Commentary

Gestalt: The New Commodity

Gestalt Chris SchroederWenda Millard, one-time Head of Sales at Yahoo and now president of media for Martha Stewart Living Omnimedia, is not only one of the best advertising executives in the history of interactive media, but one of the most provocative. This spring she gave an important speech to the IAB annual meeting, warning that media companies were selling Web inventory as if they were "pork bellies."

Questioning the rise of the role of ad networks, she expressed concern about "the commoditization of brand inventory" by some networks. At a time when everyone and their mothers seem to want to get in on ad networks, this is a perfect moment to be asking some probing questions.

This is not the first time large and traditional online publishers have questioned ad networks. For years many branded publishers refused to aggressively engage in networks, claiming they wanted to protect their own direct relationships with marketers. Many declared they had their own remnant programs. But the appeal of incremental "found money" became too strong, and they dove in.

Small- and mid-size publishers, unable to build their own sales forces, relied on networks for a large part of their revenue. But they were frustrated by low sell-throughs, as networks strove to make as many of their publishing partners happy as possible. But small- and mid-guys have no choice except to try another network or build a sales force of their own - which is not much of a choice at all.

Then came the diaspora of the long-tail, and all the rules came into question. It was once conventional wisdom that great marketing brands not only had to be on great publishing brands to protect quality, but that such publishing brands ensured better performance.

But all of a sudden audiences were aggregating in highly targeted, highly useful experiences all over the Web - often of their own making. Does a brand that wants to reach young music lovers focus on Disney, or CBS, or People or TMZ or, uh, MySpace?

There was only one way to find out. It meant the rise of ad networks - and not just remnant players of old, but really innovative, blog-savvy, highly numerate folks like AdBrite.

So the question of whether ad networks are forcing commoditization of advertising is, in some respects, shooting the messenger who's trying to address the consumer diaspora. Tools and capabilities that bring efficiency, reach and price protection simply answer to that reality.

The real issue in my mind is how to disaggregate what exactly is being commoditized. I believe that the ability to aggregate sizable quality audiences in one, trusted destination is not a commodity - but the ability to find them can be. I believe that the ability to come up with truly innovative ad products and services is not a commodity - but the ability to place them can be. And both are of great value to the marketer.

Marketers care about brand and trust, but in the end these are means to find quality - and qualified - audiences to meet a client's needs. Search grew to half of interactive ad spending because, in the end, it got the right message in front of the right audience at the right time - and, most important, it performed. And it performs not only because it is contextually relevant, but because companies like Google are building better and better analytic capabilities to significantly ensure marketing messages are positioned to best convert on the fly.

I have argued in this column and elsewhere that the groups that most efficiently find quality and qualified audiences, and place great creative in front of them, are on the right side of history. Make the tools progressively easier for marketers to directly find and place ads before quality audiences, and find or trade inventory on the fly to maximize sell-through for publishers, and there will be a revolution in how we all think about and execute ad spends. This is certainly what I think Google/DoubleClick could be. This is what start-up ad exchanges like Mark Kahn's Traffiq (which I advise) are trying to develop.

I worked in the commodities-futures business for a time. These markets were not about commoditizing pork bellies - already commodities by definition - but about making the buying and selling of them more efficient, and hedging the future risk in price fluctuations. How could that be bad for marketers and publishers?

Christopher M. Schroeder is CEO and president of The HealthCentral Network. (schroeder@thcn.com)

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