Advertisers vs. Publishers: Game-Changing Media-Buying Techniques

New algortithms and new digital media ad-buying approaches are changing some of the core principles and structural relationships that have driven the advertising industry for years. In the past, advertisers chased big audience groupings (males interested in sports, say) who could be found though specific media channels (TV broadcasts or magazines). Today, according to this report, algorithm-driven “programmatic buying” technologies available through advertising exchanges mean advertisers can target individual consumers wherever they go. This explains why users may see the same advertisement across multiple online properties and some consumers feel like they’re being stalked.

The big idea:

It’s allowing advertisers to assign value to media rather than publishers  … Publishers can’t control the price, but they can control the quality of the content and the audience on that site.

The impacts are potentially significant. Up to 10% of display ads are purchased through programatic buying or real-time bidding on advertising exchanges. That represents 629 billion impressions in 2012. In the meantime, The New York Times recent 2.2% drop in digital advertising revenue has been attributed to programmatic buying. Like some other large publishers, the Times won’t accept such ads

because they do not want to cede control over what ads will appear … That shift is punishing traditional online publishers, like newspaper, broadcast and magazine sites, who are receiving a much lower percentage of ad dollars as marketers use programmatic buying across a much broader canvas.

So how does programmatic buying work?

[It] includes a number of different technologies and strategies, but it essentially allows advertisers to bid, often in real time, on ad space largely based on the value they have assigned to the consumer on the other side of the screen. Say, for example, that Nike wants to sell running gear to a particular consumer who has a high likelihood of buying shoes based on the data it has collected, including the type of Web sites that consumer typically visits. Because the ad buying is done through computer trading, the price for that space can change rapidly.

Some in the industry have argued that, regardless of the increasing amount of time shifted from TV to the internet by coveted consumers, online advertisers don’t spend as much as TV advertisers because of the difficulty of the buying process and the inconsistency of creative formats, metrics and measurement techniques.  Every 30-second TV spot is basically the same, while there are hundreds – perhaps even thousands – of different shapes, sizes and formats of online display ads.

Various stakeholders are trying very hard to facilitate and improve the online buying process for national advertisers. But despite the good efforts of the IAB, we still have a long way to go on creative and measurement. That’s the nature of new and disruptive technologies, of course, even those that are 20 years old now. It’s a unique ecosystem and there will be interesting and ongoing evolution in all parts of it – including the creative, analytics and economics.