Display advertising is at a crossroads. Its core foundation, the publisher, is crumbling. The latest technology advances are little more than band-aids
that invite scrutiny. The channel that once seemed destined to define digital
is latching onto as many operating principles from Search as it can. It might be time to make a deal with the devil.
From my perspective the causality is two fold:
Optimization conflict on the buy side.
Relevance is rarely achieved in a user-controlled medium by anyone except the
So WTF is wrong with this market and can it be fixed?
A major failing of display media is that market participants
are in conflict with one another each optimizing for selfish interests — advertisers
trying to get the most for the least, networks trying to allocate impressions
efficiently, exchanges with bottomless “shares outstanding,” data hawkers
opening trench coats lined with user profiles, while yield optimizers are doing
their best Drew Rosenhaus impersonation.
In the midst of massive fragmentation like this there is
always opportunity. In the case of display the opportunity is for performance
marketing. If you’ve gone one click into NYTimes.com from the homepage to “premium”
content you’ve seen the opportunity. It’s the original business of the web. Arbitration. In many ways despite the inevitable future FTC inquiries into the use of Oprah & Barbara
Walter’s likeness it has a certain model of purity. It's vigorish that you control based on your performance. Game on.
This is only getting bigger. The “brand”
dollar world that display thought it was building is DOA. Sure digital spends will increase but that brand money is going into
building digital assets, not ads. For the “move the needle” spenders online
isn’t going to eat into TV anytime soon while radio and print budgets seem gone forever.
There is another opportunity. Fix the underlying problem
with online advertising. Build advertising as web services. This requires new technology and creation of new market
platforms. So be it. The channel is only sustainable when publishers and advertisers capture an
equitable amount of performance value from the audience and content. This is the only type of market you can have when media is attributable. It is also precisely why Search is so efficient.
As it stands now this value delta between advertisers performance
and publishers revenue is huge and growing. Is the true value what someone will
pay for it or is the value in how it will perform? Of course the answer is both
however this doesn’t work unless there is a meeting close to the middle.
Here’s a back-of-the-napkin equation (understanding some readers will pick at it) to see the media value
6,000,000 Impressions @ a brazenly high $1 CPM = $6,000 (Publishers gets portion of this while ad networks
getting 45-60% margins)
.10 CTR on creative
7% conversion rate (if you want 10% give me a call 😉
= 480 leads @ $40 value per = $19,200 Gross or $13,200 NET (assuming they only sell the lead once).
So I’ll make the case that publishers are getting about 10-20%
of the total value of their audience & content. Even if I’m off by a factor this is not a sustainable model. Worse off, there are not other ad dollars coming in if performance media can’t
keep performing — display’s current catch-22.
I don’t see the new or current buying and technology systems
making things more equitable. In fact from what I have seen already exchanges
are going to drive down media costs even further and become a new haven for
performance advertising at the expense of pubs.
The solution falls on the back of publishers, as it should,
to create new platforms with new revenue models. Pubs need to solve the problem
by removing the fragmentation, leveraging their internal sales teams and owning
the technology. Instead of deals with the devil pubs must recognize that
they alone have the most valuable and constant parts of the media equation, traffic
& data. They need to own it.
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