• by Bill Reynolds , October 25, 2007

As the variety of digital advertising opportunities expands inexorably, it's challenging for media strategists like myself to organize online plans in a way that can be effectively managed and understood by my clients. Increasingly, we find ourselves sorting the various online opportunities into buckets: one for search and other PPC activities; another for display advertising on networks; one for direct buys on portals and other individual sites; and maybe a mobile bucket or an online video bucket, etc.

Sometimes the contents of these buckets are discrete, but often there is a tremendous overlap in the actual inventory that is being sold. You can buy advertising on the same sites via individual publishers, through run-of-site (ROS) networks or through behavioral targeting networks, but you may see dramatic differences in price depending on how you buy it.

ROS network inventory is typically available for very low-single-digit CPMs, while some of the individual sites in those networks may be selling directly to advertisers at five, 10 or even 20 times the network price. Although the advertiser gets significantly greater control of where his ads appear when going directly to the publisher, the premium cost is difficult to justify based on projected ROI.

By aggregating huge numbers of sites and tons of inventory, the ad networks have helped drive pricing down to commoditized levels that individual online publishers undoubtedly find too low to support their business models. At the same time, they've put pressure on advertisers to reduce spending on individual sites in favor of increasing the size of other buckets with lower costs.

Must online publishers resign themselves to the commodity CPMs dictated by the network marketplace? Not necessarily. My suggestion is for online publishers to take their cue from their offline counterparts and package inventory in ways that can't be bought through other channels. In addition to being unique, these packages must add value for the advertiser that can justify the premium price.

To maintain their ability to charge premium prices, online publishers should:

Customize the offering to enhance the equity and message of the advertiser. My favorite recent example of this is the home-page takeover of www.superdeluxe.com by the movie "Superbad." Not only was the site a perfect venue to reach the intended target, but the integration of the movie's characters into the site's home page was seamless and only enhanced the user experience.

Reserve the most valuable real estate for advertisers paying the premium pricing. Consider never using the home page for anything but fully integrated, single advertiser buys. If a particular day is not sold, consider not running any advertising on the home page, or use the normal ad spaces for promotion of content elsewhere on the site, or new content "coming soon." Not only will this make that content even more valuable, it will enhance the impact of advertising when it does appear.

Identify ways to offer exclusivity to advertisers. Allow the advertiser to "own" valuable, appropriate content, without intrusion from other advertising. Exclusivity has traditionally carried a significant premium in traditional media; apply that approach to the digital world.

Emphasize these types of programs in sales proposals. Some lower-priced, run-of-site exposures may have to be included to bring the overall cost-efficiency in, but make the custom offering the centerpiece.

Stress the ability and willingness to work this way in sales pitches to prospective advertisers. As these types of programs are executed, publicize and share them with prospects in sales calls and materials.

I admit I don't know much about the economics of online publishing and the bottom-line impact of these types of programs, but I suspect they represent a challenging tradeoff. Withholding prime inventory from the networks may mean forgoing revenue that can't be immediately made up from customized premium packages.

Programs like this will also undoubtedly increase costs, both in selling and operational expenses. But without this kind of effort pressure, pricing will only increase, and the budget allocation for individual sites will get smaller and smaller.

Fortunately, online publishers have a surprising ally in this pursuit: the agency media buyer. It may not seem like it when we are haggling over pricing for a particular buy, but we don't benefit from the commodity approach, either. Of course, we don't want to pay more than absolutely necessary for ANYTHING, but just buying the cheapest CPM offers scant opportunity for us to add value for our clients.

To earn our keep, agencies need to build programs that don't just deliver eyeballs, but truly engage our target prospects. The deep relationships online publishers maintain with their audiences can be of tremendous value. They just need to do a better job of packaging that value so advertisers can justify their premium price.