Mobtown Labs

Attribution’s effect on The Ad Market - Supply Side

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!

Tags: Business model Supply and demand Display advertising Business Market Advertising Google

The Next Big Ad Market Compression

Image via Wikipedia

The more I think about attribution the more it leads down the road of connecting the ads with the true direct response vehicle. I’m not particularly talking about direct response advertising as it has evolved to today as that is really just optimization of the bottom of the funnel.

And contrarily brand marketing has still done a good job of keeping itself disconnected from direct response. So what would happen if you started cutting that branding budget and relying on just direct response advertising?

Or what if you cut the direct response dollars and just tracked all the brand impressions back to the direct response mechanisms i.e. call centers, sales people, and online commerce carts. We can do this. So why don’t we?

Well I have to give google credit. They passed up the brand dollars. In their earlier days they offered cpm advertising at the top of keywords. They later cut this out and moved over to an all cpc model.

Now we are seeing facebook doing this as well.

So these are the two biggest marketing vehicles of our recent history and they are passing up the branding dollars which could have a major backlash on our industry.

We already saw the compression of ad dollars when google swooped in and captured massive ad budgets. Well arguably they are getting the same results as when people would spend 10X what they spend on google on TV, Newspaper, and Magazines. Now Facebook is coming in and offering the best targeting our industry has ever seen and is passing up the brand dollars.

I think we will see another wave of ad dollar compression industry wide from the facebook price change backlash.

Also, I think it’s time for disruption at the big agencies and starting to use some of the tools that we have with ad servers, scoring, data warehouses, and call tracking to connect the brand dollars with the call centers, sales channels, and ecommerce carts.

Maybe a new smarter view thru metric will be the catalyst for this…..