January 13, 2012 Leave a comment
Just to get this out of the way first – I love advertising technology; I’ve worked in marketing and ad tech for a number of years and I love what technology can do today. Ad tech is an industry evolving at blistering pace that has taken us from the blinking banners of geocities through the lows of pop-up banners and the current heights of deeply interactive, highly personalized brand experiences that no longer feel like advertisements but rather content in their own right.
That said – as a whole, advertising technology is a nightmare to deal with at the moment.
Over the last years billions of venture capital money have been poured into this sector creating an industry landscape with countless players, each of them adding some value or preventing some costs along the value chain of the advertising and money flowing from advertisers to publishers to their audiences. How fragmented and cluttered this industry has gotten is probably best demonstrated in the LUMA charts (created by the Luma Partners) which have been wildly circulated in articles and presentations alike. These charts show (conveniently for each major subsector of the advertising ecosystem) the main players and their types of play.
(For a publisher the Search LUMAscape isn’t as relevant).
For anyone trying to find their path from the left side through to the right – it’s a huge, cluttered mess screaming for consolidation.
Having previously worked on the agency and the technology sides of the industry, I have come to find that working on the publisher side might be the most challenging of all for any number of reasons:
(1) A maze with a million valid options
Fundamentally, choices are good. Nobody wants to go back to world in which a single player dominates an entire market. That said – in today’s world publishers have to make a decision what service or product they want to buy or offer and how it will add value to their value chain or product lineup, and then usually run a lengthy investigation to ensure that it (a) actually improves performance and/or bottom line, (b) works with the incumbent advertising solutions, and (c) doesn’t conflict with your product roadmap.
Quite often there is more than one vendor offering a largely similar service, and often enough what’s offered by one is mutually exclusive with something else in your existing lineup (or doesn’t “talk” to one of your existing systems). It’s poorly standardized (i.e. how data is exchanged or described) and requires a lot of creative engineering to set up properly.
(2) Everything nibbles on *your* bottom line
The revenue waterfall for a publisher’s CPM is quite staggering – between the ad serving, the audience segmentation, the third party data, the DMP, the SSP, and a whole slew of other acronyms a CPM can erode quite quickly. Once you start using these services and technologies not only on the “good” premium inventory but also on the “bulk” inventory, an already slim CPM might result in zero or negative yield once you really factor in all costs.
I get it – each of the tools adds value or makes audiences or buyers available that otherwise might not have been. But for each of these tools there is the question: Is the marginal revenue or cost prevention of employing this tool for this piece of inventory greater than the cost. Which brings me to #3:
(3) You never *really* know how well you’re doing
Most publishers have a rough idea when they are doing well on raw CPM, and what their floor is where revenue turns into bad revenue (with close to zero or negative yield). Sure, it’s easy to see that at $25 CPM you’re doing well for that inventory, and selling remnant with $0.15 is still more revenue than $0.
But what does your average eCPM look like? And how do you know it’s spot on where it could be? What if you had bought that new data sharing tool? Or decided to kick the creative optimization out the door again? Even with the best modeling the choices in designing and running your ad tech ecosystem will always remain only part science – and part art.
If nothing else, the ongoing investments in this space have ensured that an entirely new consulting branch has sprung to life – monetization audits and ad tech best practices.
Luckily consolidation of the market has started and is ongoing (such as Google buying Teracent, AdMeld, etc. or InMobi buying Sprout), and increasingly we will be able to buy more comprehensive solutions instead of individual puzzle pieces – but new ventures are springing up every months and consolidation is likely to take time.
Until then: Please dear venture capitalists – when you kick off your next technology funds and investment rounds, how about funding some meta-solution providers that help publishers identify the best possible design of an ad tech ecosystem in order to manage your inventory most profitably!
.. or at the very least an audit tool that tells you how well you are doing compared to what’s possible!