Today’s column is written by Tony Uphoff, CEO at Business.com.
In today’s digital media environment, unprecedented access to a plethora of firmographic and demographic data on audiences has allowed us to revolutionize the concept of the “premium publisher.”
By using this data to clearly define value of inventory and audiences, premium publishers can now build valuable and sustainable audiences via original content. Rather than rely on paid traffic and click-bait, publishers can offer a clear value exchange of data, dedicated attention and money between the brand and audience.
This comes at a time when display advertising is growing fast. Forrester Research predicts display will soar by 90% over the next four years to $37.6 billion, outpacing any other form of advertising. But at the same time, the cost per thousand impressions (CPMs), while having rebounded modestly in the last year, continues to show sluggish material growth, if any at all.
Basic economic theory predicts that scarcity drives all markets; increased demand raises scarcity, which elevates price. However, the Internet continues to defy economic theory, as increasing demand is not met with scarcity but with ubiquity – creating a black hole and a conundrum for marketers. I see several factors creating this unique dynamic.
More Demand, Falling Prices
The industry is grappling with the emergence of bots, fraudulent traffic and viewability concerns. Digital advertisers are pricing in the impact of bogus traffic into the CPMs they’re willing to pay. Mass publishers have accounted for fraudulent traffic as part of their business models and are locked into an arms race to find the illusive point of scale that will enable them to make money.
Another factor impacting the industry is the lack of a common currency. With all the advances in digital technology, the industry still fundamentally operates on the crude click-through currency. This is literally the equivalent of pricing billboards based on the number of cars that honk when they drive by. While marketers know that not all audiences are created equally, the vast majority of online audiences are still valued the same, regardless of their intentions, demographics or firmographics (company demographics).
Music industry executive Bob Lefsetz summarized the odd position in which the Internet finds itself when he said, “Made for everybody, resonating with nobody.” Many digital publishers are creating Potemkin villages, with tens of millions of click-bait and bot-fueled visits, in a desperate attempt to find “scale” and appeal to the widest possible audience and set of advertisers. Publishers are trying to emulate the massive scale and distribution of social networks and are, in turn, giving up anything that truly differentiates them.
Finally, another reason for this dynamic: Ad tech is changing everything. Data, algorithms and programmatic buying have radically and irrevocably changed the media landscape, and we are still seeing the impact of this massive market transition play out. However, this isn’t the first time technology has shaken up the advertising and media industries.
In the 1960s – the era that many people consider to be the golden age of advertising – large agencies bought mainframe computers to “automate” the purchase of media. Television networks started to adopt sampling methodologies developed by Nielsen to better analyze, target and differentiate their audiences and price their television time accordingly. Advanced printing technology enabled split advertising runs creating regional demographics in magazines and newspapers, enabling far more targeted advertising.
With 7.2 million businesses in the US large enough to have payroll, does anyone really believe that one out of every four Americans is logging on to business news sites? By definition, selling any expensive, complex and highly differentiated product or service requires reaching and engaging a niche audience. In the early days of television advertising, the initial currency was based purely on audience size. Then along came algorithms and technology that allowed us to target specific demographics, and it changed the fortunes of the television networks overnight; the same was true for the magazine and newspaper industries.
A Waste Of Money
With the convergence of high-quality digital publishing and advertising technology, we are now able to deliver advertisers with valuable, niche audiences without sacrificing scale, relative to the overall size of the market.
Engaging in mass marketing on the Internet in order to find serious buyers of complex products or services is not only a waste of money, it creates brand damage, creates a perception of cluelessness and destroys your credibility as a marketer.
It’s time to end the myth of scale and establish a new norm of genuine value, transparency and results.