“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 Steve Goldberg, senior adviser at EmpiricalMedia.
Earlier this month, panels at Advertising Week on viewable impressions revealed a subtle new point of resistance for adoption by sellers and aggregators.
Resistance is bad because viewable is good. But the rationale is worse because it contravenes business logic and facts at the same time.
In essence, the aggregators’ concern is that once only a portion of their inventory is tagged as viewable, the rest will be devalued and the net result will be lower overall revenues. In other words, viewable cannibalizes their overall business.
That’s wrong on sentiment and wrong on facts.
First, let’s give a giant raspberry to the sentiment. Steve Jobs was renowned for ignoring “cannibalization naysayers.” He often said, “If you don’t cannibalize yourself, someone else will,” which worked out pretty well for the iPod-iPhone decision. Nokia took the opposite approach with feature and smartphones, and now they are part of Microsoft. If Steve Jobs were alive he’d probably get an extra special kick out of that ending.
But aside from that, the assumption that viewable could cannibalize business is just shockingly ill-informed. Time and time again it feels like people in ad tech skipped ninth-grade algebra and went straight to getting MBAs or Ph.D.s in quantitative theory.
So, let’s look at facts vs. fancy. Using a cross sample of several SSPs, I’ll offer this hypothetical profile of a typical aggregator.
- SSPs “see” 1 billion impressions a day from a mix of premium and long-tail websites. They sell roughly 200 million impressions a day to DSPs. They have historical viewable rates of 25 to 30%.
- Since the sell-through rate is less than the viewable rate, we could stop the debate right here. Swapping the 200 million of mixed (viewable to nonviewable) impressions with only viewable ones would not cannibalize in the short term.
But let’s add some icing to the cupcake. Typically, from experience with vendors like RealVu, when identical Deal IDs were used against a pool of viewable impressions and a pool of mixed impressions, DSPs end up paying more (between 25% and 35% more) for the viewable-only pool. Simply put, DSPs “pay up” for superior inventory, and viewable impressions are, for the most part, found on superior sites. So really our “typical” aggregator could sell 140 million viewable impressions and still have no revenue cannibalization.
But some might argue that in the longer term this still might cannibalize revenue. Yes, it could if the growth rate of display advertising was based on completely stupid decisions.
But it isn’t. Many agree our industry’s growth will come as dollars shift from other media. But that will not happen if buyers are purchasing unseeable ads. Make a better mousetrap, however, and you will grow rather than cannibalize.
Additionally, as shown above, our typical aggregator would have to double their sell-through before they maxed out the viewable pool. At 20% year-over-year growth, that still means six years until cannibalization is even probable.
Six years. Probably best to worry about something else for a while.
So now that aggregators’ general cannibalization concerns have been debunked, what’s left? Well, several aggregators have shared the opinion that selling only viewable impressions might create a cannibalizing impact on some of their publishing partners.
But for good publishers, the logic above still applies. The number of unsold viewable impressions is high enough – relative to overall demand – where their yield will increase. And the nonviewable ad slots will still get the crappiest of crappy ads or a pass back.
Which just leaves long-tail publishers for whom viewable impressions could definitely be cannibalizing. Absolutely. And aggregators are concerned this would be bad for their own business.
But wait, seriously? A handful of fewer sites contributing to your billion impressions a day would not matter at all if the quality of your 900 million impressions went up. Remember quality scores? That actually helped your business.
Put another way, let’s say there are two aggregators: Bert and Ernie. Bert says he only sells views. He loses 100 sites that are totally marginalized by this development and, with them, 50 million daily impressions that were creating low yield. Instead, those sites go to Ernie who puts the inventory out to bid for DSPs.
This is where the marketplace and those great algorithms everybody refers to kick in. They create the logical network effect. Bert’s yield goes up (roughly 30%, according to tests), which leads happier publishers on to even better yield and so on. Meanwhile Ernie is dropping lower in yield, and soon, even his good pubs are calling Bert.
Who’s cannibalizing whom? Bert eats Ernie’s lunch, or maybe Ernie, too. Game over.
So, as we can see, worrying about viewable cannibalizing business is simply wrong-headed and wrong to boot. It’s nothing more than a proxy remark for, “I make money selling something of no value so I’ll stop when I have to vs. when I want to.”
And that’s an opportunity for a forward-thinking aggregator.
You can follow Steve Goldberg (@stevegol) and AdExchanger (@adexchanger) on Twitter.
