSOs.

Host: Yeah, and they're doing it — it's not going to be the high-price-ticket in-game spot, it's going to be more some kind of surrounding buy, even if it wasn't necessarily during the game, pre-game, post-game, or halftime.

Ted Montanez: Well, yeah, I mean, we're talking about LA — what also just happened there, with another unregulated-turned-regulated industry, sports betting — Crypto.com Arena, no more Staples Center, no more Bitcoin —

Host: So, yeah, it really is only a matter of time, like the Super Bowl, obviously, advertising, the crown jewel — I wouldn't be completely surprised if it was — given the ties to Jay-Z, how he likes to make a big splash — I know they don't necessarily do a lot of consumer-facing marketing yet, at least we haven't seen that, but it wouldn't shock me.

Gaming, Streaming, and In-Game Advertising

Host: What other innovative ways — so there's, you know, consoles, growing, audio, gaming — Xbox, PlayStation, streaming games — a lot of that is in development. I've always thought the next biggest market is to be able to run programmatic ads in games, like FIFA and Madden — the actual ads in the stadium.

Ted Montanez: And just think about it — you have a Twitch streamer that's sponsored by one of these great cannabis brands, and he's playing the game, and he's streaming the game, and that advertiser's roadblocked, as we said, on that game — behind the net, in the goal — it makes sense with gaming too, right, there's always been a synergy there, it's the most captivated stream, and there's always been a synergy — very similar consumers, for let's just say the largest part of the industry, because I do think the cannabis industry needs to diversify — a good example is like Icy Hot, you have Shaq, that's the ex-athlete, but then you also have the baby boomer generation that would use it, so that's two different audiences on the contextual scale that you're advertising to.

Host: All right, well, let's take another break here, and we'll continue and answer a few more questions.

The Biggest Mistake in Programmatic: Not Giving It a Chance

Host: All right, well, let's continue the conversation on programmatic advertising.

Ted Montanez: I think the biggest mistake I see with programmatic, or digital investment, display — is not giving it a chance, letting the feeling of the unknown overtake its potential. It's something you really have to give a chance, and you have to try multiple things to figure out what works for your brand. So think about it as a way to collect, and do trial and error — come with a hypothesis, put it out there, try it, but if you test with something small, like a thousand dollars, and then say, "I didn't want to do that again, it's too expensive" — I guess the mistake I see is living in fear, from a brand perspective. And one thing I'm most excited for is to see the rise of cannabis content, and that enabling brand identity, and how that intertwines and wraps around other verticals — you know, like the saying goes, "a rising tide lifts all ships," and cannabis content, cannabis brands, wrapping around, like I said, sports, gaming, the fashion, beauty, and cosmetics industry — hopefully that lifts it up, so I'm excited for cannabis content and cannabis brands to build their identity from that.

Stan Longwood: I want to take that problem one step further, it's literally the same thing I was going to say — it's expecting to come in with the number you have in your head, and expecting to get that back within minimal time — before, giving you an example, an advertiser coming in with a thousand dollars, five thousand dollars — I feel like there's a tendency for marketers who haven't done this before to treat digital customers like this anonymous mass, like they're just numbers on a spreadsheet, and I think it's important to have the mindset that that same person you're serving, you should care about the same way you want your retail staff to care about customers, and have that same approach — you're like, "oh, that's the next dollar, something to buy" — but you need to have the same level of care and approach to that experience, even though they're online and you're not talking to them personally, they're still people, and they still care about the same things your retail customers care about. And you have to hit a consumer — there's various studies that say the numbers change a little, but it's pretty much — to drive that conversion, remarket to them, make sure your website is easy to use, make sure you have good content on your website. And at the end of the day, if I could really take $10,000 and get $10,000 back for any of my buyers every time, I wouldn't be sitting in this room right now, I'd have Mark Zuckerberg's job, and I wouldn't be doing this — it's just not how our business works. A lot of things in life — this is a problem we've been trying to solve as marketers forever — it's like when automakers said, "I know half of my advertising is working, I just don't know which half" — we've all been trying, with technology and everything, to solve that equation, how to drive profit and revenue and sales for your company using marketing, what works and what doesn't. And we're closing the gap, there's a lot of ways we can close the gap, but it's never going to be perfect — if you come into it thinking, "I'm going to invest this much, I'm going to get that much out," you should plan, but also plan for the unexpected, and learn more about your consumer, and the media that you're putting out there — test and try things. All of us sitting here running platforms want you to spend money on those platforms, but we don't get anything out of working with the guy who's only going to give us a little bit for a super-heavy-targeted thing — personally, that's not that interesting to us, we're marketers ourselves, we want to work on big, fun campaigns that work for you.

Building Long-Term Brand Equity, Not Just Direct Response

Host: You said this, and I think it's so important — it's not about the equivalent-return thinking, I want to build a long-term relationship, and continue to work with it, because there's a sense of pride in it too, we all became marketers for that reason. And you have to give yourself, and your brand, a chance to grow, and to try, and to test different things, and get your product out there, because McDonald's and Coke have been doing this for years and years, and they still don't have it perfect. I think there's a little bit of a pendulum swing that's happened, from — being blind, where it's hard to understand what's going on, to many people getting used to something more approachable, like Google Ads, where you're going to see a — this is a direct response, we had someone buy something — and we see people getting into digital and only focusing on that part, again forgetting the middle of the buyer's journey, saying, "okay, this one thing is making sales here" — but that's a missed opportunity, because you don't understand that there's a lot of other customers you probably can't count, that are going to require a little more care and attention on a longer timeframe.

Ted Montanez: Right, I know for myself, there's products I've bought from Instagram ads, but it took like six months for me to finally see them enough times, and be in the right mindset, where I'd say, "all right, I'll buy that thing, even though I'm not sure if I need it, but it looks cool" — but we have the same, or similar, ability with the tools today, with programmatic — we can serve video ads and follow consumers around in different contexts, but it requires a longer time, rather than just — that's not how you build brand equity, if you want to become a brand, and eventually a household name.

Host: That's the closest thing — but I've been beating this drum for years, which is, there's no national cannabis brand — we talked about this a little bit, and you brought up one — to me, the only reason people know the brands they know is because they're literally everywhere, and that's why. But outside of those two brands, and we're talking about it because we're in cannabis — if you go to the middle of Manhattan somewhere and stop somebody walking down the street, and you do the same thing on the West Coast, let's say San Diego, an everyday consumer, most of them certainly couldn't name three brands, and even between Northern California and Southern California, that's different, and the people who could name any would probably name two or three different brands — the Venn diagrams wouldn't line up. And on Instagram, it works — you see these stories and ads, but programmatic is, no longer engulfed by all the rest — you're on Instagram, your ads are sent out to people who are similar to the ones that follow you, and a lot of these brands, they don't have a huge following, maybe over 100, 200K, that's a lot, but constantly you cut, and you see them, and it's like, "oh yeah, I see my friends," and it's like that goes there. But it's almost more validating for the consumer when they see that brand on a different medium, somewhere else — "oh yeah, they're getting bigger" — because I myself, I'm in the business to understand, but when I see them, they're still — they haven't taken off yet.

The Always-On Strategy

Host: And leading into my narrative from earlier — it's an always-on approach, it's something that you should always have, to support everything else that you're doing — if you're not doing that, you don't have a well-rounded approach. And I think one of the other difficult things I've seen, in my experience over the last few years, trying to overcome, is working with those smaller buyers who don't have digital experience, and because they can't see it — because they don't fall into that target audience — it's not a billboard, it's not an in-store display, so it doesn't feel real to them because they can't physically see it. And that's not the idea — the idea is, again, an always-on strategy that supports your output, supports the print you're doing, supports the experiential — you need to build an actual brand relationship. We had a number of us — we all had — because, well, we tend to travel and go to conferences, and they're comfortable, and they look fine at the end, in different ways, and it is an amazing opportunity, when people want to build brands in this space, to build real, long-term relationships.

Ted Montanez: Yeah, we had somebody on last night, and there was one other brand, and they got so — into it, they got so passionate, "we helped this woman who was struggling from this," and such a good story — and it's like, okay, great, but that story should be always-on, you want to continue to tell that, and tell more, and keep telling different stories, and continually build what that brand is. But the always-on strategy, taking it to the next step, is speaking to different people at different times and different markets — like Taco Bell has been advertising to stoners forever, but they also advertise their fresh, more sophisticated tacos, for the mom who's like, "oh, I can't," the parent going home thinking, "this is a healthier option" — they're targeted to both, for better or worse, no matter what your product is. Do you guys know the analogy with — there are these injury attorneys in New York, and they had a jingle that played every single day, on every channel in New York City, everybody knew where they were.

Host: Yeah, you can't forget it, and that always-on strategy can mean a lot of different things, but you take that step and say, "okay, I'm going to do this," and you will get return, trust in the process. It takes time — from my perspective, I personally think you're not really trusting the process unless you give it a minimum of 12 months. If it's not working for you after 12 months, okay, then maybe it's the platform or the people you're working with doing something wrong, but you need to be patient — you'll probably start to see some kind of return after three to six months, but for the full 12 months — the first 90 days, you're just figuring out what works, there's tens of thousands of apps, we've found real interesting anomalies we didn't expect, in terms of apps and sites. It's at 12 months when you really have a lot of information, and you can really start to take that data and that insight —

Ted Montanez: And this is taboo too, giving it a year — there'll be a lot of people who won't like this, and I know specific people, but I'm going to call them out — if, after a year, it doesn't work, don't look at us first, don't look at the platform, look at yourself, but don't give up on the process because you've gotten some exposure and the market just decided — for those reasons, we're out, we've seen a lot of good pitches — but, by the way, if it works for pretty much every other brand — CPG, retail, entertainment, political — it's going to work for you. So after a year, if it's not working, then it's probably not the platform, it's probably something with your creative, or your website, or you're not getting clearly communicated to, and getting transparent —

Understanding the Post-Click Experience

Host: We've definitely seen campaigns where two companies, selling a fundamentally similar product, same market, same publishers, one of them getting a lot of sales, and the other one getting basically nothing, and that came down to — even at the top of the funnel, it's just the CTR, one of them was done right, and it wasn't even the post-click — when you get the post-click, where someone is actually in your buying experience, what's the post-click experience like?

Ted Montanez: Yeah, so, I shouldn't even just say "click" — someone clicks or taps on it, and they leave our world and go into that — and what does that world look like, is it Willy Wonka's factory, or is it A Clockwork Orange, like, what are we walking into? We don't have any control over that, but we do help our advertisers, and try to give them advice around having that narrative be continuous — that's the other thing, you don't want to serve someone an ad, and when they click through and go to the post-click experience, if it doesn't relate to what they clicked on, they're going to be disappointed, or offended, and leave.

Host: I like to use the analogy with display advertising — banners are you waving at someone, and you're actually waving at a lot of people, and some of them, maybe one percent if you're lucky, are going to wave back, and then that's where we say, "okay, I'm going to introduce you to the brand" — and then, it's beauty — we can only lose so much, that's right, at least from my perspective, that's why I try to educate my clients: look, we bring you the leads, you have to close them. We give you a second chance with retargeting, and, you know, praying on shopper's guilt — "I should have gotten those pants" — and you looked at them, and that's where you captured — that's the whole market, once they're on your site, that process, that flow, the data you capture, and also what you offer them.

Cannabis Brand Loyalty and First-Party Data

Ted Montanez: Because that's a big concern for cannabis brands — how do you build brand loyalty when you can't offer coupons and discounts, because there are so many different dispensaries your product might be in — it's like trying to wrangle up and put something between the brand and the retailer, there's so much friction.

Host: Yeah, and then the data you're collecting once they're on the site, and they're giving their email address, signing up for discounts or a newsletter, based on the website — that data shouldn't be two different departments, they need to be the exact same, and you need to use that — let's say six months in, you've got all these people who came to the site, all this traffic — analyze that, learn about all those people who came, then go back to the fast-moving marketplace and say, "let me go get the rest of the people who are like that," or a new market. So over that one year, collect all of that, and continually use it, build that stream, continually refine that strategy.

Closing Remarks

Host: Yeah, it's fun, it keeps it interesting. I think we're wrapping up on time here — but has this been the least amount of hosting you've had to do?

Ted Montanez: Yeah, I asked, like, three ad tech geeks a question —

Host: Appreciate it — yeah, cheers.

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