For a number of academic publishers, online advertising is a viable, if peculiar, line of business. For others, online advertising is viewed as an interesting potential in a market with many constraints on growth.
Digital advertising sprouted in strange soil, and has developed in ways that continue to make it a difficult revenue line. Back in the late-1990s, the siren song of digital advertising was around the concepts -- still valid and valuable, by the way -- of targeting and personalization. It gained many attributes of direct mail marketing, with response rates represented by CTRs. Advertisers could finally know how many people were clicking on their ads, track advertising through to conversion, and calculate a return on investment (ROI) for their advertising spend. This promised to be a huge improvement over the past, which gave us the memorable thought, "Advertisers know that half of their advertising doesn't work. They just don't know which half."
Executing on this promise turned out to be complicated, and the main beneficiaries of this complexity thus far have been the advertising agencies, who intermediate between buyers and sellers.
Understanding this sheds some light on the overall digital landscape.
Technology purveyors in the digital advertising space seek what technology purveyors in any space seek -- scale. The larger the number of users on your platform, the more valuable it is, and the more features you can add at marginal costs. The economies of scale multiply, and dominance can follow, leading to long-term, high-return business advantages.
Riding on the back of these large-scale platforms has led to a fragmentation in the market between high-quality, well-managed sites and lower-quality, loosely managed competitors. However, this bifurcation is not generally seen for what it is by the platform providers, who only see more scale, while the agencies are torn between quality and quantity, leaving content providers stressed to cater to both demands at once.
Scale is so sought after by the platforms that fraud has become an open secret in the world of digital advertising. This may actually play to the benefit of professional, well-run digital sites like those scholarly and scientific publishers generally run, as a recent essay by John Battelle explains. Quality venues free from fraud are going to become more valuable as quality becomes a greater consideration. Scale only works to a point, and then the pendulum swings back to quality. However, scale often leads, while quality consolidates its wins.
The scale of digital advertising is also more constrained than many people think, even some advertising professionals and platform developers. As Battelle writes:
Over and over, I hear that the reason CPMs (the amount of money a marketer is willing to pay for one thousand advertising impresssions) are so low is because “there’s infinite inventory.” Hogwash. There’s only so much time in the day, and only so many pages where actual human beings are really paying attention, and the web (including mobile) is growing at a finite pace. There are even fewer places where marketers can be assured of quality, engagement, and appropriate context.
Advertising agencies are generally not as consolidated, and they have a different position in the market -- negotiating between distribution outlets and advertisers. In the online negotiating game that has emerged, the squeeze is on the distribution outlets. The complicated promise of digital advertising -- metrics, targeting, testing, and personalization -- falls generally on the publisher and its sales/support staff. Agencies simply dictate and negotiate the terms. As the costs of catering to more and more agency and industry demands increase, CPMs will also need to rise to absorb them. More cards may be shifting to the distribution outlets and publishers.
Trends from the consumer side may tilt the table further toward distributors and publishers, if they can take advantage of the trend. A recent op-ed from Richard Reeves, the Managing Director of the Association of Online Publishers, cites the trend in ad blockers (a topic I touched on recently, as well) as an opportunity for publishers to re-engage with their audiences to find a mutually agreeable solution. Some publishers have been brusque with their users, with the Washington Post memorably putting up a content barrier if an ad blocker was detected, forcing users to register with the site since the user wouldn't allow ads. As Reeves writes:
Accepting that ad blockers are now a part of the advertising ecosystem is vital to moving forwards. Publishers, advertisers, creative and buying agencies, and technology providers need to join forces - not necessarily to fight ad blockers - but to investigate how to harness the technology and ensure it eventually becomes a positive contributor to the industry.
For the time being, as digital advertising continues to scale, it remains a "buy side" game, and consumers' only recourse is to block ads entirely. But the sands are shifting, putting more points of leverage into the hands of digital advertising venues that have quality inventory, strong site management practices, reliable deliverability, and strong reputations. These players -- and consumers in general -- could feel the benefits of the shift to "sell side" sooner. But the issues need to be discussed, and the story needs to be told. And it may be time for publishers to look anew at the cards they hold.