Advertising Technology

Stymied by Limited Service? Blame Digital’s Limitless Supply

TomHespos_200

We asked for it, and we got it.

It seems that for many of the innovative ad products out there, ad sales support is scarce. Whether it’s self-serve interfaces for search or Facebook ads, or by-invitation-only programs geared toward multi-million-dollar spenders, it seems impossible in certain circumstances to get an ad sales rep to dedicate themselves to providing agencies and advertisers with even a minimum level of service.

It seems almost counterintuitive to leave money on the table, especially for a media planning veteran like me. For as long as I can remember, if we had clients that were spending money, we had ad sales reps who were willing to help by costing out campaigns, smoothing out wrinkles with ad ops and trafficking, correcting invoices during reconciliation and more.

But these days, ad sales has to be more careful about where its people allocate their time and effort.  Certainly, a direct ad sales force cannot scale to meet the demand of everybody who wants to spend money in digital.  Can you imagine what it would look like if your favorite ad sales rep spent time trying to sell ads to Buck’s Lawn Mower Repair in Topeka?  The seller would chase a budget that’s not likely to be very big.

Offline sellers traditionally dealt with this problem by dedicating an outside sales force toward calling on agencies and large advertisers with established budgets, while maintaining an inside sales force that worked telephones, trying to identify larger advertisers who would spend significantly while handling calls from small advertisers and agencies who directed sales inquiries to the organization.

The digital nature of our exacerbates the problem in three ways.  First, the long tail of small advertisers who want to spend in digital is longer than the long tail in traditional media.  Costs of entry into digital are much smaller, so there is quite simply a greater number of advertisers who can take advantage of it.

Secondly, digital has no physical cost of goods. By way of example, there is a very real cost to placing a page of advertising in a magazine.  There’s the cost of materials, the physical paper the ad and the rest of the magazine are both printed on, the fuel and labor costs for the trucks that deliver the magazines to newsstands and other outlets at which the magazine is sold – these costs dictate that a page in a magazine has some intrinsic value that is then marked up and sold for a profit.

Digital ads have no such intrinsic value.  The cost to the publisher to make an ad appear on a website is negligible compared to the price the seller would like to get for that ad – scarcely a fraction of a penny for adserving and bandwidth.  From a cost of goods perspective, digital ads are, essentially, worthless.

Thirdly, the supply of digital display ads is, for all intents and purposes, limitless.  If you remember your undergrad economics 101, this, coupled with the negligible cost of goods, results in incredible downward price pressure.  It thus becomes easier for ad sales reps to chase smaller budgets unprofitably.

How have ad sellers combatted this problem? Aside from the push toward programmatic, which could help the long-tail problem, we often see sellers develop things like self-serve interfaces. Google, of course, is the prime example of this, but other sellers like Facebook have followed in its footsteps.

We also see bizarre by-invitation-only programs, in which advertisers with large budgets to allocate are targeted for inclusion and smaller advertisers are kept out.  In many ways, this isn’t much different from how traditional ad sellers dedicated their outside sales forces.  There are, however, some important differences.  Those not initially invited may not have any options if they want to consider the seller for advertising.  For those who are invited, however, accepting the invitation to participate tips their hand from a negotiating standpoint, inflating prices considerably.

If this all begins to sound like the natural evolution of the market, it’s because it is.  Sellers couldn’t continue to bring product to market if the downward price pressure weren’t counteracted in some way.  They wouldn’t make enough money.  However, natural evolution is not without its bumps in the road.

What about the new advertisers who haven’t spent significantly in digital yet?  What if they have issues with self-serve interfaces and there’s no one to help them?  What if their ad budgets don’t show up on the radars of the by-invitation-only players and they never get the opportunity to leverage those vehicles to grow their business?

These are problems we haven’t yet solved as an industry.  For the general health of digital advertising, we cannot continue to rely solely on the big-ticket advertisers to keep growing. Self-serve interfaces need to be made more friendly to new advertisers.  By-invitation-only programs eventually need to be opened up to the masses so that they can scale.

Otherwise, digital is leaving money on the table.

Tom Hespos is a contributor at The Makegood and Founder and Chief Media Officer at Underscore Marketing, a boutique firm that creates and manages digital marketing programs.

Sponsor

Sponsor