The advent of the automated ad trading for unsold inventory has without doubt altered the way buyers and sellers interact.
These sophisticated bidding technologies, real-time access and 24-hour availability make demand side platforms (DSPs) and agency trading desks (ATDs) fast, efficient and cost effective trading hubs, but somewhere along the way, perhaps inevitably, the relationship between publisher and advertiser has skewed.
This has often left publishers floundering, with the power balance tipped squarely in favour of the buyer and a whole segment of online inventory - namely premium - overlooked.
If you’re an ad buyer reading this, you’re probably thinking, ‘Great! Life couldn’t be better,’ but the reality for the publisher is very different.
The distorted emphasis on the automated trading of low-value inventory means that opportunities are lost for publishers to build direct relationships and develop bespoke packages for advertisers to reach high-value audiences via premium inventory.
In this age of austerity and caution, brand advertisers in particular place more importance on quality, transparency and relevancy, and the ‘pile it high, sell it cheap’ focus on selling remnant inventory often fails to deliver to these brand needs.
Up until now, the focus of the industry has been on developing technologies that help monetise huge volumes of unsold inventory, which have benefited more the advertisers and agencies, leaving publishers at the mercy of the buy side.
Some, however, might say their current predicament is, to an extent, self-induced as they sought to shift 100% of their inventory rather than focus on value.
The problem they face mirrors that experienced by the airline industry a few years ago. In an attempt to combat fluctuating seat sales, airlines turned increasingly to third parties to help them sell unsold seats at discounted rates.
A half-empty plane represents thousands in lost revenue: so began the obsession with bargain prices and maximum capacity, triggering an influx of third party intermediaries and travel brokers such as Expedia and Travelocity into the marketplace.
What airlines neglected to consider then was the long-term impact this cycle would have on customers’ perception of air travel.
We forget what a typical plane ticket used to cost and what we got in return, and today, we expect rock bottom prices in lieu of what we now consider to be ‘frills’, such as free meals, free movies (and good service?).
The big seat sale approach brought repercussions for the airlines. Customers began to hold back on advance direct bookings, safe in the knowledge they could secure a cheaper seat at the last minute via an intermediary.
The contagion spread to high-spending premium passengers with the frequent flyers and business travellers deserting loyalties in search of lower fares. The impact on airlines’ overall profitability was a downward one.
The parallels between the airlines’ experience and that of online publishers are irrefutable.
As publishers dropped their rates and gave access to their sites cheaply by farming out their unsold inventory to third parties, agencies took advantage of this unprecedented access to non-guaranteed inventory, using their newfound intelligence to negotiate hard on price when buying direct.
And there followed the predictable lull in direct buying - why bother now that buyers had access to their sites and could secure ‘premnant’ inventory through automated mechanisms with a bit of savvy bidding and use of audience plays?
If publishers are to redress the balance they need to understand that it’s time to refocus on where the real value and margin is generated and reclaim control of both their premium as well as non-premium inventory.
The place to begin, however, is the premium end of the scale. This is exactly what some of the biggest air carriers in the world decided to do.
Noting that the desire for quality and service is still very much a driver for high-spending passengers - as the thriving luxury goods market will testify - companies including British Airways and American Airlines opted to radically alter their sales approach, reverting to classic USPs of refinement, comfort and customer service in a bid to recapture client loyalty, increase premium seat purchases and drive higher margins.
One of the first major changes was to limit the number of sales partners they deal with, thereby increasing levels of direct engagement with customers.
Next they revised terms of their reward schemes so that only seats purchased directly from the airline qualified for reward points or ‘gold standard’ membership benefits.
It’s a strategic U-turn that appears to be working and one that digital publishers should look to emulate.
Premium inventory - just like premium plane seats - is where the true profitability lies. Publishers need to embrace the brand equity, value and peace of mind that their premium inventory offers to advertisers, addressing many brands’ fear of having their campaigns appear in compromising environments that are detrimental to their brand status.
If publishers can learn to relent in attempting to monetise 100% of their inventory, even curtail the supply stream made available to advertisers, and take care to select the right trading partners for consistent revenue gains, they will slowly start to rebuild value into their inventory and maximise its relevancy as a whole.
Make premium the priority, watch as ad revenues soar and publishers will soon be flying high once again.