The conjoined worlds of advertising and media are undergoing the most fundamental changes in many generations. Money that once automatically went to broadcast TV and print is steadily shifting to more accountable media, including the Internet and, interestingly, a performance-based compensation model. In this environment, new concepts such as sell-side advertising deserve thorough public discussion.
The concept of sell-side advertising seems to have started in a conversation between two leading media and technology thinkers, John Battelle and Ross Mayfield. Battelle captured the conversation on his blog last August and expanded on it in MIT’s Technology Review. The theory has been aired at length in the blogosphere and recently found support in the financial community from Fred Wilson of Union Square Ventures, a leading early-stage technology investor.
Battelle cogently observed that in the new pay-per-click (PPC) world “the advertisers are no longer choosing the publisher with whom they are doing business, they are instead choosing keywords, concepts, context.” Advertisers just want results. Going forward, they’ll be happy to open up their advertisements to distribute them to any publisher who wants them, so long as the publisher delivers to the right audience under the right environmental controls and is willing to be paid on a performance-only basis. This clearly takes PPC advertising to the next level and changes the tradition media selling equation.
Yet sell-side advertising can put online publishers back in control. Publishers can embrace and extend the PPC model rather than fight it.
An underlying assumption is publishers can do a better job optimizing ad performance on their sites if they control the ads. This means publishers must take control of optimization from the ad-broker networks and lead-generation companies. Currently, those companies buy “remnant” inventory on publisher sites at “low-end” CPM (define) rates. They then target and optimize performance-based advertising within that inventory to generate CPM rates significantly above what they paid for the inventory.
Media owners of all types have long lamented ad brokers and marketing service companies buy their media, optimize it, then don’t share the margins. Print publishers and TV stations can’t do anything about it, but Web publishers can. Sell-side advertising would greatly complement CPM-based brand advertising and could become a significant revenue channel.
Media companies embracing sell-side advertising would focus their efforts on attracting, aggregating, and retaining only an audience that’s highly convertible in performance-based advertising. Ad sales efforts would shift to seeking and selecting just the right ads for their audience and environments, not just any ads. Sellers will become seekers.
Advertisers would create large pools of ads designed to deliver measurable performance. They would “tag” those ads with relevant targeting and performance metrics, such as offer, target audience, target context, desired results, timing, desired volume, and price. After selecting appropriate ads and “registering” them with the advertisers, publishers would distribute and target these ads on their sites, leveraging proprietary data about their audience and site to maximize ad performance. Ads that worked well would get more volume; those that didn’t would be pulled. In this model, the publisher becomes the marketing service company. It would not only know the true value of its audience to marketers, it would control and own it.
Sell-side advertising could be an enormous boon for marketers, too. Not only would it require less work of advertisers and their agencies, it would be very measurable and very focused on return on investment (ROI) — two things high on advertisers’ lists these days.
Will it happen? I never thought PPC advertising would take off. I never expected search to become as big as it is. And I never expected the auction model, which advertisers love and which drives PPC advertising. Sell-side advertising could be a logical step in our industry’s evolution.
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