Data Determines The Advertising Winners In 2011

2011 is the year that publishers will really dive into the data game in an effort to increase profits. 

If publishers wrap data around the content they create, they seek to gain two important advantages.  First, the value of the content shifts from advertisers to publishers and second, publishers’ data becomes first-party.  The FTC “do-not-track” proposal excludes first-party data from the restrictions, meaning the relationship between publisher and reader will not be regulated. 

It’s been said that premium ads are more like forward contracts.  Agencies, willing to pay, are reserving first impression ad buys for pumping their creatives through the pipeline by a specified time.  Remnant ads, on the other hand, are less sensitive to time and placement and typically go through exchanges.  We can draw a picture of ad demand dynamics like this:


Image: ADmantX

The premium demand for ads grows vertical; as prices for ads rise, the reduction in the quantity doesn’t really diminish.  Remnant demand is not nearly as steep and is also inside the premium ad demand curve.  This is because the quantity of ads demanded for any given price will always be less than the premium category. 

Combining these two sides of the demand gives us a new picture of the whole market:


Image: ADmantX

The difference between the curves represents what would happen to the whole market if there was no longer a demand.  As WPP aptly states:

When an ad is targeted properly, it ceases to be an ad, it becomes important information.

How much would that be exactly?  Let’s say just 10 per cent of all current remnant ads would remain premium ads with better targeting.  We know that in 2010, $25 billion was spent on advertising in the U.S.; approximately $15 billion of that went to search ads, $7 billion was allotted for the display arena and the balance remained in behavioural and other means.  We also know the average for direct sell ad placement costs were about $15 per CPM.

You can now use these numbers to arrive at the overall number of impressions for premium and remnant.  Then take just 10 per cent of the remnant ads and price them as premium at only 1/2 the going rate with better targeting.  That’s $14 billion.

We face a choice in the digital ad world.  We can work to arbitrage the match between content and ads in ever faster ways, using slick mathematics and Web scale infrastructure and watch the price per ad continue to fall as a result (a race to the bottom).  Or rather, we can find new ways to revive creativity; test and show brand lift in digital, bring more on brand advertisers and most importantly improve the segmentation and match between content and ad.  The result will be prices rising, not falling.

But here’s the rub: when the FTC, more or less, outlaws behavioural or other tracking methods of targeting we will be left only with analysing the content. Those who think the absence of behavioural targeting means less tailoring of ads to consumers are wrong. 

There is so much more that can be done with content analysis.  For example, at ADmantX, we have recently cracked the code to understand emotion and motivation in content – the things a consumer feels or is enticed to do after reading.  Without crossing the line of privacy, we put far more emotion in “contextual targeting” and arrive at clean, clear, spot-on ad matches. 

Whoever owns and controls the data on content, ads, and audiences will win in 2011.  To date, publishers have gotten the raw deal in this data driven world.  When publishers better control their data better, prices, demand and revenue rise.  And we all get more out of the process.

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