Attribution’s effect on The Ad Market - Supply Side
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So I recently engaged in a debate about how solving the attribution modeling problem could effect the ad market. The conversation was broken into supply and demand where:
Supply = Publishers (this post)
Demand = Advertisers (the next post)
Supply
On the supply side solving the attribution modeling issue could affect publishers in a drastic way. Since ad inventory is becoming so fluid as a result of companies creating marketplace environments out of their ad inventory, the value that an advertiser sees in an ad, could really affect a publisher’s business.
We already know that marketplace buying drastically compresses ad dollars. We see that with advertisers who have pulled money out of newspapers and TV and put it into google. Google takes these dollars and since they can deliver the eyeballs and customers at an incredibly inexpensive overhead cost, they allow advertisers to essentially set the price of each keyword ad. Since there are so many keywords and relatively few bidders on each keyword and such low cost to deliver each incremental customer, this works extremely well so there is plenty of diversity for google to rely on their prices to continually rise as competition increases.
For display advertising it’s not the same. A homepage 300x250 ad typically only has one advertiser per day and with 365 days in a year and between $50k - $2mm per day (depending on the site) that’s a lot of eggs in one basket for a publisher.
So they are highly incented to keep advertisers from knowing the real value of their advertising and they can create scarcity in a high competition placement to drive up price.
The threat here is that if the small group of advertisers (it can’t be more than 365) all know exactly how much this placement is worth to them, they can hold the publisher hostage on price.
I think that gives an idea of two polar opposite sides of the spectrum for the supply side. One area with a lot of diversity and little competition where having true attribution and REAL pricing will not threaten a publisher’s business model and another where little diversity and high competition if attribution is introduced could curb that high competition and cause problems for a publisher.
There is also the fact that REAL pricing and a sound attribution model could make advertisers identify what really drives incremental sales in which case all publishers win!
