How To Make Online Advertising Easier To Buy And Sell
This has to get simpler; we can all agree on that. Where opinions fracture is on "the how" causing the market to limp behind its potential. I have a remedy for the leaders buying and selling online inventory to consider -- a solution so simple I can share it over a cup of coffee.
Walk into Starbucks in New York City, order a tall coffee, and you are charged $1.75 (plus tax). You pay, then step aside to receive your cup containing 12 ounces of liquid, and the next person steps up in line.
What if this simple process of purchasing coffee included an incremental step of weighing the coffee after you received it to verify you were given a full 12 ounces before you hand over your $1.75 or $0.14583 per ounce? If it weighs in at a minimum of 12 ounces on a contractually agreed-upon scale, you pay your $1.75 plus a serving tax. If the amount were 11 ounces instead of the 12 ounces, you were verbally invoiced for, you would go back to the cash register and pay $1.60 instead. Now factor an additional variable on the cost based on the richness of each ounce, and you can see how this extra step at your local Starbucks would cause a line of people to spill onto the sidewalk and frustration to brew behind the counter.
Online's indigestion comes from reconciling the differences in what publishers book at their cash register versus what advertisers end up forking over. Help alleviate this pressure without jeopardizing the value of the inventory, and the entire industry will feel less bloated.
The culprit is the number of line items that make up an online buy. Instead of one cost for the entire buy, each line item is treated like a separate purchase, with a separate cost and impression delivery goal. Multiple line-item pricing for one campaign practically ensures a discrepancy between total dollars booked versus the amount billed and paid.
Say what you want about print advertising, but the effort required to resolve billing discrepancies is a breeze compared to online. In print advertising, a magazine's rate base acts like 12 ounces of coffee. You pay for your ad and move to the side. If you feel your cup was light or the blend was weak, you vote with your feet and buy coffee elsewhere next time -- but you can't renegotiate the price you contracted to pay for the cup in your hand.
So how can online advertising create a cup of 12 ounces to sell, instead of selling on a per-ounce basis, and still serve up great-tasting coffee?
Individual line items (not just sponsorships) all become estimates -- and publishers are only responsible for meeting the total impression goal of the buy to earn the entire budget booked.
So if I sold you ten million impressions with five line items, each line item may have various impression estimates with estimated CPMs and budget allocations, but as long as I deliver a total of ten million impressions, I can bill you the amount I booked. If my total delivery misses by 5%, for example, I would bill you 5% less.
This simplified process would greatly diminish discrepancies, causing those in accounting to cheer, buyers to leave work earlier, and sellers to be more accurate in delivering revenue booked. The growing angst you might feel with this oversimplified approach to billing reconciliation is that it opens the door for publishers to behave poorly (publishers could over deliver their ROS inventory and under deliver the "good stuff," and still get paid). I think the opposite will occur, however. This approach will force publishers to behave better, not worse.
Think about print advertising again. Buy a PG4C in a magazine, and you are going to pay your contracted rate regardless if the magazine hits its rate base. So why don't magazines skimp on their circulation delivery? Because that's how buyers judge them. If a magazine misses rate base, that magazine won't land on future plans.
In online, buyers would judge sites based on their consistency in hitting and exceeding their promised estimates. Fail to deliver, and those sites will invariably fail to make the next plan, putting greater pressure on publishers to compete based on better behavior.
Billing is the plumbing of any industry, and ours has been blocked-up for years. Oversimplifying how buyers pay publishers will make buying online easier for everyone. Everyone agrees we need to do something, so why not this?