The New Inventory Problem, Part 2

  |  August 12, 2004   |  Comments

Is premium pricing a solution for the inventory crunch?

Part one of this series discussed the growing inventory management problems publishers face as agencies and clients begin to routinely impose frequency caps on their online campaigns.

For many publishers, a relatively small portion of their audience generates a disproportionately large percentage of page views. So regular frequency capping can mean regular "under-deliveries," one of the worst words that can be uttered in an online publishing operation -- worse, even, than "unsold inventory."

The column generated a tremendous amount of email and a number of excellent observations on the problem and suggestions for solutions.

Today, I'll examine some of those observations and suggestions.

Don't Wait for a Buy-Side Solution

It's unlikely this problem will be solved with a buy-side approach. For years, many large players in the market have had intense discussions about creating a universal reach and frequency tracking and delivery system. Nothing's ever gotten beyond the discussion. All potential systems involved setting unique cookies on all browsers in the market. Each proposal was shot due to privacy, data ownership, or control issues.

Improve the Exposure

Capping the frequency of campaign creative limits the number of times an ad unit may be served, but it does nothing to address the number of times a visitor actually sees the ad. It won't address confirmed exposures, only opportunities for exposure. Though this is a much more fundamental issue than frequency capping, everyone must understand imposing artificial limits on campaign deliveries will prevent a number of consumers from ever actually seeing, or "consuming," the creative and its message.

What can be done? One suggestion is to use more rich media. Just ask Mookie Tenembaum at United Virtualities or Dick Hopple at Unicast. They've been vocal on this for years and can point to double- and triple-digit increases in the effectiveness and actual exposure of campaigns that employ rich media.

Price at a Premium

There's no way around this. The only way publishers can afford to delivery guaranteed reach and frequency in campaigns and still profitably run their businesses is to price these campaigns at a premium. It's no different than in TV. The best shows, with the largest and most predictable audiences, are priced at a premium. Pricing is justified on not just the loyalty the show's content creates but also the low "friction" costs for advertisers to buy a predictable reach and frequency of audience every week.

Personalize the Capping

With the ability to track and delivery campaigns on a per person basis, governed by demographics or behaviors, there's no reason we can't start capping delivery of ad creative on a personal, rather than campaign, basis. Some audiences, such as the highest value target audiences, might justify enormous exposures. Others, the unidentified or undifferentiated audience, might only justify a limited number of deliveries.

Improve Infrastructure and Measurement Standards

Fixed frequency caps are the future, particularly for branding campaigns. To survive in that world, all publishers must better understand their audiences and be able to project, manage, and measure campaign deliveries on a per-person, not just per-section or per-page, basis. This requires much more sophisticated inventory management systems and much better packaging and price strategies. Managing price and inventory will become the key differentiator for publishers profitability, as it is in the airline industry.

Will the Market Tolerate Premium Pricing?

Yes, I'm sure of it. Online marketing is going from a want-to-have to a must-have in most consumer marketing sectors. Search has created a number of online addicts, and the population is growing fast. Unfortunately for search providers, but fortunately for content publishers, search inventory isn't growing. People aren't performing appreciably more searches today than they were last year. Search inventory hasn't grown as fast as advertiser demand for it. The winners are publishers who can deliver advertising that's just as targeted and just as predictable in delivery and response. If marketers have to have it, and it works, they'll pay the price.

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ABOUT THE AUTHOR

Dave Morgan Dave Morgan founded TACODA Systems in July 2001 and serves as its CEO. TACODA is a pioneer and leading provider of behavioral-targeted online advertising solutions for driving quality branding relationships. TACODA delivers advertisers high quality, targeted audiences from premium sites, powering successful online advertising campaigns. TACODA-enabled Web sites, which number over 2,000, reach over 70 percent of the U.S. Internet audience monthly. Its roster of customers, mostly Fortune 1000 business, includes branded national, regional and vertical sites, and 75 percent of the top 20 U.S. newspaper companies. Customers include the New York Times Digital, Weather.com, iVillage, Gannett/USATODAY.com, The Tribune Company, Belo Interactive, BusinessWeek.com, About.com, Advance Publications' Advance Internet and Forbes.com. Virtually every top 50 online marketer has run campaigns on TACODA-enabled sites, including travel, automotive, packaged goods, consumer/health products and consumer electronics companies.

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