Wenda Harris Millard, the new Chair of the Board (on which I serve) just laid out a line I really loved:
“We must not trade our advertising inventory like pork bellies.”
She refers to the commoditization of branded advertising inventory via ad newtorks and algorithms. It was quite inspiring. But folks were not sure whether to clap. I say: Bravo!!!
I respect John Battelle and what he does with Federated a great deal, and there will ALWAYS be a place for custom ad campaigns (conversational marketing as they call it at Federated) that need to be based on human relationships and built for specific sites and audiences, but taking an “anti-algorithm” or “anti-ad exchange” stance when it comes to advertising is not really necessary. The fact that Millard even has to call it out like a battle cry is amusing to me because I don’t believe the algorithms and ad exchanges of the world are killing the premium advertising business. Nor will they ever do so.
I’d equate this kind of “fighting against the algorithm” talk to web directories in 1996 saying that algorithm-based search engines are bad and that a web directory with the human touch is going to better serve people looking for information. You can imagine people making that argument at the time, but as we saw, that definitely was not the case as Alta Vista and then Google crushed the directory business for finding websites.
I can understand this viewpoint a little bit as exchanges have started in the non-guaranteed area of online advertising. I imagine the fear comes from the notion that exchanges would move to premium inventory and thus lower premium ad rates for publishers and commodotize it, or make the role of salespeople and what they do go away.
Neither of those things seem likely to occur. As Exchanges move into the premium inventory space what they’ll create is NEW relationships and INCREASED operational efficiency. Is the value of Wenda Harris Millard (and team) and John Battelle (and team) in their ability to think creatively and build relationships, or to spend days and weeks trying to establish contact with the right people and dealing with the operational overhead of getting campaigns and their creatives running, getting reporting dialed in, etc.
Another analogy is looking at stock exchanges and stock brokers. A lot of stock trading is done electronically through algorithms and through stock exchanges, but has that killed the role of the stockbroker who still has a relationship with a client and has expertise that’s valuable? It may have changed their business as the industry became more computerized, but it hasn’t killed it.
Our clients on the Right Media Exchange still have human relationships and do business as humans, but they’ve removed the operational inefficiencies and the Exchange has allowed them to more quickly and easily create new relationships.
As exchanges move more into premium inventory, it will just create more buyers of that premium inventory on a common platform where they can purchase it quicker and scale the number of premium relationships they have.
Even if their fears are warranted and algorithms and exchanges did lower rates that publishers were receiving, they wouldn’t need to generate as much revenue if they had no need for their sales team anymore. What you lost in premium revenue, you could make up with not having to support a sales team.
One would argue the reason that’s bad is that premium ad buys and salespeople help advertising be more relevant and high quality. I think that point is probably up for debate in the first place, but as technology improves ads will become more relevant through enhanced targeting. And just because a premium ad is on an exchange, it wouldn’t make it lower quality or less relevant because of how it was bought and sold.
I still think it’s unlikely it’d ever come to that, but those are the reasons I don’t think people in the premium publisher inventory space should fear ad exchanges and advertising algorithms.