Wednesday, May 14, 2008

The Pubmatic Predicament

Also known as - large publisher display media ads sold by ad networks in US are getting cheaper and cheaper.

It showed that the yield the Pubmatic model could bring to its network of partner sites was decreasing. Fast.

The only exception was small websites - they were experiencing a 12% increase Feb through April -8.

Yet the average CPMs on large sites has plumetted 44% over the past two months, with medium sized websites remaining unchanged.

There were two main responses.

Silicon Valley Insider felt it represented an economic slowdown and was slamming the 'desperate publishers' that used Ad Networks -

Valleyway was less concerned - putting the price drop down to simple supply and demand economics
"The business of brokering ads is failing advertisers and publishers. Advertisers don't want to spray their ads across the Web; they want to target them to the right audiences. Publishers, meanwhile, would like to see their products earning uninsulting rates. But what is sold cheaply is valued little."

I am with Valleywag on this. I don't think declining yield has anything to do with an economic slowdown - it's more a consequence of a proliferation of these ad networks and a huge oversupply of inventory. I would hazard a guess the exact same thing is happening in Australia with Ad Networks popping up every week almost - the more of them there are, the more supply there is ... the more leverage agencies and clients have to negotiate to push down rates to ridiculous levels. How do I know this - well, I negotiate these sorts of things weekly and have seen how far I have been able to push it.

The key issues that face sites that use these sorts of networks are

- It devalues your inventory. YES - it provides some quick short term revenue but ultimately it waters down your value proposition.
- You resign control over your pricing and positioning. It becomes a numbers game not a context game ... the idea of 'premium' is gone.
- Advertisers value context and environment and ALWAYS have. Running shedloads of cheap blind RON means my carefully placed client x ISP ad might run next to 3 random credit card ads. 99% of clients would never consider buying TV or Mags on this model.

The real game of digital media is not about cheap inventory. It's in offering VALUE and currency to advertisers. Personally I feel the rise of the Ad Network and this approach is a clear sign of a lack of skilled sales practitioner in the digital world who can sell the space in a smart, trusted-advisor type way and sell the benefit beyond the audience numbers. As a result it's gone automated to monetise eyeballs whenever, however, wherever.

The only people benefiting from this cheap inventory approach are the people pedalling the cheap inventory.

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