Ad inventory is becoming a hot commodity. Publishers are rushing to create more. Is an ad glut inevitable?
Over the past few weeks and months, I've been seeing a lot of signs. Big media players on the hunt for online inventory have snatched up sites such as MarketWatch and About.com. Startups like Bloglines and Feedster, ostensibly conceived as ad-supported media companies, are attracting buyers or venture investments (or both) -- before they've had a chance to prove themselves.
What's it all about? Online inventory. As advertisers and big media players finally acknowledge the undeniable change in consumer content consumption, the rush is on to generate space to sell. In the hot pay-per-click (PPC) market particularly, the rush toward inventory creation has been swift. One sees Google AdSense ads on practically every blog nowadays. Meanwhile, Kanoodle and FindWhat have rolled out their own self-serve publisher distribution networks; Yahoo is expected to follow suit.
It's no surprise someone like me, who watched this industry from 1998 to 2001, would begin to wonder whether we're heading toward the bust part of the boom/bust cycle. With all this exuberant inventory creation, when do we reach market saturation?
I'm not a glass-half-empty person. I love seeing this industry flourish -- and deservedly so, after years of languishing. I'm just trying to make some distinctions between today and the wild, ad-supported boom of the late '90s, when the question "What's your business model?" was inevitably met with a one word answer: "Advertising." Thankfully, most people I've spoken with about this lately have plenty of distinctions to offer.
The main difference is there's growing demand from advertisers who do have business models, unlike the dot-com players who spent on online advertising back in the day. Just in the past couple of weeks, ClickZ News headlines featured brands such as Kia Motors America, Frito-Lay, Reebok, American Airlines, and Starburst.
As these advertisers grow more dissatisfied with traditional media options (the :30 spot, for example) they increasingly allocate a larger percentage of their budgets to interactive media.
As Piper Jaffray's Safa Rashtchy recently wrote in the company's Silk Road newsletter: "There has been a fundamental shift in the way advertisers view [the] online medium. While as recently as last year some advertisers would still demand proof that online advertising worked, most advertisers now take it for granted that online advertising has to be an integral part of their campaign and many are allocating in excess of 10 percent to online."
Union Square Ventures' Fred Wilson agrees. "Most advertisers now know they're going to get better value with their online buys than with their television or print or outdoor or radio buys," the venture capitalist told me.
Knowledge of that value proposition comes with experience, hard-won experience in some cases.
"Think about 1998," Wilson recalls. "Companies would go to AOL and throw tens of millions of dollars at becoming an anchor tenant. That was the big ad buy that everyone did, and it was a complete waste of money."
Back then, it was all about "eyeballs" and "stickiness." Now, it's about performance.
"What's happening is advertisers are becoming more discriminating in the types of inventory they're looking for, and they're trying to figure out the mix they want in contextually targeted versus demographically targeted advertising," said Peter Horan, CEO of About.com, recently acquired by the New York Times Company.
Publishers are getting smarter, too. About.com has begun integrating its network with that of NYTimes.com, using a technique that intuitively makes sense.
"We recently put up some video promotion widgets to drive traffic to the technology and movie portions of NYTimes.com, because we were inventory constrained in those segments," said Horan. "We were basically sold out on the video plays on the site." He estimates the About.com promotion will result in 350,000 to 400,000 extra video plays per month. Not bad.
Our own JupiterWeb, a division of parent Jupitermedia, employs a team of folks we call Audience Development. Their function is solely to drive traffic from certain parts of the network to others -- ensuring advertisers' goals are achieved.
"Media companies got smarter and said, 'Hey they're taking all our inventory on a CPM basis, what are they making on a performance basis?'" Goldstein told me. Publishers are learning a lot more about the true value of their inventory, and adjusting accordingly.
The other big factor that's affecting inventory is technology. Ad-supported companies springing up today aren't necessarily publishers in the traditional sense. That means they don't have the cost structures (read: content creators, like myself) associated with inventory creation.
"What we see a lot less of these days are a lot of the failed models that we and others pursued in the late '90s, when we looked at new media as being directly analogous to the old models," Wilson told me.
Many of today's fledgling media companies are using technology to aggregate content from all across the Web. They're also aggregating traffic using similar methods, buying keywords and doing SEO (define). The technology creates the content, in effect. (Where the content comes from originally, and whether it can continue to be produced in this new environment, is a topic for another column.)
"People have learned the lessons of the Web and understand it's a very different medium for delivering value to the people who use it, and a very different medium for delivering value to advertisers," Wilson said.
Even publishers with more traditional models are benefiting from technology, including behavioral targeting. They're learning more about their audiences, which allows them both to create inventory more intelligently and to sell audience, rather than context, in lower-value areas.
I'm convinced. We're living in a very different world than 1998 or 1999. Performance rules, publishers are getting better at providing that performance, even the rush of investments and acquisitions are occurring at much more rational valuations.
"Yes, there are deals getting done, but there's a new sobriety of rationality," Goldstein told me. "The question is whether that's sustainable. And I don't know, but this is not Broadcast.com being bought for $5 billion, nor is it GeoCities getting bought for $3 billion."
Thank goodness for that. Remember that glass? After talking with these folks, it's beginning to look more than half-full. It practically runneth over with possibilities.
Search and traffic sourcing are both crucial to luring shoppers to your website. In this article, "2 Successful Holiday Strategies for Online Retail", you'll learn how to use a two-pronged approach for your holiday search campaigns that combine top keywords with the best referral sites. Data in this article comes from SimilarWeb.
Pamela Parker is a former managing editor of ClickZ News, Features, and Experts. She's been covering interactive advertising and marketing since the boom days of 1999, chronicling the dot-com crash and the subsequent rise of the medium. Before working at ClickZ, Parker was associate editor at @NY, a pioneering Web site and e-mail newsletter covering New York new media start-ups. Parker received a master's degree in journalism, with a concentration in new media, from Columbia University's Graduate School of Journalism.
Singapore, 3-4 November
Hong Kong, 8-9 December
Hong Kong, 8-9 December
Google My Business Listings Demystified
To help brands control how they appear online, Google has developed a new offering: Google My Business Locations. This whitepaper helps marketers understand how to use this powerful new tool.
5 Ways to Personalize Beyond the Subject Line
82 percent of shoppers say they would buy more items from a brand if the emails they sent were more personalized. This white paper offer five tactics that will personalize your email beyond the subject line and drive real business growth.
December 9, 2014
1:00pm ET/10:00am PT