Thoughts on Pricing and the Muture of media

Based on the IAB Ad Ops summit yesterday, as well as some other recent conferences, there are many prognosticators saying that online media is quickly moving towards a “trading platform” type of buy/sell environment.  An advertising exchange where audiences, not impressions will be bought and sold in real time to the highest bidder.

Many of these prognosticators have alterior motives in their pitch.  They own/operate an exchange like bidding platform for example that would like to do more business (or are building one).  The pitch comes both from sell side (ad networks) and buy side (agencies) who are both builders of networks… which I find interesting, because a true exchange, is “side” agnostic – and is an independent marketplace without bias.   Much of this marketplace type of buying appears to be driven by agencies and clients with media spend who claim publishers will make more money letting clients bid on their audience in real time.

The thing I’ve been pondering however though, is  if selling on an exchange is so wonderful, why don’t client brands do it?  I’m a seller of media and the worst thing that can happen to a seller of media is that they become commotized.   I’m also a buyer and consumer of hundreds of products.  I would buy a new droid phone if I could bid $3 for it.  In fact, I’d likely bid quite more, but I’m not ready to pay their asking price.  Many people are, I’m not because I have a great iPhone and I don’t have a pain point to address.  But if Verizon and Google put the new Droid up on eBay, I’d bid on it.  In fact, I’d like to buy all of my groceries, personal care products and pharmaceuticals this way, offering to pay only what I choose to pay.  Yet I can’t find (new) supply online to bid on… nor will the supermarket allow me to negotiate for a better price when I try to offer them 1/2 price for a gallong of Tide detergent.

Pricing exists to maximize value for the seller.  The notion that “you must monetize every last impression, even if you only get a penny” is seriously flawed.  If it worked, than, manufacturers, would produc.e to a level where they make only $.01 more than their COGS.  But they don’t…  In the online advertising business, when you hear the “claim” of being able to monetize the inventory you are not currently monetizing, be cautious.  The value your premium advertisers received is derived in part by the fact that there is not as much advertising clutter on your pages.  Remember, if you are sold out of your inventory you are probably not charging enough.  They guy who offers to “sell you out” by undercutting your price is not charging enough.  An the revenue is not incremental at all if the total net revenue declines as a result…

I would like to just one of the prognosticators who claim “real-time bidding is the only way media will be purchased in the future”  put their own goods and services (brands on the client side and services on the agency side) up for auction instead of selling based on value and quality.