“Data-Driven Thinking" is written by members of the media community and contains fresh ideas on the digital revolution in media.
Today’s column is written by Ben Goldman, chief revenue officer at 180byTwo.
Ads.txt adoption is creating ripple effects throughout the media ecosystem. Launched by the Interactive Advertising Bureau as a way to combat fraud caused by domain spoofing and arbitrage, it’s a text file implemented on publishers’ sites that verifies the vendors approved to sell inventory.
Adoption of Ads.txt has accelerated quickly. By February, more than half of the world’s top 5,000 websites selling programmatic ads had adopted Ads.txt, according to Pixalate, compared to just 8.5% in September.
Perhaps the most significant impact of Ads.txt adoption is on the price of premium media inventory. The demand for premium inventory and the removal of fraudulent impressions is driving inventory prices higher. In this case, higher prices for premium inventory mean data budgets may feel the squeeze, given that advertisers’ ROI metrics remain relatively fixed:
CPM inventory + CPM data = eCPM
With the increasing adoption of Ads.txt, brands are feeling more confident that their ads are seen by real people. This also means their scrutiny is now shifting to data and how it can be used to reach the right people with the right message. Accordingly, the science and art of media planning is now less concerned with vetting the quality of media and more focused on choosing the right recipe of quality data.
There is no limit to the amount of data available for marketers; quantity isn’t the issue. Rigorous testing and new pricing models can help marketers identify quality data.
The standard for data pricing today is a fixed CPM. But some advertisers relying solely on static CPM pricing find it hard to justify the data investment compared to an inventory-only campaign. This type of pricing also limits the data from aligning with advertisers’ goals and may prevent it from being valued accurately.
And although this model serves as the de facto way for advertisers to test new data types, data buyers and sellers may move over the long term to other pricing models, such as data licensing or cost of media. Pricing models that align with specific client goals is paramount to any data providers’ audiences being used for digital campaigns.
But shifting the pricing model for an entire industry is easier said than done. Not only has the number of data providers with no clear differentiation exploded over the past five years, but demand-side platforms (DSPs) and data management platforms (DMPs) are still very much in the driver’s seat. They are the face of data exchanges for marketers, control the pricing options available and regulate quality on their own terms.
For example, Lotame recently announced “Precision Audiences,” which are data segments it claims exceed industry benchmarks. This is just the beginning of how exchanges and DSPs will want to be the ones making the rules for pricing and quality data.
So how do data providers adjust to this shifting landscape with increasing demands and less control? Simply lower their prices? That may be the initial reaction. But I believe we’re at a tipping point that will force the data industry to find other solutions besides a race to the bottom on pricing. For example, what if data was sold via the traditional offline or analytic model of data licensing? Adobe is one of the few exchanges that already offers licensing of digital data within its DMP.
Another option that may become popular is the cost-of-media model made famous by The Data Alliance within The Trade Desk. This method works well for performance-based campaigns and does not add overwhelming data costs. Simply put, marketers pay when the data works.
Personally, I think the future of data pricing will be a blend of all three models. A fixed CPM or cost-of-media model allows media buyers to test data before they make long-term commitments. And once a data partner has proven that it can deliver on clients’ needs, the licensing of digital data will make sense to lock in costs.
There are no signs of data use slowing down, especially as data continues to flow with increasing ease through a system of platforms, partners and publishers. And as the versatility of pricing, coupled with audience precision, continues to evolve, it’s an exciting time for both data providers and buyers.
As this “value-driven” pricing model takes effect, here are the questions every brand should ask today: “Is my data of the highest quality, and is it actionable?”