Last month’s ad spending tally from the Interactive Advertising Bureau was another “record-breaker,” as marketers lavished $17 billion on web ads between January and the end of June 2012. Display revenues in the first half totaled almost $5.6 billion, up 4 percent from $5.3 billion in the first half of 2011.
So everything should be coming up roses for publishers, right? Wrong. A look at some prominent premium leaders during Q3 -- among them AOL, The New York Times, and Federated Media -- reveals continued downward pressure on digital brand ad spend.
AOL. An inspection of AOL’s performance this past year shows that third party network revenues, partly associated with its Advertising.com flagship, have been rising consistently by double digits (18 percent growth for the third party segment in Q3). At the same time, despite a vast effort to build interest in its premium-brand focused Project Devil ad formats, and heavy investments in its owned and operated sites, particularly video, AOL still produced flat display growth and a meager 2 percent rise on its own sites, which include The Huffington Post and Techcrunch.
Federated Media. Just last week, Federated Media drew attention for its announcement that it was shifting away from direct guaranteed sales and toward programmatic buying. In a conversation with AdExchanger, CEO Deanna Brown hastened to say that FM would not be completely scuttling direct sales personnel and methods. Instead, as part of a 10% lay-off of staffers from various parts of the company (Brown would not say how many of them were sales people or offer any other specifics beyond that percent figure) FM would double down on its roots in “conversational marketing” (known elsewhere these days as “native advertising,” or “content marketing”) and on programmatic through ad network operator and supply side platform Lijit, which it acquired a little over a year ago.
“It’s not just FM that’s seeing this, but there’s softness in this churn and burn, standard, RFP-driven, direct media business,” Brown said. “It is not economically viable. We’re making a proactive decision to move our business to both the premium and programmatic sides."
Yahoo. Yahoo, which long-held the display leader spot until it was dislodged by Google and Facebook, has been struggling for years under various CEOs who have pulled their beleaguered display sales teams in different directions. In her first earnings conference call appearance, CEO Marissa Mayer was asked where Yahoo’s future revenue enhancements would come from – search or display?
Mayer’s response was a bit muddled. But as she teased out her thoughts, we gathered that search was the primary driver, and that eventually, with more promised investment in its data stack tools such as Genome and Right Media, programmatic buying would make clear contributions to Yahoo’s revenues.
NYTCo. Many publishers remain averse to programmatic buying, feeling that they either lack the scale to benefit from exchanges or that their premium inventory would be unprotected. In assessing its 2% decline in digital advertising in Q3, NYTCo CFO James Follo pointed to the weak economy, particularly dismal real estate sales, but he also singled out the threat presented by programmatic. (Interestingly, he mentioned Google and Yahoo as avatars of programmatic buying channels.)
Follo hinted programmatic buying has affected all manner of brand dollars. So the question FM and others face is whether they can redefine premium or simply stick with the traditional, standard advertising world that appears to be shrinking.
Pivotal analyst Brian Wieser has long been one of the premium display pessimists and his views have only solidified of late.
He contends that there is a “structural weakness” due to the transfer of traditional media models to online. “Premium display remains a significant part of the strategies of the world’s largest advertisers as they find other alternatives,” Wieser told AdExchanger. “Primarily, when digital was first becoming something that larger brands were spending money on, it was largely an extension of the traditional magazine/newspaper model of advertising. It was all about adjacency and demographic based affinities. There was very little between what was happening on the web and a standard magazine buy. Over time, many, not all, advertisers got comfortable with ad networks. They went beyond just reaching demos and narrowly defined interests. And this was all a lot cheaper than buying adjacencies and premium content. Then, we’ve had the rise of social media as advertising and marketing strategy. After that, there’s not a lot of money left over.”
These days, whoever provides the technology for aggregating audiences wins. As Wieser said, it’s not about adjacency anymore. Instead, advertising buying and selling is about providing a clearer, more transparent look at the value of inventory and a particular audience in real-time. That means that even the most resistant publishers will have to find a way to package their audiences to meet real-time demands for specific kinds of consumers.
“It’s good to hear some acknowledgment made by Yahoo and AOL about programmatic buying,” Wieser said. “But what I think is not fully appreciated is that with continued deflationary conditions in the display market, it is not a good environment for investment. And that will have consequences for content companies. Ones that can rely more heavily on subscriptions will do fine — the ones that are truly exceptional — and by that token, there are not many companies that fit that bill.”
To generate more revenue, premium publishers will have to find a way to corner their market, whether it’s in breaking news or finance or sports or fashion. Wieser believes that the SSPs — the Rubicon Projects and PubMatics of the world — will be able to help to a certain extent. But ultimately, he believes the number of premium publishers will naturally shrink.
“The industry will position itself for better long term growth if there is more consolidation. If you look at AOL, Yahoo and Microsoft’s MSN and put them together, it makes for a single, more efficient place that can provide greater value to first party data,” he said. “I’m not saying that’s actively happening or that it’s necessarily going to. But if you can create a one-stop, you can recreate those inflationary pressures on ad dollars that existed in the traditional model, because the mass reach that those three possess is still very valuable.”
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