Differentiation Creates Value

If column inches and growth rates are any indication, 2012 will go down as the Year of Real-Time Bidding (RTB). Truth is, RTB is great for buyers who want to efficiently acquire cheap audiences at scale. However, by its very nature, RTB shoehorns everyone's inventory into the same mold so that algorithms will have consistent data for decision-making. 

The problem is that this one-size-fits-all approach actually fits nobody and is the first step in a race to the bottom for CPMs. When buyers are confronted with a flood of inventory that all looks pretty much the same, they will naturally buy the cheapest. This is a disaster for premium publishers, who have invested tremendous resources to build high-quality content and audiences, but get dumped in with everyone else on a public exchange. It's a zero-sum game. When marketers win by finding an audience for less, publishers lose.

So how can we create the proverbial win-win scenario? Well, one thing to remember is that publishers are masters at attracting and retaining audience attention. This is the very reason advertisers need them, as they’ve learned when their own publishing efforts generally fall flat.  When there are experts available, why not use them to help accomplish your goals?  Agencies seem to have lost sight of that in their quest for reduced prices. 

So the answer becomes back to basics: Publishers and marketers need to work together, to create more value for both. Publishers know their audiences best, and can craft packages and placements that are more valuable than a few cherry-picked impressions.  Publishers can take advantage of first-party data, both implicit and explicit, that would never be available on an ad exchange.  And publishers can guarantee access to scarce inventory, ensuring that buyers don't lose out to higher bidders. Marketers get higher-quality audiences, and publishers get higher CPMs. Win-win.

The challenge to the digital advertising ecosystem over the next few years will be how to preserve publisher value creation while keeping the good parts of RTB -- efficiency and audience segmentation -- alive and well.

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1 comment about "Differentiation Creates Value ".
  1. Will Beamen from Big Media , February 1, 2013 at 12:28 a.m.
    tom, you are sidestepping the real issues...come on...have some guts and tell everyone what you really know. Prices go to zero soon because the exchanges are purveyors of non-viewable impressions that (in some cases) make up ~50% of an exchanges inventory. We are still targeting actual users with real data against them but the ad is never viewed...however, doubleclick counts the conversion if the user converts (even if the ad is not viewed). ...the basis for most liquidity in exchanges, DSPs and SSP;s (like Yieldex)... I believe that RTB has a huge slowdown in 2013/14 because although the concept makes sense, we have reached the wrong end of the pendulum and marketers will start to realize that the dharma initiative (known as search, doubleclick conversion attribution and RTB) is a mirage and their businesses are not actually any better off than before RTB. Again, RTB does make sense as a concept but it is a house of cards atop the current models around inventory, data and conversion attribution.