Publishers are getting screwed. The exponential growth in mobile usage has created an explosion of ad volumes that has pushed down prices and revenues. This can’t continue. If they want to survive, publishers need to find a way to pull the power pendulum back from advertisers.
In the early days of the ad tech industry (around five to ten years ago), innovation was driven by the supply-side of the marketing value chain – i.e. the publishers. The first ad tech platforms were ad servers, from the likes of DoubleClick, which helped publishers to optimise their ad inventory. Their internal media sales teams then brought in demand and set the prices.
However, with the shift to programmatic and real-time buying (RTB) over the last five years, this power pendulum has firmly swung across to the demand-side.
First we had ad exchanges, which allowed advertisers to buy inventory through real-time auctions. Now they could buy only the ads they really wanted, on an impression-by-impression basis. This revealed that the true market price of some supposedly ‘premium’ ad inventory was actually much lower than publishers had been charging – whipping the market power away from publishers.
Then demand-side platforms (DSPs) were created, which enabled advertisers to run campaigns across multiple exchanges at the same time. Recently, we’ve even started to see ‘Super DSPs’ emerge, which allow agencies to optimise campaigns across multiple DSPs. With valuable consumer data being shared across all these technologies, advertisers can now find their audiences wherever they are on the internet, on any device. And that might not be on the traditional ‘premium’ publisher sites of yesteryear.
But whilst advertisers and their agencies have become extremely sophisticated in their use of ad tech to improve their media buying, many ‘premium’ publishers still seem reluctant to move on from the late-2000s. The threat to pricing from exchanges meant that many ‘premium’ publishers have simply refused to use them, sticking instead to their direct sales model, continuing to cut annual trading deals with the big media agencies to force their loyalty.
Yet, this approach will become unsustainable once the financial, efficiency and effectiveness benefits of buying all media programmatically have proliferated across all advertisers. Sure, the media agencies will resist, since their direct trading deals often benefit them more than their clients. Consequently, an increasing number of brands are bringing programmatic buying in-house to cut their high-cost agencies out of the digital media buying process.
Once big brands start to inform their favourite ‘premium’ publishers that they will only buy their ad space programmatically, there will be a mad scramble by publishers to adopt the technology they have been resisting for the last few years.
However, for ‘premium’ publishers with high volumes of good quality inventory, simply selling this ad space through someone else’s programmatic platform isn’t necessarily the best solution. Some old-school ad networks are known to cream off outrageous hidden margins, effectively stealing this revenue from their publisher clients. And ad exchanges, whilst much lower cost than ad networks, still mean someone else is making a margin for selling a publisher’s space.
In the last 12 months, there has been plenty of debate about ‘private exchanges’, where publishers are able to retain greater control over their inventory when it is sold through a third party ad exchange. For example, they could continue to sell direct to advertisers and honour their trading deals, but just serve the ads programmatically in real-time.
The optimal solution for ‘premium’ publishers is clearly to swing the power pendulum fully back in their favour by equipping them to launch their own ad exchanges. If their ad space was good enough to sell via their own sales team then it should be good enough to sell through their own electronic marketplace. The publisher will retain a higher margin and have complete control over how their ad space is sold, to whom, with what data and at what price. Indeed, ingesting first party data into a single ad exchange that the publisher has complete control over is way more secure than passing that data out to multiple third party exchanges and ad networks, where you have no idea how that data will be used or retained.
If ‘premium’ publishers acquired the technology to enable them to launch their own ad exchanges, then they are in the best position to take back power from the demand-side of the advertising value chain, whilst also enabling their clients to benefit from the efficiencies offered through programmatic media buying.
This article was originally published here.