I was reading this article about Ad Exchanges in the US and this line grabbed me.
“CPMs on exchanges that use Triggit have risen to the point where they now average $3”
That’s $3 pre the exchanges cut (and anyone else using it). Maybe the publisher might see $1, $2 max.
So for a piece of content that generates 100,000 reads, that’s $100-200 in revenue. The economics of these exchanges seems to make little sense for publishers. And ultimately, they will make less sense for users and they will get more ads, and poorer quality content (as content is expensive)
2011 is seemingly the year of agency DSPs. I get the appeal for an agency (incremental revenue stream and the ability to cut out the network middleman) – and I get the appeal to a publisher with loads of remnant cheap inventory (the chance to make a few cents extra for minimal cost). But I don’t see how sustainable it is for the companies creating the content and generating the pages.
There’s talk that the larger publishers will set up their own networks, their own DSPs, private ones. Again, I understand the thought (when they’re giving their inventory to network x who sells it at a 1-200% margin through a loose ‘blind’ buy) but this will ultimately have to erode the areas they’re making a strong CPM.
At $3 cpms no one is making any money. They are losing it.
Maybe instead of focusing on this race to the bottom (which somehow hides behind technology that does no favours to the content creators/site owners) we should be focusing on ways to generate more value.
If DSPs and networks are the future of online advertising, it’s a pretty dark future for everyone involved. I don’t buy the argument that it makes things more efficient. Sites shouldn’t just sell pixels, they should sell context and insight. These things don’t come with a network/automated play.
Here’s the thing – in the media world only the digital side is choosing this ridiculous race to the bottom. Outdoor, radio, TV, print, magazines would never consider this approach. 99% of them don’t let anyone sell their assets besides their own teams.
Selling on price seems to be a last resort when you can’t demonstrate value elsewhere. Is digital media becoming so devoid of value that many just throw it out there into these mass exchanges and hope for a few cents after everyone takes their share? How sustainable is this?