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Noah Robinson is the CEO of Audience Marketplace(AudienceMP.com), a transparent behavioral ad exchange. Previously, Noah was the VP, Business Development at Glispa, the Director of Business Development of Gratis Internet, and a Co-Founder of Beyond Interactive Sao Paulo. He serves as a contributing editor at Behavioral Marketing Daily(Behavioral.us).

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The Remnant/Premium Double Standard - Part 2

Written on
August 13th 2007
Author
by Noah Robinson  |
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Square Peg/Round Hole

Although premium publishers have a few choices towards eradicating the double standard, none of the choices are particularly exciting.

First, publishers can simply refuse to sell remnant inventory and instead allocate the inventory to house ads. This can work for some publishers, particularly if they offer premium content products (e.g. subscription-based services) because it maintains rate card integrity but for the most part, this tends to hurt revenue numbers.

Second, publishers can donate their inventory to charities and non-profits. Google, for example, donates impressions to charities when its AdSense technology can’t display a contextually relevant ad. This does good for the world and simultaneously builds good will within the industry and the world at large. As with house ads, this option will cause the publisher to lose significant revenue.

Third, publishers can use excess inventory to bonus their paid advertiser campaigns. This is a great way to engender loyalty from advertisers but it may also lead a publisher down a slippery slope. It’s never good to provide too much bonus as eventually, the advertiser may to expect and demand it. Also important, in cases where the ratio of unsold inventory to total inventory gets too high, the offering of bonus inventory can end up undermining contract sizes as advertisers simply underbuy in hopes for gaining the bonus to fulfill their goals.

The sad reality for most publishers today is that there are few obvious, immediate ways to end the double standard cold-turkey.
A New Paradigm

Having talked with many publishers and advertisers, I believe that the answer may lie with behavioral targeting. Although our industry has hyped behavioral for quite some time, and it’s been around from almost the beginning, it’s still in relative infancy.

Most premium publishers today make almost all of their revenue from advertising based on consumers visiting their sites. It’s an obvious, intuitive model. But how many publishers are making money when their users are off their site? Behavioral targeting technologies today enable any publisher the ability to reach their audiences when they are off-site. If a pharmaceutical company is willing to pay a $75 CPM on a premium health site like WebMD, they should be willing to pay something more than the cost of unsold inventory on Yahoo Mail…and yet less than the price paid for contextually relevant inventory.

In other words, if publishers are willing to understand and embrace behavioral targeting technologies, they can clearly and swiftly eradicate the Double Standard. Whereas before, premium and remnant inventory were both on-site – now premium inventory is on-site…and remnant inventory is off-site.

By adopting this model, publishers can easily mitigate the losses caused by cutting off sales to DR firms…and more importantly, earn significantly more revenue than they ever did with sales to DR firms.

All possible parties win under this new model:

Premium publishers will earn significant revenues when their valuable audiences are away. This not only minimizes pricing inequities but it also reinforces the true value of contextual relevant. Enforced scarcity for on-site inventory can only help maintain pricing integrity.

Advertisers benefit from the behavioral model because they will now be able to reach premium audiences, on an incremental basis from contextual relevant locations, at a much cheaper cost than on-site placements.

Finally, top remnant inventory sellers (e.g. MySpace, Hotmail, etc) and participants in advertising exchanges (e.g. Right Media Exchange) will benefit by a continuing increase in payouts made for unsold inventory. This is made possible through the alchemy created by behavioral data.

Back to the Future

It’s ultimately up to publishers to eliminate the Premium/Remnant Double Standard. It won’t necessarily be easy, and there may be some pain before significant gains are achieved – but if we don’t address the issue, on a fundamental level, the entire medium is at risk.



Reader Comments.

Noah, you are the man.

Posted by Gail Leong | 4:38 pm on August 13, 2007.

Interesting perspective under the assumption that rational economics are the only drivers in the media buying process. But there’s a reason why brands would pay significant premiums for certain inventory. As you pointed out, there are pharma co’s willing to pay $75 cpm to be on webmd, etc. It would be interesting in discussing what factor(s) drive those decisions - quality of content, editorial control, what else?

Posted by Mike Girard | 11:48 am on August 27, 2007.

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