“The Provocateur” column is intended to incite discussion on a variety of topics around the evolution of digital media.
Darren Herman is Founder, Varick Media Management and Chief Digital Media Officer of kirshenbaum bond senecal + partners
Liquidity is “Easy,” Valuation is Hard
– Current “demand side” technology platforms do not ingest client side data (other than ad-serving data) so most bidding is done for pricing efficiencies which is why publishers are freaking out.
– Unless pricing is done strategically by the true demand side, then the opportunity is limited for “media plan partners” as the sharing of the really useful data is limited.
– If we’re moving into a real-time environment, knowing what we want to pay (bid) for each impression is going to be key but a major technological undertaking at real true volume.
– Does pricing of inventory sit separately than inventory procurement? Is inventory procurement the “last mile” where “pricing” is extremely strategic?
Our industry is moving fast, but are we moving in the right direction and with the right infrastructure? This question is one that truly keeps me up at night.
There is a lot of focus in two areas of our ecosystem:
- Media procurement
- 3rd party data procurement
Are these the right areas to focus on first? Apparently the $100MM+ that has been invested in our space in the past 12 months, 100+ jobs created, thinks that this is correct. While I appreciate both of these areas of our ecosystem, I view both of these components as “the last mile.”
Without naming names, many companies are building out pipes into inventory sources (exchanges seem to be the trend) to gain access to inventory pools to shift demand liquidity. Pipes in themselves are inherently dumb so the secret sauce that each of these companies are building is a platform that pings (for lack of a better word) multiple inventory sources to find the pricing inefficiencies and exploits them based on a rule set forth by the individual client (i.e. content rules, daypart rules, etc). No wonder publishers are freaking out.
What I’m spending quite a bit of time working on, and looking at, is the macro problem that needs to be solved for the long term: pricing individual impressions. While inventory sources such as Right Media, AdX, AdECN, AdNexus all tell us what the bid prices are for inventory, we, as marketers (agencies/brands), must know what we can and should pay in order to drive the right performance based on the campaign KPI.
I’m wrestling in my mind if the pricing of inventory should sit separately (but used in the ecosystem) of inventory procurement, as IMHO, pricing is extremely strategic whereas inventory procurement is looked at as “the last mile.” Agencies will be out of business if they do not own the pricing mechanism in the long-run. Currently, they sit in the drivers seat here as they [should] have access to the majority of data that will make pricing predictions possible.
I see a world where the pricing mechanism ingests media and audience data (1st, 2nd, 3rd party – sorry IAB), business intelligence (NPV, etc), and provides real-time predictive bids, not just an exploitation of efficiently priced inventory. This can live totally separate of “the last mile.” The major outcome of this is that key publishers for individual clients will start to see CPMs rise for their inventory because actual individual impressions can be valued and prices will rise for inventory.
If you think that this is already being done [at scale], I’d like to hear about it. If this was true, our media teams wouldn’t be making Nike sneakers after work or going out to Cipriani for lunch each day. I do not believe Madison Avenue could answer how much every single impression is valued which is a problem because hundreds of billions of dollars are spent there.
There might even be the “holy cow” moment when we figure out which part of our advertising spend is working for us.
Follow Darren Herman (@dherman76) and AdExchanger.com (@adexchanger) on Twitter.
