The New Competitive Landscape for Online Advertising

1
852

ADOTAS – Last fall, it was interesting to hear that Microsoft, AOL and Yahoo would collaborate to sell their onlinead space. Before their partnership, there had never been any significant motivation for publishers to partake in this type of collaboration – in fact, many might have said that it was something along the lines of “competitive suicide.” Still, companies have tried, as we saw with 5to1 and News Corp. However, they have all seen the same fate, as a major flaw of these partnerships is something similar to the prisoner’s dilemma. This frequently leads to selfish behavior and a “must-win” attitude rather than a collaborative one, despite the potential benefits of working together for all involved parties.

It appears, though, that history does not always repeat itself. Instead of learning from the mistakes of their peers, publishers may now instead be trying to fix them. Historically, publishers have scrambled to absorb as much revenue as possible from their inventory by seeking to monetize 100 percent of it, as evidenced by their use of technologies and third parties to help monetize their unsold inventory. However, there are signs they are beginning to alter this strategy, with Peter Naylor, EVP Digital Media Sales at NBC discussing at the end of last year about the need for publishers to develop holistic strategies for inventory, commenting, “Not every publisher wants to maximize revenue for every last impression.”

There are also some signs that publishers are now looking at the benefits that can be obtained byworking more closely together. According to a recent survey from the Association of Online Publishers (AOP), more and more online publishers are setting aside their competitive differences to work together, hoping to compete against large digital platforms in an age of falling advertising budgets. In fact, the results of this survey show that 72 percent of publishers hope to collaborate with other publishers within the next year.

While many will have a similar reaction to this news as I earlier described, the competitive benefits of these partnerships are actually pretty substantial, although surprising. As a Financial Times article article pointed out earlier this year, publishers now rely on new forms of digital distribution through platforms like Facebook, whose size and scale make individual negotiations near impossible. Instead, most advertising is automated and optimized digitally, giving bigger platforms a leg up in ad sales because they have something that smaller publishers simply can’t provide: lots and lots of eyeballs. In April alone, unique U.S. visitors to the site totaled 158 million, according to comScore. These numbers are hard to compete with from an advertising point of view, pushing publishers to implement new collaborative practices, including syndicating content, trading audience data and licensing technology.

This new preference for collaboration seems to also be driven by the fact that publishers are exploring new territory like mobile development, e-commerce and commercial data analysis. There are very real opportunities for publishers in each of these areas, but fear of the unknown and high initial investment requirements are big obstacles for small companies. A partner helps lessen the risk of developing a new strategy or expanding into new territory, which is extremely valuable as publishers struggle to capture as much of dwindling advertising budgets as possible.

Obviously, this focus on collaboration raises the question of how publishers can behave competitively when they are helping each other succeed. However, I predict that this collaboration will force publishers to differentiate themselves in new ways, raising the bar in online advertising overall.

1 COMMENT

LEAVE A REPLY

Please enter your comment!
Please enter your name here