18 March 2013 in ExchangeWire EMEA 0 Comments

WireColumn: Premium Publishers Are in the Audience Business, Not the Ad Impression Business

pet wirePetteri Vainikka is CMO of Enreach.

Call me crazy, but I believe the biggest problem premium publishers face in better monetising their digital content is that they don’t know what business they are in. In other words, they are selling the wrong product.

Allow me to explain.

Since 2011, all conversation on publisher ad revenue and yield management has revolved around RTB. Only very recently has anyone dared to remind the ad tech seminar loyalists that, in fact, something as unsexy as direct guaranteed sales actually make up the cornerstone of publishers’ ad sales. Not RTB. (There is now also a healthy amount of innovation around direct guaranteed sales taking place, but that is a different discussion…)

For publishers, the disproportionate RTB debate (i.e., the debate around the sales channel and transaction model) has unfortunately distracted them from addressing a more fundamental question: What should they be selling to create a sensible and sustainable business in the digital age? (Not how should they be selling what remains the wrong product.)

I believe that selling gross ad impressions is the wrong product, regardless of the transaction mechanism applied. Why? Because essentially anyone with a website can create and multiply ad impression inventory, there are as good as no entry barriers to the market — and what is even worse — the market as a whole is irreversibly crippled by order-of-magnitude over supply. Just ask yourself:

Would you want to be in the (RTB or not) gross ad impression business as a premium publisher?

So what business should premium publishers be in then? The answer: in the audience business. To be even more precise, they should be in the audience persuasion and audience understanding business.

The audience persuasion business consists of two elements. (Audience understanding business, on the other hand, is simply the integrated analysis of audience persuasion, and takes the form of insightful reporting.)

The first is obvious: the audience. To really make things simple, the audience needs to be defined in a currency native to those you want as your customers. In the case of premium from-print-to-digital migrating publishers, these are probably the large offline brand advertisers. Their language is dead simple: demographics (such as gender, age, HHI, education, etc.). Publishers are encouraged to augment demographics with other audience characteristics, but demographics should form the common foundation and language.

The second is perhaps less obvious (as it operates largely on a subconscious level, influencing you without you noticing it), but is equally well-understood by people familiar with brand building and media planning: the context. The context in which a branding message is shown to a user influences the way the message is perceived, interpreted, and acted upon (in many cases subconsciously). The very same marketing message will have a different brand impact on the very same user depending on context. In other words, media’s own brand association, and the quality of the editorial, impacts the effect of the branding message itself.

So, in practice, as a premium publisher, your advertising products should consist of your your audiences (e.g., male, HHI >€150k, 25-45), sold by reach and frequency, and complemented by your context’s positive influence (contact price of a user being dependent on where in your network the user is contacted). When selling your audiences this way, there is natural scarcity of supply. You simply don’t multiply your high-value audience reach as easily as you multiply your (unsold) ad impression volumes. Also, building and maintaining a media brand that inspires trust and yields positive brand association, takes time and provides a natural entry barrier.

The second hallmark of a solid high-value audience business is providing rich analysis of the effects of audience persuasion. This should take the form of audience segment-by-segment reporting. For example, if the target audience is defined only by gender (e.g., male), then as a premium publisher, you should report on how young men responded versus older men. How affluent men responded versus less affluent, and so on.

Response metrics should not end with clicks, either, but include view-times, brand-recall, etc. Selling audience persuasion simply falls short, unless it’s combined with selling audience understanding.

So, isn’t the ultimate product still a display ad campaign? Yes, in terms of audience delivery vehicle. No, in terms of what you sell and report. When you sell audience persuasion and understanding, you sell guaranteed exposure to a defined audience segment — in a guaranteed positively impacting context — and measure the effects meticulously. This kind of a service is something not every publisher can support or deliver, and should be the defining element of a premium publisher. (Selling display ads on exchanges is perhaps the world’s most commoditised business.)

Finally, publishers who are in the audience persuasion and audience understanding business have the perfect platform to grow their native advertising business. As it turns out, native advertising — to be successful — relies on the very same audience, context and analysis foundations.

On the other hand, you can of course continue selling gross ad impressions on exchanges, and hope that (deus ex machina) CPMs will start increasing.