Just a quick note to direct any reader who hasn’t seen it to a great post by Doug Weaver of Upstream Group. Doug’s a sharp guy with a wealth of experience and consistently insightful commentary on the industry, this post being no exception.
Worth a read.
I’m sure by now most readers of this page have already read WSJ’s comprehensive coverage of the ever-increasing privacy concerns with behavioral tracking and targeting earlier this week. Just in case, for those that haven’t, the series is interesting and worth the read. Seems like I was right about those embers still being hot.
I predict it won’t be long before data ownership issues flare as well. A central issue in the privacy discussion is of course a internet user’s ownership rights in data about her usage, so data ownership issues intersect with privacy issues. However, data ownership issues also have much broader ecosystem implications. I introduced this topic on an AdExchanger thread a couple months back and will certainly elaborate as this distinct set of issues moves to the foreground. Watch for fireworks if not outright conflagration here as well over the next couple years.
With all these challenges for behavioral targeting, it’s a good thing there’s another approach that drives fantastic results where it matters: offline sales.
As I work through my current events backlog after coming back to the office, I wanted to call out this press release from Microsoft re: their recent deal with comScore to provide enhanced R/F and audience composition tools for branding-focused media buyers. The release highlights a theme we are passionate about at Brand.net and have mentioned time and again on this page: online advertising lacks brand-friendly metrics and tools, which makes it too difficult for brand buyers to plan and manage campaigns in a manner consistent with the rest of their (primarily offline) spend. These metrics and tools position brand marketers to deliver real business results and are essential in helping brand budgets follow audiences online. Our friends at Microsoft were even kind enough to quote our analysis estimating only 5% of brand budgets have yet made this transition. As today’s Wall Street Journal also observed, this represents a major opportunity for all the players in the space. It’s great to see the online ad industry increasingly recognizing the brand challenge/opportunity and mobilizing to address it!
It’s true that there’s an imbalance between supply and demand, which is putting downward pressure on rates as highlighted in this morning’s WSJ article “Future Shock for Internet Ads?”. However, I think there are some important details missing that would add richness and perspective to this article and other similar ones.
First off, the writer cites PubMatic data at the beginning of the article. I have every confidence that the PubMatic data is accurate for what it is, but articles quoting the data rarely mention that it reflects a very specific sub-segment of the overall online ad market. That is direct response campaigns running on primarily small publishers with poor average content quality (with many exceptions I am sure) and weak/non-existent direct sales channels (likely not many exceptions here). This market sub-segment is the most volatile and most sensitive to changing market conditions so in that sense the trend numbers (48% Y/Y decline in Q4) really represent a “worst case”. The absolute numbers ($0.26 average CPM in Q4) are similarly non-representative; the significant majority of money that was spent in the display market during Q4 was spent at CPMs an order of magnitude higher than that. PubMatic actually makes some attempt to clarify in the text of the report itself, but in general these numbers are too often represented to be a broad barometer of display advertising, which they simply are not.
Two other important points: In general much of the online ad supply that’s being created is not being created in areas that advertisers have figured out how to use yet. Social networking sites and long tail content sites are good examples. The consumer applications are evolving so rapidly that effective ad models are lagging behind, so spend stays concentrated in areas that advertisers understand better.
Finally, in any analysis of supply/demand balance and particularly when CPMs are involved, it’s important to note that there are two distinct high-level market segments in online ads – Direct response and Brand. Across all measured media, Brand spend is 2x DR spend but this dynamic is very different online. Nearly 30% of DR spend is now online, but only 5% of Brand spend is. This imbalance is a big reason why the overall supply/demand balance is out of whack. The author mentions this at the end of the WSJ article I reference above but I think these more specific details help clarify why this is happening.