We need to get into the ad serving business

Inventory management is an industrial age conceptThere is a 20th Century marketing term being used in 21st Century marketing that doesn’t belong, and if local media companies are ever going to truly comprehend and benefit from digital advertising, we’re going to have to let it go. The term is “inventory,” and it hearkens back to industrial age models of doing business. If you don’t believe we’ve entered into a new age, I feel sorry for you, but that’s a different problem than what’s on my mind today.

I want to review (again) why I feel that not only the term but the concept is holding local media companies back from embracing the digital disruption. Here’s part of what I wrote two years ago:

In introducing the concept of Local Ad Networks to media companies — where we place ads on as many sites in the marketplace that will have us — I’m often met with the following response: “Why would I want to increase the number of sites I’m advertising on when I can’t even sell the inventory I’ve got on my own site?” It’s a logical question given the world we’ve created been handed. The answer is simple, but understanding it means thinking outside the conventional realm of reach-frequency in a display advertising model.

Implied in the question are at least seven assumptions…

  1. The CPM method of selling and accounting is the best way to handle online advertising.
  2. All ad impressions are created equal.
  3. Eyeballs are eyeballs, and inventory is inventory.
  4. Cumulative reach is the same as real time reach.
  5. Banner blindness isn’t a real problem.
  6. The value of online advertising is determined by the advertiser, not the publisher.
  7. Local advertisers are happy with the CPM model.

In the old days of the Web, media companies built static pages, and those pages contained code for advertising. In this context, media companies sold “inventory,” because the weight of the site included a limited number of “avails,” despite the reality that the numbers of views depended on the number of people visiting. We could mathematically calculate a “real” inventory, just like we did with newspapers or local television, but this was always an unknown until after the fact. Eyeballs were determined by audience estimates, and that was often highly obscured, which benefited us.

Today, however, ad “views” are precise and web “pages” are generated dynamically based on a myriad of choices built into templates that come alive when a browser cries (in a hypoinstant) “Lazarus, come forth!” This allows advertisers to target specific browser windows, because in that hypoinstant the browser doing the calling is fully vetted electronically by the ad server for identifying information, such as IP address and cookies. In this sense, the ad server cares less about the ad slot — the inventory — than it does the browser that’s making the request, so “inventory” at the very best is a hole. Fewer people are buying holes these days; they’re increasingly buying specific browsers. This is what “targeting” is all about, so your inventory is only significant if the data available for the user meets specific criteria. It’s not that the holes aren’t important; it’s simply that they’re not the important part that an advertiser is buying. As long as media companies offer only sterile holes, we’ll never get on the side of real money in digital advertising, and this is as true for mobile as it is the desktop.

Today, Gordon Borrell released new revenue projections for newspapers and beyond, and there’s one slide that caught my attention. It projects local digital revenue into the future, by advertising type. Take a look:

Borrell Revenue Projections

The big growth opportunity is with targeted display advertising, and while “targeted” is a big word, the real money is in browser targeting, mobile or otherwise. According to Borrell, advertisers are no longer interested in CPM run-of-site buying, the mainstay of the old world. They’re interested in reaching specific categories of watchers or readers, and the ability of a news website to provide detailed targeting is limited (Wait, we have a pet section!). The 3rd-party ad companies that serve ads on our sites have more detail about our users than we do, which is why they can target via our inventory while we really can’t. My fear is that media companies will get caught up in believing that they actually provide targeting within their infrastructures and will continue to cede the real money to pureplay web companies (and ad networks) that are able to do beyond.

In a very real sense, the actual “inventory” that a media companies provides is its audience, not it’s advertising avails.

The solution is for media companies to build their own local ad networks, but that’s one of those things that media companies simply don’t appear to be interested in exploring.

See “Why I’m leaving AR&D” below.

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