At what point does the delivery vehicle for digital advertising move from being a premium good to being a raw commodity?
Frequently I hear talk about the term "commoditization" when it comes to online advertising. Today, I'll challenge some of the assumptions behind the term. In the end, when people talk about the commoditization of impressions, they really mean that impressions are dropping in value. The term commodity is a financial term with a strict definition:
However, it also has a more general meaning:
So is an impression a commodity? That depends.
At its most basic, an impression is a delivery vehicle for a piece of advertising. But obviously there are differences between impressions. Some differences are contextual (publisher name, content associations, dimensions, creative types supported, etc.). Some are audience based (gender, age, location, psychographics, behavioral segments, etc.).
It's the juxtaposition of all these various parameters that make an impression valuable or not. So an impression seen by Eric Picard on MSN Money sold to a media buyer by the Microsoft Advertising sales force isn't a commodity in the strictest sense; it has a certain value and doesn't exist elsewhere. That same impression on MSN Money sold by an ad network blind (meaning no information about which publisher the impression was delivered on) in a finance category will be worth another price -- and perhaps is actually a commodity, especially according to the stricter definition above. Ad networks take bulk impressions and make them more valuable by adding data to them. Of course, the fact that they're bulk is because in a sense, they are distressed inventory. So perhaps that doesn't quite qualify as a commodity in the strictest sense -- only in the broader sense as -- we dig deeper.
The other issue here is that while the impressions are the same, the prices are different. That's because through one channel the buyer doesn't have access to some of the key data, such as the publisher's name and the site section. In a sense, the valuable premium impression was turned into a commodity by selling it in bulk as undifferentiated inventory.
What I'm getting at is there are a few ways to look at this.
What do we all mean when we talk about the term commodity? That commodities are low value? That's obviously not the case. Gold, after all, is a commodity. So when people complain about impressions being commoditized, what are they complaining about? That they're decreasing in value? That they're undervalued?
The simple fact is there are huge amounts of inventory on the market. There's a supply-and-demand problem. There's too much undifferentiated or poorly differentiated inventory out there, causing the whole market to drop in price. The more differentiation we can express against this mass of inventory, the higher the value of it.
The problem we're up against right now is that humans can't examine and make buying/selling decisions against more than a few parameters. Even if you had a bunch of differentiated impressions with lots of data points, you'd have a hard time buying or selling them in the old-fashioned human-to-human way, so we need the technology to automate the buying process to ensure that we can ultimately get to that promise of one-to-one targeting that everyone talks about. Today, even with lots of targeting parameters to choose from, humans simply can't match a buy to available inventory using more than a handful of parameters.
So back to the question at hand. Is an impression a commodity if it has lots of identifiers that cause it to be unique? No. But at what point does an impression move from being a premium and somewhat unique good to being a raw commodity? It almost doesn't matter. Our goal should be pushing data and, ultimately, value into every impression sold.
On the heels of a fantastic event in New York City, ClickZ Live is taking the fun and learning to Toronto, June 23-25. With over 15 years' experience delivering industry-leading events, ClickZ Live offers an action-packed, educationally-focused agenda covering all aspects of digital marketing. Register today!
Hong Kong, May 5-6, 2015
Gartner Magic Quadrant for Digital Commerce
This Magic Quadrant examines leading digital commerce platforms that enable organizations to build digital commerce sites. These commerce platforms facilitate purchasing transactions over the Web, and support the creation and continuing development of an online relationship with a consumer.
Paid Search in the Mobile Era
Google reports that paid search ads are currently driving 40+ million calls per month. Cost per click is increasing, paid search budgets are growing, and mobile continues to dominate. It's time to revamp old search strategies, reimagine stale best practices, and add new layers data to your analytics.
May 6, 2015
12:00pm ET/9:00am PT