Commentary
Pineapple Express: If You Care About The Display Ad Market, Take A Hit Of This
- by Joe Mandese @mp_joemandese, March 19, 2013
That giant sucking sound you’ve been hearing in the online display advertising marketplace apparently has been coming from where the pineapples grow. No, not Hawaii, but Menlo
Park, CA, where Facebook is headquartered. The reason for the cryptic pineapple reference is that’s the new code word industry insiders use when they want to refer to Facebook’s business
practices, when they are under contractual obligations not to mention the company by name. Actually, “pineapple” became the running joke during the OMMA RTB conference I emceed in San
Francisco Monday, whenever anyone wanted to refer to anything that was somewhat NDAable.The reason I’m using it here is because Facebook appears to be a primary
culprit behind the slowdown in the online display advertising marketplace overall, including the RTB portion of it. Now don’t freak out when I say RTB is “slowing down,” because when
I pointed that out after Brian Monahan’s opening keynote at OMMA RTB, I think some people overreacted to it. Monahan, who is managing partner of the intelligence practice at Interpublic’s
Magna Global unit, was updating a benchmark forecast he made for RTB at OMMA RTB last year, which he took down from his original 2013 growth rate of 40% to 39%. That’s not exactly a market
crash, if you know what I mean.
And from what I could discern, the launch of Facebook’s FBX Exchange has been a major factor in the process, dumping so much high
quality inventory on the market, at what apparently are super cheap rates, that it’s had the effect of ripping a parachute cord on the overall marketplace. While some speakers put FBX’s
CPMs at under $1, those on the FBX, er pineapple panel, said they were actually as low as tens of cents. No wonder the overall online display marketplace has slowed to an 4% rate of expansion,
according to recent data compiled from the major agency holding companies by the Standard Media Index.
Joe Mandese is the Editor in Chief of MediaPost. You can reach Joe at joe@mediapost.com.
I know I am old school but hear me out. Facebook is arguably one of the biggest and most powerful media properties in the world. It has a business model that must be at least 99% dependent on advertising revenue. Electronic and digital advertising inventory has always been a commodity that aligns with the principles of supply and demand. Usually, in this type of marketplace the seller wants to keep tight control over inventory supply in order to control price. I continue to be amazed that huge digital media companies that create inventory on the sell side cannot move fast enough to plug their inventory into machines that give the buy side full transparency into the supply side so that the buyers can arbitrage the CPMs all the way into the floor. I get why this is good for instant growth but I have no idea why this seems like a smart long term strategy for the huge suppliers of ad impressions.