Aug
25
“A publisher can and should price their inventory at levels that will meet the market expectations and drive their business model. What they should not do is allow some sort of invisible hand (or should I say hands) to price their inventory against a backdrop of objectives that can and often does change at a moment’s notice. This practice has fundamentally driven pricing down across the web and, perhaps more importantly, changed the success metrics from ones based on “demand creation” to ones driven by “demand fulfillment.” A big part of the problem is this notion of “remnant” ad units. Remnant, as most folks know, has been around for a long time in analogue media. Broadly, it is the idea that certain inventory, because of position or proximity to extinction, is more or less valuable then other units. The airplane industry (filling unsold seats with low fares close to the time of departure to drive revenue yield) helped pioneer the idea, but you also see it with ads in the “back of the book” of magazines or on late-night TV. Until recently, we had seen the growing use of ad networks to “liquidate” the unsold remnant inventory that was result of people spending more and more time online while the ad-dollar migration from offline failed to keep pace. The IAB (where I’m chairman emeritus) and Bain Consulting did a study on this about a year ago that showed a huge increase in the percentage of inventory sold via ad networks on a sample of seven member sites (5% to 30% increase in just one year). What this study also showed, though, was the incredibly low amount of revenue that these impressions garnered as the pricing for inventory sold in this manner was outlandishly low (less than 2% of total ad revenue was generated by these impressions and the pricing from ad networks has fallen even further since this study was done). The fact that we’re relying on methods developed by an industry (the airline business) that has to date not made any money in the aggregate is scary to say the least. Consumers aren’t dumb; They understand that if they wait, they can get lower fares, and, as such, the airlines have been forced to operate on razor-thin margins after spending years educating their consumer base to act in a way that was and is debilitating to those companies’ bottom lines. And media buyers spend a lot more time and energy trying to get great buys for their clients than consumers do shopping for cheaper airline tickets. ”
Publishers Are Killing Web Advertising’s Potential With Misguided Pricing | paidContent
Great article by Jim Spanfeller on ad pricing on the web. I highly recommend reading the whole piece. Not all new information, but very well presented.
