Middle Tier
The goal of de-averaging, the subject of another article in this week’s newsletter, is to have marketers create not just the right ad for each person, but the right user funnel for each person. To date, so much of online marketing, even with creating / landing page testing, still takes a one-size fits all approach. It’s an optimized one-size fits all approach but still the same experience for each user. Assuming that marketers, in particular those with distinct customer acquisition goals (a group that includes not just continuity programs, but also the large spenders of travel and retail), can actually start to tailor the message and experience better, does that mean they start to advertise less? In other words, by leveraging the data and technologies now available, do we actually shrink the ad market because people need to spend less to achieve the same if not greater results? Or, does it greatly increase the pie because more people can now enter who couldn’t before? Assuming that the the availability of de -averaging can free up inventory for others not currently marketing (especially in display), it will take lots of time before the potential becomes reality. In the meantime, we are left with an interesting issue with respect to monetization.
Currently in display, we basically have two types of inventory – premium and remnant. Premium inventory generally encompasses that which a site can sell itself for close to the desired amount. Remnant tends to include everything else. Certain types of premium inventory never become remnant. A mid to top-tier publisher for instance won’t run a large overlay if they don’t have a high paying customer behind it. As we talked about when covering the Yahoo flogger slap, for much inventory, the distinction between premium and remnant is a matter of a page refresh. One minute a placement can serve an ad that paid a high price, the next it can serve filler. And, in Yahoo’s eyes, that lack of distinction is a big enough threat in the long-run that they would willingly give up hundreds of millions of dollars annually. If, however, the remnant ads are on par with the premium, then it becomes a moot point. And, that was always the goal of the major ad networks – to provide equivalent ads to publishers and equivalent placement to advertisers. Ad networks were to be the Hotwire or Priceline, catering to an overlapping audience, but it wouldn’t ever interfere with those who had a preference and would pay for it.
Instead of equivalent advertisers, the inventory glut has had all parties scrambling. There are so many impressions and not enough advertisers, that the gap between remnant and premium certainly hasn’t shrunk, and if anything has grown. That should spell opportunity, and there are a couple of different ways that it can be solved. Most of the ways focus on targeting. Google’s AdSense is a great example of remnant advertising that has for many sites become this better remnant. If they make $10 plus CPM on premium and $.50 on remnant, they make $1 to $2 with AdSense. Google has had a distinct advantage thus far in the market because of their advertiser breadth and the targeting that allows them to outperform standard display ad networks. Being generous in the definition, their approach though, isn’t entirely different from two companies that we talked about previously Adblade and Adfusion. Each of those companies takes a single ad placement and makes it available to multiple advertisers. Given the impressions that each of them garners, there is clearly something in the approach. The former, Adblade, operates like Google, in that they have a platform for advertisers, and when users click on an ad, they go directly to the advertiser’s site. The latter, Adfusion, controls the experience, and when a click occurs on the ad, it goes to their site first and then if a second click occurs, it goes to the advertiser.
As we look at the non-traditional companies having success monetizing display, it isn’t just that they focus on a one to many approach of taking one ad unit and monetizing with multiple advertisers. What they have either directly tried to do or benefited from by accident is creating an alternate monetization experience that takes place in the standard monetization unit. That’s where we see so much potential for those in our space, especially those facing challenges of placement. The difference in build out between a single flog and an advertorial content network like ARA Lifestyle is less great than the perception boost. The publishers don’t mind running that, because in addition to being not a visual turn-off, it looks like something designed to be around tomorrow. It looks like its own brand not a mooch off of another. There is so much inventory available for the right method it’s almost unbelievable. The trick for those used to leveraging the advertorial to convert the customer is leveraging it to convert the publisher. Have the ads add some value to the site they run on. The user here is not just the end user but the publisher. If we can gain the publisher support, then they will run something even if it makes slightly less money just knowing that it won’t at least cause any issues. These ads as potential value add content could be that gap between premium advertising and remnant. Someone will figure it out. It might as well be one of us.
