Commentary

Not All Inventory Was Created Equal

by Cory Treffiletti , Featured Contributor, May 2, 2012

We’re heading into a phase of the online ad business that’s clearly based on the concept that not all inventory was created equal. The fervor around the viewable ads issue, coupled with the rapid development of data management platforms (DMP), which make marketers smarter about how they spend their money, leads us to a situation where placement, audience and performance of creative can influence the value of the inventory that’s available. That means changes are in store for the media buying community.

To date, most online ad pricing has been one-dimensional, and tied either to context or a basic set of data parameters, but the issues mentioned above are becoming hot buttons and leading us towards new opportunities. These include dynamic pricing, upfront markets and a changing perception of the landscape for supply and demand of online inventory.

It’s inevitable that there will become a finite supply of premium, higher quality inventory for advertisers as more advertisers become smarter. The potential resolution of the viewable ads issue means more marketers will be competing for a smaller set of inventory whether it be contextual, audience-based –- or, more likely, a combination of both. Conversely, the market for junk inventory will drop. This creates a situation where demand and supply lead to a fluctuating marketplace, more like financial markets. This could lead to realistic upfront markets finally being established in the online space, which have not previously been required. In the past, there was the perception of limitless supply for premium inventory, but that’s simply not the case. The best sites and the best placements are being bought in advance, and that’s going to happen more often.

The other factor that leads to this situation is the increased use of DMPs by marketers. As more marketers become smarter about the ways they spend their money, they could end up competing for the same inventory, or at least similar customers. Right now, the use of a DMP is a competitive advantage for a marketer, but it will become table stakes in the next 12-18 months. Thus, the long tail of media will become more valuable, and the “extra-long” tail will be devalued as more marketers squeeze value out of the top 50% of available inventory online.

The other factor that gets overlooked is performance. If the interaction and engagement rates don’t increase in online ads, then only the most visible, more premium inventory will be considered valuable. The long and extra-long tail of inventory will see no value at all. Regardless of whether inventory is priced on performance or not, you can’t squeeze blood from a stone. If the inventory with poor creative can’t drive performance, then the advertisers will place the blame on the inventory, unfortunately, rather than taking the blame for poor creative, and they’ll focus their dollars on only the topnotch placements and audience. It won’t be fair, but it will be a fact.

So the fact is not all inventory is created equal, and the immediate future for media buying is going to be changing quickly. Upfronts may become a necessity. A futures and secondary spot market may soon become a reality. The perception that there is a finite supply of premium inventory will become commonplace, and prices may indeed begin to increase.

Do you agree?

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2 comments about "Not All Inventory Was Created Equal".

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Patrick Reynolds from Triton Digital, May 2, 2012 at 10:42 a.m.
I think this is correct as far as it goes. If you take the premise that there are no "digital" agencies any longer as all agencies are digital, I think we need to similarly establish that there is more to online ads than display. As you point out, effectiveness is dropping as clutter increases. This happened offline and now is following suit online. But what of audio-based advertising? While admittedly tiny versus display, it usually doesn't compete for attention inside of a cluttered environment. There is no "below the fold" concern. The audio component has the microphone alone. The companion banners provide the same attribution model as display. It's different, for sure, but valuable. In a Upfront I'd like to see the whole spectrum of creative opportunities explored, not just display. I think the degree to which we can "unsilo" Digital is directly correlated to the pace of conversion from traditional to digital models.
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Keith Gooberman from Varick Media Management, May 3, 2012 at 10:43 a.m.

Overall, this is a strong article. Everyone is getting smarter about what they're buying. Different advertisers/trading desks are buying against each other for the same common contextual/data segments. This is starting to drive prices upwards. But we're not that close: supply still far outweighs demand. The pricing on remarketing segments for financial intenders is the one area I've seen a significant lift. This user is pinging the top 5 mutual fund/stock/IRA providers in the country, and then when they strike exchange ad calls, all of these organizations are bidding (high) and driving up prices. This is the most exciting change and indication of a true marketplace I've seen. The difficult thing about the futures of this valuable market, is ultimately these segments are defined, and owned by the different financial powerhouse institutions. And sadly, those guys aren't big on sharing.