There always has to be a struggle between good and evil in any good movie or play (and even in the not so good ones). This theme holds true for our industry where there is a constant struggle for power between the buyer and the seller.
For the longest time the publisher (or supply aggregator) held the power and dictated rates, campaign timing, and in many cases held final creative approval. In recent years the centre of power has shifted dramatically to the buyer. With programmatic buying of audience and exchanges generally levelling the inventory playing field for display, the buyer sets the price, controls the data and determines when and what domains to buy.
This creates immense challenges for the seller:
1) Dramatic price deflation
2) Reduced differentiation among competitors
3) Perceived lack of control over sales process
4) Pressure on profitability which diminishes the ability to invest in product
5) Increased need for data analysis and optimization
Marketers have invested heavily in trading desks and third party vendors to accumulate vast amounts of audience data, campaign data and transactional data that has given them a distinct advantage in this new programmatic landscape. They know more about audiences, their environments and the value of the media than ever before. Interestingly, many of the early adopters have been direct response oriented marketers or large scale advertisers looking for cheap advertising. The big brands are still more reserved in their investments, but that will change quickly.
Many have believed that in display there will always be a growing and virtually unlimited amount of inventory causing CPMs to go to almost $0.
This past week during the Thanksgiving break we saw something surprising; a dramatic reduction of tradable inventory on the exchanges. This reduction caused a spike in CPM pricing and a widespread panic among buyers.
After the holiday, inventory levels quickly returned to normal but this should be a wake-up call to all the sellers out there. They still have power. If the premium publishers and a few of the large aggregators got together and restricted inventory supply, prices would naturally rise. I’m not suggesting price fixing or an industry wide embargo, rather a focus on quality inventory. If publishers would simply eliminate the poor performing ad units we would see a natural reduction of inventory and pricing would then fall in line.
Buyers want quality and Sellers want higher prices, so are they really at odds or are they both after the same thing in the end? What do you think?
The views expressed here reflect the views of the author alone, and do not necessarily reflect the views of 24/7 Media, its affiliates, subsidiaries or its parent company, WPP plc.
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