The Infinitely Complex Online Sale

Too bad selling your online audience isn't as simple as selling, say, a widget. Widget-makers have to answer such basic questions as: Do I sell direct via my Web site? Do I work to get distribution through department stores? Do I trade margin for becoming an exclusive supplier to Wal-Mart? Then, they set the plan in concrete for the next year or five years or beyond.

Compare this to the problems faced by sellers of online media.

Publishers spend millions generating content, designing user experiences, and promoting themselves as the destination of choice when people open up their browsers. In order to pay for the user's hard-earned attention, they sell impressions: the right for third parties to piggyback off their audience in exchange for a revenue model that allows publishers to pay off their investments, keep shareholders happy and employees productive.

Decisions on how to sell our product -- audience -- are infinitely more complex than the widget-maker's.



One question publishers must address is: Who wants to buy my audience directly? Endemic advertisers are the desired mainstay of many publishers. For example, the hypothetical would naturally appeal to American, Continental and JetBlue. The airlines would be willing to pay a premium for an audience that was, by contextual definition, receptive to their message.

Assuming my in-house efforts don't sell out my inventory (or if I want to cheaply pursue other potential buyers) I might turn to arbitrage or rep networks. But because our inventory is infinitely perishable -- we have precisely half a second to decide the best partner to monetize our goods, because pages need to load and the broadband clock is ticking -- we need to decide whom to sell to instantly, and we need to make this choice over and over.

This decision is complex because it requires us to make numerous small judgments millions or billion of times a day.

Some of the factors that go into those decisions include:

Pricing: Who is paying me the most, on an effective cost per thousand basis?

Volume: Even if someone is paying a premium, there is a cost in terms of time and energy to every partner I support. So can they buy at a premium, with sufficient scale to make it worth my while?

Risk: CPM, CPC, CPA? We need to determine whether it's better for a buyer to pay $x per month for the next year, or $2x for the next campaign. Do I lose the former in pursuit of the latter? What market forces, Wall Street concerns, or vendor risk should be factored into the choice?

User experience: Does the buyer's message or messages speak in a relevant way to my hard-earned audience, without offense? Pornography and gambling pay well, but will my users question the implied sponsorship when they see those ads on my site?

Privacy: Are my partners treating my users fairly? Am I at risk of negative consumer feedback, of negative public relations, or even legislation, if my partner does something outside of my control? What if they sell my inventory to yet another wholesaler? When does my responsibility end?

Channel conflict: What happens if an agency knows that it can buy my site directly at $30 CPM -- but then learns that a wholesaler is willing to sell my site at $20?

Information arbitrage: Advertisers are willing to buy directly from me because they know what audience they are getting. If one of my partners provides the same surety - "this is a subscriber @ publisher x" - when on other properties, do I win in the short run but lose in the long?

Technology issues: How do my partners handle inventory management and forecasting? Are discrepancies within reasonable limits?

As the online advertising market continues to grow, the answers to the above questions only become more important; and the reward of good decisions, the cost of bad ones, and the scrutiny around both will continue to increase.

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