"Displaying Search" is a column capturing the intersection of display advertising and search marketing.
Today's column is written by Tim Ogilvie, CEO of AdBuyer.com, a demand-side optimization platform.
Jonathan Mendez wrote a good post on his blog several months ago entitled “The True Media Value Delta”.
In that post, he shared a highly profitable display campaign where an education advertiserwas paying only 25% of the “true value” to the publisher. They were pocketing the rest as profit while the publisher was getting rooked.
But there’s something missing from this equation. Are advertisers truly getting a free ride with display advertising, making 75% margins on their buys as standard fare? In an auction-driven marketplace with lots of arbitrageurs ready to fill gaps, why haven’t prices risen in the same way they have in the search marketplace?
The answer lies in the cost of exploration. Jonathan’s example is like staring at a gushing oil well and concluding that the wildcatter was printing money. A fuller picture would reveal a trail of dry holes in the ground that didn’t yield any oil. Each failed experiment costs money but doesn’t generate any future profit. The burden falls on the gushers to make up for these losses.