Why media owners are losing out on potential digital ad revenues
8 maart 2013 Plaats een reactie
Media owners are losing control of their data and their ability to command the maximum value for their audiences, and many don’t realise it. The reason? Advertisers and agencies are dropping cookies on publisher sites and taking valuable data, which is changing the way digital advertising is bought and sold.
While digital media has introduced potential new revenue streams from paywalls, subscriptions and online events, publishers all still have significant advertising revenues that they need to retain and grow, increasingly on multiple devices. Multiple device campaigns and fragmented audiences make it easier for advertisers to buy in volume and drive down advertising yields.
Digital media is successfully delivering subscribers and content. Last week the Financial Times reported that digital had overtaken print subscriptions for the first time, and we can see media owners of all flavours refashioning their business models around digital platforms. The UK advertising market was worth more than £12bn last year, according to Zenith Optimedia. Online is already the biggest category of spend and is on track to continue extending its lead at the expense of traditional channels like print.
But the cookies being left on publisher sites by advertisers have opened the door to the ascendance of ad networks, real-time bidding and Algorithm-based or programmatic trading, which is changing the way digital advertising is bought. The industry is being turned on its head so that advertisers are now the ones assigning value to media, where volume and price dictate value rather than audience quality and access. To borrow financial trading desk terminology, the buy side has become the sell side.
It’s a shift in practice that urgently requires a requisite shift in thinking from media owners, or it’s no exaggeration to say that we’ll end up at the behest of advertisers who will build their own networks independently of publishers, drive down value and make business unsustainable for media owners dependent on advertising.
One of the problems is the currency of digital advertising, the CPM, or advertising cost per 1,000 impressions. This encourages advertisers to buy in volume and then expect a huge discount on the CPM. In most media, this volume would command a premium, but ad networks, which aggregate available space from publishers and match them with advertisers, have only exacerbated the trend towards lower yields with publishers using them to fill remnant inventory.
Algorithm-based or programmatic trading has further emphasised the problem, with some agencies predicting that up to 50% of bought media will traded in this way by the end of the year. Now publishers must operate in a world where ad agencies run trading desks that automate the buying and selling of ads and advertisers can bid, often in real time, on ad space largely based on the value that they – rather than the website owner – have assigned to the audience.
Publishers need to respond or yields will become unsustainable. I think the best way forward is for publishers to act as a buyer of their own inventory. As ad agencies increase their programmatic spend, publishers should think about how they can increase their floor prices – perhaps they can extend their audience by buying inventory from other publishers – just like a buyer. It could mean looking at arbitrage – buying in one market, selling in another simultaneously through retargeting campaigns to their known users on other sites and making a good margin on the difference.
This response plays to the strengths of business-to-business publishers, which have smaller highly engaged audiences that advertisers want to reach. B2B media owners have always collected data to help demonstrate and realise this value to their commercial partners. This first-party data can be made richer with data from other sources, and enlightened B2B publishers are already adopting such techniques, building their own private ad exchanges to put the value and commercial control back in their own hands.
I believe the whole media industry can learn from the approach that B2B publishers are taking to the way digital advertising is sold. It means thinking about the audience and how to reach them for the best possible price, across many devices, in a targeted way.
So publishers must think like buyers, look at what third-party cookies are being written onto their sites and have a strategy for removing the undesirable ones. They must work together through private exchanges and networks to deliver value and quality to their advertising partners, and they must make sure that they don’t undervalue their business.