Advertising’s Toughest Tech Problems, Part 2

In December, I wrote about inventory prediction and targeting. Today, I’ll focus on a corollary — frequency capping — and the issues that arise when it’s combined with targeting.

Frequency capping enables a publisher to set restrictions on the number of times a unique site visitor is exposed to a specific piece of creative. There are many reasons an advertiser would request creative be frequency-capped. The main reason is to control delivery so a media buy is distributed evenly across a specific audience, rather than many times to a few people.

After all, with online advertising there’s no reason a 100,000 impression buy couldn’t (at least in theory) be delivered to one person. And what many industry people haven’t swallowed is that most publisher audiences are very high frequency across a small number of people, and low frequency across a large number of people.

The distribution curve looks like this:

Frequency Curve

Let’s say for one publisher’s site, the total audience size is 10 million unique visitors. A savvy media buyer comes along and buys 2 million impressions frequency capped to two. Take a look at what happens:

Frequency Curve Capped

In this case, almost all the low-frequency audience is purchased and removed from rotation immediately. This means the rest of the advertisers who come and buy ads from this publisher get a smaller audience at a higher frequency.

If you combine frequency capping with targeting (of any kind), you’re automatically eating up the audience that’s available. I’ve often heard from media buyers that behavioral targeting can often cause problems because the audience is small and, therefore, creative is delivered at a very high frequency. Since most agencies can measure frequency’s effect on conversion (if they use a third-party ad server), they recognize the problems this causes.

On average, conversions drop off after a frequency of five. Of course, specific creative and offers have their own frequency sweet spot with its impact on conversions. But in a world where frequency capping is usually given away by publisher sales forces to make a sale happen, advertisers scarcely understand its impact on campaigns run by other advertisers across the same audience.

This is a clear example of the tragedy of the commons. It’s in every media buyer’s best interest to frequency-cap campaigns because the unique audience will be snapped up by other advertisers. But from a publisher’s standpoint, there’s a clear value to not allowing the audience to be hijacked that way by a few advertisers.

My high-level recommendation: As an industry, we must recognize frequency capping is valuable, and capped campaigns should cost more. If we don’t charge more (in many cases, significantly more) for frequency-capped campaigns, someone will walk away with a great deal, often at the expense of the rest of the advertisers.

Ultimately, we must buy and sell audience, not raw impressions. Perhaps the right way to handle this is to only ever sell frequency-capped impressions, and sell by audience size. This will cause scarcity and therefore increase CPMs (define).

Join us for the ClickZ Specifics: Online Video Advertising seminar on March 19 at the San Francisco Marriott in California.

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