Almost every piece of content we interact with online can be thought of as a stool supported by three legs: the interests of publishers, advertisers, and consumers. The interests of the three parties are quite different, of course. But for the stool to stand, the needs of all three parties must be adequately met.
And I'd argue that we have one very wobbly leg right now.
Consumers and advertisers are in great shape. The former get everything they want, for free. The latter can deliver ads with CRM (define) like precision at CPMs (define) less than the loose change in your pocket.
But publishers -- the party that actually creates all of the value that consumers and advertisers extract -- are suffering. Assuming that we don't want to end up sitting on the floor in a pile of splinters, that third leg must be made sustainable.
To make the stool sturdy again, all three parties must reassess their role in the value exchange, thinking in a new way about what they give for what they get. It's a complicated, multifaceted problem. As a starting point, let's look at one key issue for each party to think about.
Publishers and Pricing
The spread between the price of directly sold ad inventory and network/exchange ad inventory is so wide that it's hurting publishers. Pricing may be somewhat subjective, but it has to make sense, and at the moment it doesn't.
My favorite site (which will remain nameless) is a perfect example. If I wanted to buy the site directly I'd be quoted a $30 CPM. Yet most of its inventory comprises either house ads or placements from no-name brands that are clearly scooping up unsold space on the cheap -- let's generously assume a $3 CPM.
By holding out for a $30 CPM when buyers know they can buy the site for so much less indirectly, the publisher is backing itself into a corner. At that price, the publisher must be an absolutely perfect fit to make a plan, a once-in-a-while purchase instead of a staple.
Admittedly, I don't know the publisher's finances, but wouldn't it make sense to sell many more ads at a $10 CPM to top-tier advertisers than stick with the current premium/remnant mix?
Advertisers and Interruption
Brands basically use two different communication approaches online: they run ads that talk at people, and they run social media programs that attempt to connect with consumers in a more meaningful, productive way.
The social media approach seems to have defined the ideal rules of engagement online. In other words, what brands should be doing on the Web is connecting, not advertising. And yet, advertising is important and necessary.
As The Boston Consulting Group pointed out in its recent white paper, "The CMO's Dilemma: Can You Reach the Masses Without Mass Media?" one of the fundamental challenges facing advertisers is that the newer, more social approaches to marketing just don't have enough scale to drive the required business results.
In addition to messages that consumers choose to interact with (which should always be an ideal to strive for), brands should also start to get comfortable with the idea of delivering advertising online that we can ensure consumers will see.
With the beta launch of ShortTail Media's D30 ad unit earlier this week, we're seeing a move toward an interruptive online ad model. As advertisers, if we want to have healthy publishers and the ability to reach large audiences in an impactful way, it's an approach we need to embrace.
Consumers and Payment
The content we all enjoy online feels free, but it isn't. One way or another, we need to pay for it, whether that's with our time or money.
My guess is that the vast majority of us would rather endure an interruption of 5 or 10 seconds than pay a subscription for our favorite content. To date, consumers haven't been required to make many sacrifices online, but that has to change if we're going to keep getting the quality content we've become accustomed to.
It's tradeoffs all around. More realistic pricing from publishers. An acceptance from advertisers that sometimes we actually need to interrupt consumers if we want their attention. And consumers must sacrifice a bit of their time.
There will no doubt be bumps in the road, but over the long term we'll ensure a business model that works for everyone. Maybe not perfectly, but better than it does today.
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March 19, 2014