Remember some time ago I mentioned that media is shifting towards becoming a commodity? Most ad exchanges are likened to Stock exchanges and so the next stage is to buy and sell in a similar manner to a stock exchange.
The next level is buying impressions like commodities – hedging futures and options. Recently a friend of mine from London stated the TV was the largest growth medium a year ago and I was not convinced. When I went back to check I realised that TV slot media prices had fallen so low it was rich pickings for brand advertisers. Most shifted their budgets there to gain mass adoption of love for their brands and indeed it was the largest growth medium in advertising. Prices fell in the UK because of the downturn and also because cable TV operators had an abundance of new free channels in the UK. In fact when I processed all of this in – it was apparent that TV has been selling futures for a long time. All TV slots are sold months ahead of time and in line most advertisers who tend to buy inventory months ahead of time due to new product launch, rebrand or just to reinforce a message. If TV secures the bulk of brand dollars and trades in advance of contracts then why can’t advertising in time move into that form of selling?
There is no reason not to go there –and with all the technological evolution being placed on internet advertising it seems very likely that we will one day hedge advertising contracts. I can see it now a big brand advertiser lets say Pepsi – knows it has a new product launch in Sept and buys up SOV online for that month and then there is a R&D delay to Nov – Pepsi can turn around and sell their contracts in sept to another and should in turn make a profit due to either bulk discounts when they purchased months before or indeed from prices fluctuating upwards in the ad world. That profit should be able to buffer the delta between buying inventory for sept and indeed last minute inventory buys in Nov. Why not? Anything is possible?
Whether Pepsi internally can sell that forward contract to another is interesting. Will it get its agency to do that or its own DSP seat (assuming they go there) or a DSP that is not theirs (more likely). This heralds a new era for one of these value chain players – to move into become a futures trader of inventory or just plug it back into the DSP and sell it for as much as it can get.
We’ve still evolving the spot market – clearly RTB (real-time bidding) has to appreciate its scale and breadth for it to be truly called a spot market but once this happens then its very evident that this type of last minute inventory consumption creates a brand new performance market with enhanced targeting, BT but what does it still lack? Well the market evolved but the advertisers still don’t plan in spots they plan in lengthy branding campaigns that need direction and mapping. So essentially advertising evolves to create a market for spot buying but it hardly makes a dent in empowering advertisers to purchase their campaigns through the spot market. Advertisers have long planned product refreshments, new products or simply re-educating their users and their marketing departments are awarded budgets in a similar fashion. Again we go back to the roundabout on scale. RTB has scale challenges so a spot market is currently not right for brand advertisers. So do we have to wait for another wave in technology to really engage with brand advertisers?
To some degree ‘YES’
Last year the advertising industry was worth about 450Bn with 54Bn resulting in 12% of all advertising was digital. That is then split between search and display. The real apex here is not growing the internet pie itself but growing the solutions to allow cannibalisation to the other areas of advertising; so growth is double digits. So are we all thinking about the right advertising features for growth?
Evolution comes in stages so the spot market stage will probably have to come before a futures and options market but let’s not lose our visibility when placing technology kudos over the right solution for double digit growth.
So coming back to TV- maybe we need to think about a model that really ingrains with the TV advertising model – the ability to incubate media slots that are sold months in advance: almost the ability to predict audience figures online coupled with ROI and guaranteed inventory. Funny we were almost there before….. then and only then will we see a huge swing towards share shift in advertising. I just can’t see advertisers shifting models into an unknown marketing pipe. Then you would come across a mountain of challenges like planning budgets etc.
Just food for thought!