Commentary
Buying An Online Ad Is Like Booking An Airline Ticket
- by Maarten Albarda , Featured Contributor, August 24, 2018
It’s an important study, as digital ad pricing is about as clear as mud. I often compare it to how airlines are pricing their seat inventory. On any given flight, two passengers seated right next to each other in the same kind of seat, traveling on the exact same plane to the exact same destination, may have paid a completely different price for that seat. The airline industry is champion of yield management, and its algorithms are masters at “knowing” what price points companies can get away with right up to the minute of departure.
This explains why a ticket between my hometown of Charlotte and Philadelphia can cost two to three times more than a ticket from Charlotte to New York or Los Angeles, both of which are farther away then Philly. And depending on the (time of) day or how long or short in advance I book, the price will differ (and this is before all the add-ons many of us have to buy separately).
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The report authors have also tried to take into consideration some of the middlemen fees, which is kind of like trying to price out your airline ticket with all the additional costs. They peg the cost for middlemen services at around 40%, a number they have taken from sources that include the Association of National Advertisers.
In other words, out of every dollar a marketer spends on digital advertising, on average 40 cents never reaches a consumer due to fees.
Mind you, some of these fees are paid for very useful safeguards, quality measures and other services. But some are just upcharges, like getting an aisle seat at the front of the plane.
The additional fees for middlemen and other services vary year-on-year, which means that even in this trend report, cost comparisons with previous years is a little dangerous. This is probably why the report has an ominous warning on page 8 that states it contains pricing TRENDS and not benchmarks.
Still, the report provides a useful and current update on costs in digital advertising.
The general conclusions are that prices in Q4 of 2017 are higher than those in Q4 of 2016. Surprising? Probably not. Especially since high-quality inventory demand has increased as marketers are savvier about where and when to spend their digital ad dollars. And high-quality supply is a little tighter now that major inventory cleanup operations are underway.
Prices are not up for in-app advertising, which the report states might be due to a more mature market. That might be the case, but I think (from my own experience) it might also be due to marketers discovering less ROI from these types of investment and diverting dollars to newer or (perceived) more impactful platforms such as influencers, stories (Instagram, Facebook, Snapchat) and online video in general.
To that last point: online video is the most expensive form of online advertising as measured by CPM. The prediction is that online video ad cost will continue to rise as demand increases and remains strong.
The question remains, what that price actually is. Perhaps ask your fellow passenger on the right/left?
Very interesting, Maarten. I would add that even if you get a fairly clear idea of what you are buying in digital media half the time when you complete a buy and head for your seat on the plane the plane isn't even there.
O hell. The airport isn't even there. And still, in two decades, I've never so much as clicked on a digital ad by accident, and never will, accidentally or intentionally. They'll tell you I did though, and that I stayed long enough to eat a bag of imaginary peanuts too.
Comparing buying online ads to buying a ticket on an airline is an odd analogy. If you use a booking/travel agent, you pay more for the ticket. Using a third party vendor or a network partner to buy inventory for you is no different - you're paying a fee to have someone do the work for you.
Airline seats are finite - you could argue that online ads are not. There's never a shortage of inventory. There may be a shortage of good inventory, but I've never heard of an online advertiser saying no inventory is available during a time they want to advertise.
If you want to buy all the seats on the plane - you can - and likely at a discount. But some people are going to get good seats and some people are going to get bad seats. If you buy tonnage of online IMPs, you'll get a discount. Some IMPs will be good and others will be completely wasted.
It's simple supply and demand economics. The "digital age" doesn't change that. Do your homework. Roll up your sleeves. Working with publishing partners will yield better results than buying tonnage through networks.
Taking away the finite nature of a particular flight's inventory compared to the infinite nature of a marketer's investment in an "online flight" designed to get that Marketer from Point A, to Point B... I think Maarten's primary point is spot on, and not "odd" at all. Bottom line, in both cases, two people that are investing very different amounts, presumably arrive at the same destination intact.
At least with the former, that intact arrival can be quantified. The passenger that has invested twice as much to reach his destination is thrilled to be safe on the ground, as is the passenger that sat next to him on the flight, and invested 50% less than his seatmate.
Not so much with online investment. A scam, and a sham it seems to this traditional media man. I'm assured that I've "arrived" somewhere in return for my hefty investment, that in some way, somehow, the ball has been moved forward on my marketing objectives. But has there really been forward movement on any objective in the unseen digital blitz? Has anybody really heard the falling of my tree?
The question is not whether I should be concerned about investing twice as much as somebody else for that same "departure/arrival uncertainty." The question is whether or not an appreciable amount of my budget should be gambled away on such "smoke and mirror" uncertainty at all.