The article in Advertising Age this week reliving some of the points that were made at the IAB Leadership conference in Carlsbad, CA, about erosion in the middle of the online advertising value chain ushers to mind the old maxim, "Advertising is sold, not bought." We'll get to that in a minute.
For now, if you believe in the virtues of audience-based media over the virtues of place-based media, then you believe that publishers probably don't matter anymore - or matter less - to the outcome of media planning decisions because media value today, to you, is in the data, not the position. You are among many, therefore, that may have read the Ad Age piece and thought, "So what" when it came to publishers.
It is safe to say, then, that if you belong to the value chain at all you probably belong to one of the provider-types in the crowded middle of the value chain (ad networks, ad exchanges, data providers and ad servers, etc) where the expectation is certainly that the online market will continue to grow, maybe even to $80 - $100 billion worldwide or more by 2015, but that value considerations will evolve along their present lines: that is, from advertiser - to second party - to third party - to fourth party - and, finally, publisher. Or, from high - to lower - to lower - to lower - and, finally, to bottom; Or, in the event of consolidation, from high - to lower - to lowest.
In this value environment, it matters a great deal that prices stay low because so much of what gets exchanged is dependent on cheap access to premium web inventory. Providers in the middle of the chain have proved ruthlessly efficient in this regard, going so far as to position audience-based targeting as a "new science" and an improvement on old-fashioned media planning (which would be according to place and time in addition to who). So far, however, the "improvement" has failed to extract a better price for itself or others downstream, and it is hard to see how it will given the stress it would put on provider-types in the middle.
But, again, if you believe publishers don't matter any more - or matter less - to the outcome of media planning, so what? It is certainly worth thinking about the fact that place-based media has simply become too expensive to plan for in a fragmented media world.
Fine. What happens if the market grows to $80 - $100 billion as some predict? How will the current value chain absorb the increase if not through price? Here are all the options:
Option 1 - Volume, which means more advertising pours into the Long Tail of the Internet unless comScore's list of the top 100 web sites that account for 84% of ad network purchases (per research from Adify) grow in audience size dramatically;
Option 2 - There is no option 2, except price.
Now, the fact that (according to Adify's research) 84% of ad network impressions currently run across the top web sites means that the likelihood of every incremental dollar between here and $80 - $100 billion going to the Long Tail is very slim. Media buyers have a built-in bias for branded media. It's easier to sell to clients; it aligns with their client's own brand sensibilities.
Pretend, though, that every incremental dollar from here to $80 billion, or so, does, in fact, flow to all new media inventory besides what is represented in comScore's top site index. Prices can stay low under the circumstances. But, there will be many, many more publishers with significantly higher earnings that suddenly have the means and inclination to compete for a bigger share. Think of it as the G.I. Bill that introduced the possibility of higher education to a generation of Americans that never thought of it before. It will be game-changing, ushering in a potent "middle class" with decisive powers.
Or not. Maybe only half the next $40 - $50 billion seeks out new inventory and the other half must find a home within the premium inventory sector at the top. It becomes a closer race for space and opportunity, prices go up and the rich get richer.
Either way, more influence over the outcome of media planning and buying accrues to publishers, which is why the maxim "advertising is sold, not bought" elbows its way to the front. Even now, despite arguments about infinite supplies of inventory, there's an argument afoot about supplier value. Publishers are whining because they feel pain. They will want advocates going forward.
This is an ominous thing facing provider-types in the middle of the chain for when the day comes to atone for value. The difference to them between now and $40 billion from now will be the difference that results from selling versus buying advertising. It will be about advocacy.
It is a sad fact that advocates for the poor have always had very little leverage in the world except moral leverage. Advocates for the rich, on the other hand, have always had commercial leverage, and a $80 billion market will undoubtedly create more leverage for the citizenry of the new media economy - the ones accountable for its upkeep and maintainance - which are its publishers.
Or not. The market could fail to grow. We could be done and dusted at $50 - $60 billion worldwide some day, in which case advertising explorers, acting on behalf of their brand customers, with nothing to report from the new media frontier but ad model chaos, may sail on to potentially more favorable places, such as easy-to-recognize interactive TV.
That's a disappointing prospect given all the potential online, which says that one way or another, advocacy matters. Value must get sold, advertising value included. And, ultimately, the value of the supply matters most, if not to everyone, at least to the suppliers.