The Earth Isn't Flat

I was enjoying the cover story in this month’s Fast Company magazine about Facebook when I got to the bottom of page 68, and it read, “Continued on page 92.” I don’t know why magazines still ask readers to work harder to finish what they were enjoying, but I do know the quality of this article was worth this antiquated inconvenience. 

It had been a while since I settled into a magazine expose, so the reward was refreshingly obvious.  This article featured excellent writing, with behind-the-curtain insight supported by sourced facts.  It had a rhythm to it that made my mind dance. It ended leaving me smarter and wanting more.  It seduced me to read another article in this issue: a hysterical piece by Jason Feifer on how brands don’t understand “selfies.”  I giggled out loud as I turned the pages.

Content is not created equal. 

It differs in quality, and that difference can be tied to the person responsible for producing it.  Professionally created content starts with journalists who have skills and expertise non-journalists will never have.  Some journalists do it better than others, but they all do it better than you and me.

When a premium publisher with professional journalists and writers sell ads on an exchange (open or private), what they are really doing is disconnecting the value of their professionally produced content from their ad sales proposition.  The value buyers place on these programmatic ads is tied to data and performance.  Content is eliminated -- or at best, severely diminished -- from the equation.

That’s why CPMs, a reflection of value, are so much lower when ads are bought programmatically versus direct sales, where content quality is incorporated into the sales proposition.  This spread is something like $2 bucks per thousand for an ad sold on an open exchange, versus a $20 CPM for an ad sold directly.  The spread between CPMs for direct buys and private exchange buys are less dramatic, but nonetheless significant.

So let me get this straight.  Online advertisers have a high demand for highly targeted ads, and publishers have limited supply.  That dynamic should mean CPMs for these ads should be higher than ads sold directly, not hundreds of percent lower. 

When I sold ads for Newsweek, we had geographic editions that, on a CPM basis, were materially higher than our national run.  It induced advertisers on the fence to buy us nationally while charging a hefty premium for advertisers who demanded more targeting. 

How is doing the reverse a good idea? How can premium publishers sell a high-demand product at rock bottom prices, while simultaneously diminishing the core value their professional journalists and writers bring to the equation?

When I pose this question of viability to those in this space, I often hear back “this ship has sailed” from the makers of the boats.  Then I immediately think about the Titanic.

There was a time when everyone thought the world was flat.  That’s because when you constantly talk to like-minded people, you’re always right.  Venture-capital-backed technology companies have done an unprecedented job of convincing premium publishers that CPMs for highly valued ad impressions with limited supply should cost less, and that content is almost meaningless as long as you reach the “right person.”

Well, the earth is not flat -- and programmatic doesn’t help premium publishers increase the value of what they sell.  It allows them to collect money without selling, and empowers buyers to purchase high-valued ads at lower prices. 

That could only end badly for premium publishers in this brave new world.

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2 comments about "The Earth Isn't Flat ".
  1. Stephen Mindich from phoenix media group , July 10, 2014 at 5:56 p.m.
    Oh that what you wish for was true - or, I fear, ever even possible. One would like to believe that the quality of content would figure into the value proposition and that marketers would be willing to pay more for that quality as they were once willing to do. But they no longer are because of one simple new reality - there are so many places and ways available through technologically targeted advertising to reach those same people who still do read well reported and written publications, just not necessarily using those publications' sites (or pages). And the inventory available at very low cpm's is nearly endless to buy the same psychographic profiles of those very readers. Given this reality, those quality publishers have little choice but to accept low rates on their sites allowing advertisers the access to their valuable audiences. Assuming this model continues, and despite your assertion that the earth is not flat, it sure seems to be and the result is that there are fewer and fewer of these publications who can continue to employ those profeional writers and editors that you correctly value.
  2. Paula Lynn from Who Else Unlimited , July 10, 2014 at 10:53 p.m.
    MNI sold those geographic full pages. Many advertisers do not have sales or distribution for the entire country which was very true pre internet. Much of that is still true today. Wouldn't have been great for a more local advertiser with a budget for a 1/3 page in Newsweek to buy only in the market (s) they need ? As you know, it is not and was not financially feasible production-wise. Alternatives were and are used with lower CPM's too although budget trumps CPMs. If you need a national buy, it is less expensive and lower CPMs to buy it than the individual markets. B2B pubs have higher rates and higher CPMs than consumer pubs. So who profits from venture capital backed technology companies convincing highly valued space with limited supply to cost less ?