When Less is More

At last week's Jupiter Advertising forum, an audience member asked the panel a question I hear all too often: "What if I get too targeted? Won't I end up selling campaigns that aren't interesting to advertisers?" What he was really asking was "If I give advertisers what they want, won't I make less money?"

Intuitively, he probably knows that giving buyers what they want is much better than trying to force them to buy what they don't want. But there's a mindset in the industry that giving advertisers exactly what they want is a dangerous strategy: The famous quote from Saatchi & Saatchi urges us to abandon this mindset: "If you only give people what they already want, someone else will give them what they never dreamed possible."

The experiences of publishers who have been able to monetize keyword search tells us a great deal about what happens when you give marketers what they want. Recent reports that the demand for keyword search is outstripping supply highlight some important facts about market dynamics:



  • When you give marketers what they want, they demand more of it.
  • As demand grows it will eventually outstrip supply and this will cause prices to rise.
  • Price increases will force advertisers to look for other ways to satisfy their demand.

    Here is a thought experiment which illustrates the point:

    What if keyword ad buyers were forced to bid on just 50 words (or word categories), instead of the thousands they can bid on now? For example, instead of being able to bid on "viral marketing" or "affiliate marketing" or "guerrilla marketing" or "direct marketing," they would all be forced to bid on "marketing." Clearly, the price of "marketing" and the other 49 general search words would be so high that many marketers would not find value in buying them. In essence, everyone loses. Advertisers don't get what they want and sellers end up making less. If buyers can't buy what they want, they pay less. The opposite is also true: if you give buyers what they want, they'll pay more.

    So if it is clear in the search market, why is it unclear for the rest of online advertising? To find the answer, we need to examine the forces that keep publishers from getting "too targeted" and giving advertisers what they want.

    Say an advertiser wants to reach high net worth individuals and they are willing to buy a large reach campaign in a publisher's stock market section. But the publisher also has an income registration variable that has been supplied for 5 percent of her users. Should the publisher down sell the advertiser from the large-reach campaign to a campaign 1/20th the volume? If so, should she ask for 20 times the price?

    Most publishers don't want to face these choices, but let's look a little deeper into the real problem.

    1. Real Targeted Reach
    Publishers are pretty good at selling where their audiences are strong. The problem with the first generation of targeting was that it produced too little reach. If you rely on a registration variable that has only been filled in by 5 percent of your audience, you're sacrificing the other 95 percent. Newer behavioral techniques that go beyond a simple demographic to category- and word-level behaviors are able to produce campaigns with large reach (assuming it is an audience the publisher actually has).

    2. Value Pays
    If an advertiser wants to reach all in-market SUV shoppers, providing a high-composition group of SUV shoppers will deliver greater value. Advertisers will always shift their spend towards the buys that provide them more value. This means that publishers will get more money from the advertiser. It also means the audience in question becomes more scarce (and hence, hold greater value) over time-allowing pricing for that audience to increase.

    3. Price Smart
    Selling a more targeted audience will make a publisher more money if it is correctly priced. But how do you price it? Publishers and advertisers must both place greater value on a more scarce audience than on an audience that isn't in demand. That is what is done with place-based buying.

    The problem occurs when we try to value and price an audience relative to a place. For example, pricing an audience at a 20 percent discount from premium place. This ignores the time-tested media practice of pricing based on scarcity. To pull this off, publishers will need more sophistication in how they price and how they determine scarcity. It will require them to keep track of things like the fact that a tennis audience and a golf audience may have a significant overlap. If one audience is sold out, in essence, so is the other.

    Pricing needs to take this scarcity into account. In addition to bidding for words or differentially pricing places, publishers will eventually differentially price the audiences within their site. (Note: Differential pricing of audiences is pre-mature for many publishers that are new to selling audiences.)

    4. Compete Where You Are Strong
    To apply these principles successfully, publishers can't be selective. If a publisher really doesn't have a lot of what the advertiser needs to meet campaign objectives, selling more of what they don't want isn't really going to help. Publishers must compete where their audience makes them competitive. If they do, they will win in the long run.

    5. Package Wisely
    Finally, giving an advertiser what they want doesn't mean that you can't package your audience. Basic economics teaches us that more sophisticated pricing leads to more revenue because you sell higher-priced inventory to those that can pay more and lower priced inventory to those that can pay less, resulting in more revenue all around. It's also true that more sophisticated packaging leads to more revenue. Buyers understand that sellers need to package and bundle their business. It is true in advertising in general and is also true of targeting.

    With today's behavioral targeting capabilities, publishers can deliver sizeable audiences that are finely targeted. If these audiences are appropriately priced against the value they deliver to advertisers, publishers will make more money and advertisers will keep coming back.

  • Next story loading loading..