Managing “Infinite Inventory” - Leo Scullin

Managing amp8220Infinite Inventoryamp8221The plethora of ad networks pulled to life by a market that needed aggregated sites and ad impressions at scale have been harnessed somewhat by the ad exchanges Both ad networks and exchanges help manage advertising transactions at a scale and speed suitable to growing market needsAs network growth peaked a new intermediary the demand side platform DSP entered They make their profit margin by arbitraging as they disintermediate the ad networks With the DSPs taking their cut the agencies see a threat and an opportunity At first it seemed that access to this technology would be a perfect solution amp8211 agencies wouldnamp8217t need to invest in technology and instead they could focus on the service aspects of their business But such hopes were quickly dashed and the agency response especially at the holding companies is the agency trading desk ATD Proprietary technology coupled with their service offerings now sets them apart in front of their clientsAs Sarah Fay a veteran of industry giant Carat and a current board advisor to DSP x1 notes the primary driver of the DSP segment is performance advertising Low CPMs are the focus at this end and with so much ad supply continued pressure on rates looks to continue for the foreseeable future But some change is likely and soon according to other media agency giants Display advertising with different metrics initially centering on engagement is in the DSP mix already according to sources within the top media agenciesOther advertising measures such as awareness consideration and purchase intent while not as easy to isolate in the short term will be baked in amp8211 somehow The DSPs have also yielded some extra benefits as pointed out by a top agency analytics expert amp8220no RFP better CPMs and frequency cappingamp8221Today on the agency side the experience with DSPs is being continuously evaluated and extended beyond performance buys It remains to be seen how far automation can go to displace or complement the amp8220people basedamp8221 components in this secondary tierThe sell side has answered the automation call with algorithmbased supply side platforms SSP Here the media owners have called on the services of a handful of new players who are helping them optimize the yield on the display advertising More and more name brand publishers are retreating from the ad networks turning to SSPs or even looking into private exchanges With either approach SSP or private exchange the idea is to tightly control the sale of inventory with strict business rules and pricing parameters in place to prevent channel conflict And of course to keep upward pressure on CPMsGiven the complexity of this landscape brand marketers need to view this ecosystem through a set of filters The following market grid from Arkose illustrates the expanded view of the market tiers noting the new forces coming in from the buy and sell sidesDigital Ad Marketplace Tiers amp8211 Expanded ViewThe primary tier is all about hightouch people driven business usually represented by sponsorships customized packages or special annual commitments that initially require a request for proposal RFP Based on IAB reports for the first half of 2010 Arkose estimates that sponsorships will account for about 500 million in 2010The secondary tier represents a combination of peopledriven transactions and increasingly algorithmdriven business Nearly every single secondary component in this middle tier relies on RFPamp8217s which is a necessary but time consuming phase The component parts look like a laundry list as the experts used this variety of terms for the inventory in this segment Hence there is a lot of noise in this space as every player within this ecosystem is jockeying for market and mind share perhaps further confusing brand marketers with hype and complexity Amidst this noise the market needs to gain knowledge amp8211 what works and how and what are the costs associated with one strategy versus anotherWhen it comes to Audience some echo Andrew Kraft SVP at Collective Media when he says amp8220standardized data in this space could be usefulamp8221 In addition to the overall usefulness of an ICD Mr Kraft is referring to standardized cost data that highlights the relative value of one audience versus another This will further cement in the minds of brand marketers the value proposition of digital advertisingOur panel of experts all seemed to concur that the tertiary tier is the exclusive province of the networks and exchanges but not just among direct marketers For instance brand marketers from the consumer packaged goods CPG field have dabbled with ad networks in the tertiary tier and as one media director said amp8220to take advantage of the favorable pricingamp8221 while maintaining their concerns about the quality of the environment The continued oversupply of inventory and the automation supporting this tier will keep it in the mix for the foreseeable future But the Digiday Report from December 2010 indicates that amp8220DSPs are being seen as a substitute for ad networks in the coming yearamp8221To further assist the marketer the market structure below highlights the role of technologyenhanced versus the peoplebased parts of the businessDigital Ad Marketplace amp8211 High Touch versus Automationamp160 Automation is central to the tertiary tier and the Performance segment of the secondary tier The dotted line above automation represents the inexorable trend to bring more businessrules based approaches to the marketArkose estimates that almost 23rds of display expenditure are spent north of the dotted line On the other hand it seems as if 80 to 100 of the discussion today punctuated with LUMAamp8217s technology landscape falls below the line Technology may be a godsend to this industry but it does not and will not eliminate many costly and time consuming aspects of the work flow needed to support digital ad campaignsIt is in the high touch aspect of the display spectrum where negotiation prevails human and where an industry cost database can bring a market price framework to better define this market place This would also allow media owners to bring an industrybased price value component to their conversation Nevertheless the touch aspects of the digital industry remain the most costlyAbout the Author Leo Scullin is a Partner at Arkose Consulting LLC of New York a firm that offers strategic tactical and management guidance to clients seeking to leverage their interactive marketing investments and initiatives He has extensive experience in internet professional services as well as deep expertise in launching and positioning online and traditional media lscullinarkoseconsultingcomRead all Leo39s MediaBizBloggers commentaries at ArkoseCheck us out on Facebook at MediaBizBloggerscomFollow our Twitter updates MediaBizBloggerMediaBizBloggers is an openthought leadership blog platform for media marketing and advertising professionals companies and organizations To contribute contact Jackmediadvisorygroupcom The opinions expressed in MediaBizBloggerscom are not those of Media Advisory Group its employees or other MediaBizBloggerscom contributors Media Advisory Group accepts no responsibility for the views of MediaBizBloggers authors

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