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There are plenty of reasons why newspaper and magazine publishers are seeing their advertising revenue decline, but one major sticking point for them is the existence of ad networks. Publishers remain convinced that sending their unsold inventory to third parties to sell online is pushing the general value of their online ads down. There may be some truth to this.

But until publishers figure out how to sell all of their inventory in-house, networks will continue to serve a purpose — and irritate media moguls.

This month The Online Publishers Association (OPA) put out a study (which I wrote about here) that tried again to discount the value of ad networks, saying that ads sold through ad brokers are significantly less effective than those sold directly through publishers.

And today, Jim Spanfeller, the outgoing CEO of Forbes.com (and treasurer of OPA), took to PaidContent in attempts to banish the notion of remnant advertising from the lexicon. 

Should that happen? Maybe. But not for the reasons he thinks.

According to Spanfeller, online and offline advertising is more similar than different.

He has a point that the lack of scarcity in advertising is not new to the Internet. Magazines can always print more ads. The only place in traditional media where the amount of advertising is absolutely finite is in programmed television slots. However, his argument that magazine and online ads are the same when it comes to leftover inventory falls flat. He writes:

"Countless research has shown that almost all positions in magazines and newspapers have similar impact with readers. Print publishers have aggressively argued this for years—for the most part, successfully."

Onilne it's a different story. Readers don't flip through a website they way they page through a magazine. Says Spanfeller:

"On the web, ads generally perform the same regardless of when or where they are viewed. Sure, some inventory is better than others, but that is due mostly to the audience it attracts and the environment it provides (impressions in email applications for teenagers, for example, are not as valuable as contextual ads in high-value editorial products viewed by affluent adults)."

But here's another thing that's not as valuable online: unsold advertising. Ads on different pages within a website can have widely different values. And even sites with premium ad rates can have trouble selling some of their inventory on low traffick pages.

Spanfeller would rather have publishers eat the cost of unsold advertising than get the profits generated for them through ad networks:

"At the end of the day, the inventory that is now getting sold as remnant, mostly through horizontal ad networks, is generating so little revenue that it is inconsequential to the bottom line of the business."

But the entire reason that publishers send excess inventory to networks and third parties is because their sales force cannot sell it in house. If publishers fixed that problem, there would be no need to complain about networks. Because networks would cease being useful to them.

Spanfeller's semantic problem has some weight. He writes:

"A big part of the problem is this notion of “remnant” ad units. Remnant, as most folks know, has been around for a long time in analogue media. Broadly, it is the idea that certain inventory, because of position or proximity to extinction, is more or less valuable then other units."

Getting rid of the notion of remnant advertising is not altogether a bad thing. Unsold inventory isn't neccessarily worse than what has been sold. It is just as yet unmonetized. If the term is misleading, we can do away with it. But that won't help online publishers. Until they figure out how to sell all of their inventory, third party sellers are going to remain a part of their business.

Meghan Keane

Published 25 August, 2009 by Meghan Keane

Based in New York, Meghan Keane is US Editor of Econsultancy. You can follow her on Twitter: @keanesian.

721 more posts from this author

Comments (1)


John Ardis

While I genuinely respect and appreciate Mr. Spanfeller's accomplishments in the industry, I do want to offer some alternative viewpoints. (Full Disclosure: I work with ValueClick, who manages multiple networks.)

I don’t agree that the situation is a simple as is outlined - that ad networks have had a major role in degrading the value of online ad inventory. Rather, I believe there several fundamental shifts in the advertising industry which are conspiring to create the situation you describe.

1. Measurability - There is no doubt that interactive marketing has accelerated the embrace of metrics in all marketing channels. However, it was merely an accelerant on a fire that was begun previously, by the direct marketing industry and sophisticated marketers with increasing demands on measuring brand impact. This increased focus on metrics and accountability inevitably led to marketers trying to place a monetary value on their spends - indeed, now looking at them as “investments” instead of “spends.”

2. The Blur - With the increased focus on measurement, the blur between “branding” and “direct response” commenced in earnest. While there’s a long way to go until the blurred mindset is fully embraced, I for one believe it is both inevitable and welcome. By beginning to view both immediate- and longer-term impacts of a program, marketers can better understand an entirely new dimension to the interactive channel. The more we can stop insisting on complete separation of brand initiatives and direct response initiatives, the more it will provide the marketers with greater insights, and service firms with some relief on the myopic focus on immediate payback.

3. Fickleness - With all of this, a mindset of “What gave you done for me lately?” has permeated the buying arena. It used to be that after a media property spent many years and dollars establishing themselves, the advertising premium they would insist upon would scarcely be questioned. With the democratic nature of the Internet, though, scores of other decent media properties have emerged, without the need for the investment of time and money it used to take. Frankly, my belief is that the biggest rub is the resentment that traditional media powerhouses have over being questioned. When the tipping point occurred between the establishment of the offline media brand as a trustworthy source of quality content and the premium prices it wanted to charge for advertising was achieved, the properties could - if they wanted - start selling as much advertising as they could, and then create content to go around the ads. This reversal of what got the properties there in the first place led to the perception that much of what is published is fluff, and the upstart “citizen-journalists” that have emerged online provided the bite-sized bits of meaty content for which consumers are now looking . This is a major disruption in the way things have operated for decades, and led to the buyers having the confidence to begin questioning the latent value of the media property brand.

So where do we go from here? As one might guess, I believe that networks, exchanges, etc. are here to stay. However, I also firmly believe in the protection of the media property’s brand and rate card. Making sweeping statements that networks erode pricing without bothering to drill into the rumored 300+ networks that exist is like saying all magazines are a waste of money. Established, reputable network players learned a long time ago how to collaboratively work with their media partners to ensure that the best balance is struck between monetization for the media entity and appropriate value for the media buyer. Reputable networks do not promise inventory for a given media property without an explicit agreement from that property.

To keep in line with your travel industry example, a good network operates like Hotwire in the travel industry - a buyer can designate the caliber of property they’re interested in, they can see a series of prices for properties in that caliber - they may even see a large pool of properties on which their ads MIGHT appear (again, with those properties’ consent). But at no time until a firm contract is agreed upon is there any disclosure of the final properties that make up the buy. In addition, there is no subsequent promise that the same buyer can get the same property(ies) the next time out - if they like that property, they need to go directly to that property to negotiate the best rate they can. Otherwise, they have to assume some element of risk in return for the reduced rates.

This collaborative, partnering approach has been adopted by the top-tier networks in the industry and this, coupled with agreements about pricing floors, fill rates, etc. has led to many tenured, mutually-beneficial relationships.

about 7 years ago

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