Between work and writing a new book, I don’t have a lot of time for commentary on current media events, but this one demands attention. Google made a couple of big announcements over the past week, and while the amoeba-like splitting of itself into two new companies is getting the most attention, it’s the announcement that it is separating YouTube from its programmatic ad buying through the DoubleClick Ad Exchange is what’s most important.
YouTube is Google’s big content play, so let’s read between the lines to see what’s going on. By including YouTube in the programmatic inventory that DoubleClick serves, Google has realized that it cheapens not only the value of YouTube advertising but also the content itself. This is a logical conclusion and one that I’ve been harping about for many years. The scourge of paid content is 3rd party ad exchanges, for they purchase inventory based on their own reach-frequency needs, not that of the content providers. Local media companies then sell their inventory to them for several reasons. One, it’s easy. In so doing, media companies go back to the order-taking business they know so well. All you have to do is wait for the phone to ring. Two, it’s what everybody else is doing. Our industry is a copycat industry, and nothing carries weight like what the guy across the street is doing. In this way, we drag our offline business online and feel good about it, because it’s validated by everybody else. Three, we’re able to centralize almost everything, which is cost-effective but foolish, because the flexibility for revenue is at the individual property level. Four, it’s what the advertising industry is telling us to do. Everybody in the offline advertising value chain gets paid with this automated buying and selling, because there’s still a place for clients, agencies, creative, networks, and exchanges. It’s a beautiful thing, isn’t it?
What we give up in all this is critical, because those exchanges set the value of our property. But Google, clearly the 800-pound gorilla of everything web-based, is throwing a huge monkey wrench in all of that by now forcing anybody who wants to advertise with all those videos (and video, my friends, is where it’s at) must now go directly through YouTube. Google, a major player in programmatic through DoubleClick, has looked at all of its numbers and decided that it can make more money by removing its content play from its own ad exchange.
Folks, this ought to be a revelation to those who run media companies. If Google is willing to do that with its video content, why should we do anything less?
In an insightful post from AdWeek, Lauren Johnson spoke with Raju Malhotra, svp of products at Epsilon-owned Conversant:
“More than half of all video ad impressions today are on YouTube, but Google only gets 20 cents of every dollar spent in online video advertising,” Malhotra said. “With features like TrueView that have better consumer experience, it seems Google can monetize this inventory far better if they control this more tightly.”
And here’s another thing. The TrueView ad concept is a stroke of pure genius for advertising, because it puts users in the driver’s seat. The concept is so pure Web that media companies simply can’t bring themselves to copy it. Its ads are skippable and have produced some very clever responses from the ad industry, like this terrific offering from, of course, Geico.
Video advertising is moving to an entirely different form for online content providers. It has to, because here, the users are in charge, and our needs MUST evolve to fit that paradigm. Google is leading the way. Let’s see who has the courage to follow.