How is ad pricing different online and offline?

Outgoing Forbes CEO Jim Spanfeller argue that it isn’t in this article on Paid Content –

Some interesting excerpts …

“The web has advantages in providing a platform for advertisers, but the notion that it is some sort of new animal entirely has grown out of a variety of misconceptions that have worked to radically slow the eventual migration of ever-larger advertising budgets online.”

“In buying into the notion of remnant, publishers have vastly reduced their pricing power. They are training the buying community to fixate on the wrong metrics, and for very little near-term return. At the end of the day, the inventory that is now getting sold as remnant, mostly through horizontal ad networks, is generating so little revenue that it is inconsequential to the bottom line of the business.”

It appears that two things are happening locally around this sort of area. The ad networks  are becoming larger sellers of inventory volume and also capturing a larger share of the overall display pie.

However, from all conversations I have had … most if not all publishers involved in partnering with a network are unhappy about the yield they are receiving. In many instances … the yield they are getting from a network is less than 5% of what they would be getting dealing direct with advertisers and selling on a reasonable CPM.

Now there’s only 1 group who should shoulder the blame for this and it’s certainly not the ad networks, it’s the publishers. Instead of trying to work out a smarter way to price their inventory and generate revenue they’ve turned to the easiest, cheapest solution which is to outsource it to someone else and share the revenue.

Inventory tiering must be looked at by the main players sooner rather than later. Otherwise the race to the bottom will be over a lot quicker than most expect.


2 responses to “How is ad pricing different online and offline?

  1. um there isnt anything strategic about a market.

    Markets set the prices, well mostly.

    Not sure there is a lot of merit in a strategy of not selling stock because the price is low when the alternative is less than low.

    Networks tap a different revenue pool.

  2. I agree with Jim’s point – “They are training the buying community to fixate on the wrong metrics, and for very little near-term return”

    Digital business models are going to struggle if we do not migrate further brand dollars online. The remnant models are training the market to think of online as a DM mechanism.

    Ben, you also make a good point regarding pricing models and this is certainly something that we are looking at. Supply and demand will always dictate pricing but simply choosing the easy way out is not the answer.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s