A lot has been written about the interview Group M’s Ari Bluman gave earlier this year when he announced Group M’s intent to get off the open ad exchanges by year’s end. Pulling away from the open exchanges is an interesting decision, but what I found more interesting was what Bluman and Mediapost left unsaid.
“Again, 50 billion ad impressions. Four hundred ads per user per day. That’s not real,” said Bluman in that interview. To me, that was the biggest hint as to why a media buying company as big as Group M would want to get away from the open exchanges, but that’s as far as Bluman went with it. I think he could have said more about the dynamic behind that vast swath of ad inventory.
A few years ago, I wrote a piece about the transactional display space, and what variables advertisers and media buyers could expect to control within it. One thing that I reinforced in that piece is digital’s problem of limitless supply – the notion that digital’s cost of goods is so low that ad inventory is, for all intents and purposes, without limit. In a market driven by pure supply and demand, that means the open exchanges essentially have no market-driven price floor. When you can create more of something on a whim, scarcity never has a chance to do its thing and price goes to zero (or something close).
To me, it’s this dynamic that is the biggest threat to the open exchanges, and if the various investment entities pouring money into the sector want to realize any sort of ROI, ad fraud and ad piracy play a minor role in comparison to that of the limitless supply problem.
So what should be done? How about a cleanup project?
With some guidelines in place, the number of quality ad views out there could be more closely pinned to the size of a publisher’s audience. I’m talking about some or all of the following:
A single ad on each content page.
One ad per slideshow.
Strong discouragement of multi-page content executions when one page would suffice.
Ditching auto-play video entirely and adopting a preroll-only model
No pop-ups or inter-page inventory.
Sure, it sounds like a pipe dream, but if an exchange emerged that had strict guidelines like the ones above, you can’t tell me RTB advertisers wouldn’t flock to it.
Can you imagine what this might look like? We’d actually have some scarcity and advertisers would be willing to pay for it. With advertisers willing to pay for quality, CPMs could increase on both the direct-sold and programmatic sides of the business. And maybe big advertisers wouldn’t exit the exchanges if they thought RTB represented their only chance to reach certain people with a quality ad message.
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. Look for Tom’s column the 1st and 3rd Friday of every month.