Rise of the Middle Class (Ad Inventory)

In the past month or so I’ve had the chance to attend several online advertising industry events where a recurring topic of conversation has been how can publishers better monetize their remnant ad impressions. While technologies like real-time bidding (RTB) have made accessing and transacting this type of inventory easier for buyers, the corresponding growth in the use of RTB has not translated into increased revenues for online publishers. There is hope though.

By applying the same underlying technologies that power RTB, a new class of ad inventory has emerged that exists between traditional direct-sold (tier 1) and remnant (tier 2) inventory that is being referred to, conveniently enough, as tier 1.5 inventory that might be able to bring together the best of both inventory worlds. In a traditional RTB environment, ad inventory from one publisher to the next becomes indiscernible outside of pricing, removing the contextual relevance of each ad impression in the process. Even if you incorporate audience data for targeting specific web visitors, without knowing the context or even website that will be surrounding the ad prior to bidding on the impression, campaign performance, and thus publisher CPMs, will remain poor. It will be the ability to automate the entire process of targeting the right user on the appropriate website alongside relevant content that will improve the fortunes for all parties involved.

That’s where private exchanges come into play. They bring the efficiencies of RTB into an environment where advertisers know the context of where their ads will be delivered and publishers can set parameters as to which advertisers can have access to their audience and at what prices. Entities like quadrantONE for local news in the U.S. and the just announced pact between three of Canada’s largest broadcast companies are taking this one step further by pooling impression inventory from multiple online publishers across the same content types to provide a larger audience pool for advertisers to target in hopes of garnering larger portions of ad budgets. Layered on top of this, semantic technologies from the likes of Crystal Semantics, Peer39 and Proximic, can be leveraged as part of the set-up and bidding process within private exchanges to better organize content into categories in an effort to complete the contextual picture for the available ad inventory.

Instead of relying on advertisers coming into their web environments, others like the New York Times are looking at new ways to expose their content for monetization by leveraging social media. The company recently announced the release of Ricochet from their R&D Ventures group, which allows advertisers to wrap their ads around relevant articles from any Times Co. publication that these brands can then distribute across social media channels to interested fans and followers.

All of these opportunities don’t mean that publishers can get away with just enabling technologies for ad buyers at the transaction level in hopes of improving their indirect revenues though. In addition to building audiences through more engaging content, there are a number of services being brought to market by start-ups at the user interaction level that can help drive a better web experience, which can translate into more ad revenues. Companies like Visual Revenue are helping online publishers determine what content to highlight on their homepages through predictive analytics, while Sailthru’s Concierge provides content recommendations to keep users engaged once they are on the site. Finally, Yieldbot is attempting to tie all this activity together into the appropriate context for advertisers to target users on an impression or even session basis to create an on-going advertising experience.

In society, a growing middle class is beneficial to the overall health of the economy. The same can be said for online advertising where the rise of middle class ad inventory will benefit the entire online ad ecosystem. This doesn’t mean that tier 1.5 inventory will be a panacea for all remnant inventory nor will it replace direct sales relationships. Instead it will offer buyers and sellers more choice around how inventory is bought at scale thanks to the ad standards developed over the years by the IAB. There will always be a need for full service ad sales teams that can create a native advertising experience that guarantees audiences for those advertisers willing to pay for better access and services. It’s those companies that figure out the right experience for their site and users and can optimize revenues across these 3 tiers of ad inventory that will be able to gain the advantage in a still nascent ad market.

Photo image source: Time Inc.

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