20 Apr 2013

I want to pay more for your ad inventory! But in return...

Catching up on the last few weeks of craziness. I was at home in San Francisco in time for AdTech recently, walking the floor and looking at all the silliness. To me the valuable part of that show is Innovation Alley where new companies get to showcase what they have. Was very impressed with news companies like Sophia, Whit.li and OnlineMediaDiva, and wish them well after the show. We actually exhibited Chango back in the Alley a few years back with great success, and went on to win the innovation award. Not that I am bragging. Well, a little :)

During the show I was invited to the 'Programmatic Breakfast', hosted by SpotXchange and TubeMogul, all about RTB video inventory. They did a good job with the venue and content, and I will never say no to french toast in a mug! The people in the room were an interesting mix; at my table were several of my own agency clients, all buyers, all theoretically incentivized to want media as cheap as possible. And in contrast were a lot of publishers, all counter-incentivized of course to want inventory to be as expensive as possible.

Perhaps the venue should have included a boxing ring, or a jello-wrestling pit.

During the opening speech by SpotXchange, our host revealed new features for publishers, particularly the addition of geo-specific floor prices for video inventory. I had assumed such a thing was commonplace, but it turns out is actually quite new. During the preamble, they jokingly apologised to the buyers in the room for driving up media prices further.

My thought on this is actually different. I don't mind their tools driving media prices up, as long as the media then represents better value. That value can be determined by placement quality (above the fold, first look, alongside better content etc) or by passing more data in the bid request, that let's us be smarter with our pricing.

Media is dirt cheap today. If you eliminate all the real crap then the average cost of RTB media is $0.80 to $1.00. Most exchange media is being bought by the major retargeting companies, and they typically charge their clients a minimum of $5.00, and can still demonstrate huge ROIs for their clients. With advertisers being screwed that badly, there is plenty of room for media prices to increase.

I would rather see an advertiser pay $2.00 CPM for the media, and work with companies like Chango that charge a margin much less than the others, and the advertiser end up paying under $3.00 all in, rather than the typical $5.00 today (and don't come arguing for CPC and clicks - there is far too much data that shows the click is a con).

In this scenario the publishers win, they get a bit of breathing space and can then invest in better content. In turn the advertiser wins because they then get to place their ads in a higher quality place, which will perform better. In fact the only people that lose are the companies making 80% margins from their clients!

So, SpotXchange should build these tools, and should help publishers generate higher returns - but, in return, publishers need to invest in their product and improve what they have.

1 comment:

Anonymous said...

This is a great post Dax and hopefully can help bridge some of the divides between buy and sell in the RTB world.

By "alongside better content", would you agree that that could mean "pay a premium to be on a premium brand"? Would you agree to a "brand factor" type of model where you would agree to pay a premium over the CPM the conversion model metrics might say to pay, recognizing the upper-funnel brand value?

Would love to hear your thoughts!

Thanks

- Someone also been in industry for around 15 years, mostly on pub-side