For Online Ad Industry, It's Time To Stop Being Nostalgic
Time is flying. I’m sure you’ve already heard it at least a dozen times since you returned to your office last week: “It can’t be 2013 already, can it?” We seem to be living in an age of increasing -- and often overbearing -- nostalgia. I’d even argue that nostalgia can become debilitating. And in the case of the online advertising business, dangerous.
One of the biggest mistakes in business is the tendency for decision-makers to look back on the glory days of their respective industry and wonder: “How can we replicate that? How can we get back there?”
This is a question that wastes massive amounts of money. It can cost companies billions of dollars in lost opportunities, and ultimately, their ability to exist altogether. If you hear an executive say, “how can we get back to the time when things were better?” you know he/she is looking in the rearview mirror. It’s kind of like the way most of Congress longs for the U.S. economy before the 2008 recession. Or the way some baby boomers yearn for the perceived morality of 50 years ago. In these instances, their primary achievements seem to be wasting time and stalling progress.
What we can never see in the rearview mirror, across all industries and examples like the aforementioned, is how much better the future can be than the past ever was. Let’s address something that seems to come up every day in the rapidly changing world of digital advertising: the fears of publishers about the threats to their sales forces.
Here’s what we (ad tech companies) often hear: “My CPMs used to be higher.” Or, “I made bigger margins back then than I do today.” Or, “I feel like my inventory isn’t being valued as the unique brand-enriching entity that it is.”
The next step in this routine is to blame exchanges for commoditizing everything and thus attacking the strength and power of publishers. Publishers want their sales staff to have the upper hand, and to be able to do all the schmoozing and wheeling and dealing that is within their authority. What they don’t realize now is that the best way to get more demand and to institute a fight over their inventory (and in turn, obtain higher CPMs), is to get more people bidding on their inventory.
If publishers make peace with the fact that exchanges are here to stay, then they can make peace with RTB as well. Once they do, they can see how their CPMs will remain competitive and even go higher. Trading on exchanges is a little bit like a stock going public. The whole purpose in going public is to get access to demand that you could never get otherwise. It’s the same in RTB.
Smaller advertisers in small U.S. cities know exactly who they want to target and will bid accordingly. There are millions of advertisers like this. And the sales forces at most premium publishers would never have called on them directly. Demand from exchanges represents the only path most publishers have to this demand.
Because a good market decreases the friction in transactions and increases demand, as the number of advertisers in RTB increases, a publisher is going to: 1) like the bid it sees; 2) like the fact that even a small advertiser is expressing this much tenacity in trying to obtain its inventory.
What’s the alternative for a publisher? If publishers try to dig in their heels and bypass the need to play on exchanges, don’t be surprised when you hear advertisers say: “That’s okay. We’ll try someone else. There’s almost no single publisher that’s a must have on my media plan.”
To answer the question “What’s the best way to monetize ad inventory?” -- let’s look in front of us, not in the rearview mirror.