The Remnant/Premium Double Standard - Part 1
Since the early days of internet advertising, premium publishers have quietly sold online display advertising under a Double Standard:
While the largest, most powerful advertisers in the world pay single-to-triple-digit CPMs for premium inventory, smaller direct response advertisers pay pennies on the dollar for the exact same impressions.
Supply and Demand
At face value, the existence of a Double Standard is puzzling. Why would brand advertisers, with significantly greater clout and purchasing power than DR advertisers, overpay for media?
There are many factors that led to the emergence and longevity of the Double Standard, but the fundamental cause is rooted in simple supply/demand economics.
Although brand advertisers are willing to pay significant CPMs to reach a qualified audience, there’s simply too much inventory available on the top web properties for them to buy all of it. Many of the world’s most respected web sites are simply unable to sell their entire inventory each and every month.
Rather than let these excess impressions go to waste, top publishers sell their remnant inventory to highest bidders in direct marketing…usually at a cost well below $1 CPM.
A Quiet Behemoth and the Dangers of Inconsistent Pricing
This simple Double Standard has led to the emergence of a huge sub-vertical within online advertising. As eMarketer reports, of the $15.9 billion spent on online advertising in 2006, $10.5 billion was spent on direct response media.
Although less publicized and even less understood, the DR industry is worth almost twice the entire market for online brand advertising.
As brand marketers better understand the level to which they are overpaying for inventory, publishers will face significant pressure to either open up their unsold inventory directly to the brand marketers or to stop selling unsold inventory at the discounts currently allowed.
The stakes are high. Many premium content publishers cannot afford to publish quality content without the high CPMs garnered by brand advertisers. If brand advertisers stop paying premiums, the entire content industry could fall apart.
At the same time, publishers count on the income provided by selling their entire inventory – even if much is sold at bargain basement rates.
Reader Comments.
I posted some thoughts here — http://www.mikeonads.com/2007/08/10/adotas-premium-v-remnant-series/
Looking forward to the rest of the series.
- Pingback from Let’s Not Forget Service | The Myriad Things
I am the CEO of ZEDO Ad Serving so see a lot of this. Here are 2 examples.
MSN in the recent past seemed to allow advertisers to buy the SAME INVENTORY for either $3 CPM or 30 cent CPMs (as remnant). How they decided which advertiser paid $3 and which paid $0.30 is a mystery to me, although the guys who got 30 cent CPM ads often seemed to be in Seattle. They were also big buyers and the inventory was pre-emptable (if someone offers more then they lose it). The brand advertisers would not be happy about this if they knew - but I am not sure if MSN still does this.
Another example is the inventory on Web 2.0/ social networks.(ZEDO serves ads both for big direct marketers and big web 2.0s.) These sites sell the brand advertisers inventory on the high CTR pages. They also do a lot for the brand advertisers including e.g. frequency caps, age and gender targeting and some behavioral targeting. Direct marketers pay much less but get the low CTR inventory on the photo pages and no age/gender targeting and often no frequency caps. That seems more fair: lower price, higher volume and lower quality inventory.
Leave a Comment
Article Sponsor
More Features
-
Loading ...
Latest News
- Readers weigh in on ATT, ad networks and the iPhone July 2nd 2009 ADOTAS — In our weekly poll, readers overwhelmingly said that [...] more »
- Hiring, promotions, location, partnerships and product news July 2nd 2009 ADOTAS — Internet Oldtimers Foundation, Jumptap, eXelate, Kampyle, The Digital [...] more »
- OPA large ad units unfurl across the web July 1st 2009 ADOTAS — The Online Publishers Association said a group of [...] more »
- Email spam in June worst since 2007 July 1st 2009 ADOTAS — MessageLabs Intelligence released its numbers for June, and [...] more »
- Joost becomes YouTube roadkill, starts layoffs July 1st 2009 ADOTAS — Despite reworking its technology to work in a [...] more »
- Ad networks, not websites, choked on Michael Jackson news July 1st 2009 ADOTAS — The news of the pop star’s death saw [...] more »
- StrongMail doubling down on social media, buys PopularMedia July 1st 2009 ADOTAS — StrongMail has announced that it acquired PopularMedia, a [...] more »
Features
- Automakers Need to Become Better Conversationalists July 2nd 2009
- Affiliates can win in the media buy game July 2nd 2009
- Crowd-Sourced Ads: A Measured Response June 28th 2009
- Is the government coming for you? June 28th 2009
- Customer Loyalty: How to Earn It June 25th 2009
Spotlight
Trust Me – I’m a Professional … SEOADOTAS — At WebMetro we typically provide SEO Action Plans as part of campaigns. As the name implies, an SEO [...] more...
Reader Favorites
Layoff Tracker
- AOL - 700
- Apple - 50
- Clear Channel - 2,800 total (1,000 currently)
- Google - 340
- IBM - more than 7,800
- Joost - about 90
- MySpace - in June, about 720
- World Avenue - 30 percent of workforce
- Yahoo - 2,220 total, about 700 currently
- Zango - closes, about 90, in addition to earlier layoffs
Classifieds
Recent Comments
- Josette Davids: Great article and an amazing time was had by all at this event. I'm an
- Mike Poserina: There is also a tragic flaw rumored in Bing's ad placement engine. When resolved,
- Andy: Erin, Never mind the commenters who can only see the negative side of things. I thank you
- pkohler: We've also noticed that ads frequently adversely affects the performance of a Web page. As
