I was recently talking to someone in the industry I admire and we both started discussing the options, forwards and contracts of dispensable media. Ironically both of us have oil/gas history. He mentioned to me the context of the spot market and how in oil and gas – almost the majority of deals are done in advance and commodities trade in this manner and hedge where needed. The spot market is a residual market where it’s a lot less of the commodities that trade. Take the 80/20 rule – 20% is the spot market in oil/gas and 80% is the futures, forwards contracts market.
Let’s look at the premium and remnant market in digital – is it not the exact opposite? 20% of the market is secured guaranteed premium inventory and the other 80% is the spot market! Incredible – this means that the upside is greater and that digital is only at the start of its bell curve. While 20% has the bulk of the monetisation –we have an 80% pool of potential upside waiting in the wind. Technically, the spot market becoming competitive and working by market forces should only increase the guaranteed market.
I know – you’re going to say that oil is oil wherever you buy it from but inventory is not comparable because of the differences in type, vertical, geo etc. The premise is still the same though. Just as we wave goodbye to some of the middlemen ad networks; we say hello to DSPs. Again, DSPs are only truly dispensing media under a common platform they cannot attain bespoke guaranteed deals or specific requests for inventory assignment so whilst they create efficiencies on the buying side they only do that when you think of inventory as ad banners trading through them. What happens when you want to look at ROI across different types of inventory pools? Like search, video, social media.
DSPs are an answer to commodity purchasing of ad banners – but what about those agencies that still need to secure the inventory ahead of time – again – using my Pepsi example – we’ve still got a long way to go in truly making the digital market efficient through ROI. DSPs are a good start in that evolution to the next stage but it depends on your buying habits?
Interesting to note that agencies have got on the bandwagon mostly as a result of advertisers pushing for ROI, but the very same advertisers are the ones who have not changed their habitual thinking of media buying – everything is done by the marketing plan. In that case – guaranteed inventory (Premium) will still exist, it will still have the majority of the monetisation pie and we’re only changing the game for the other value chain players. Efficiency is created by reducing down the number of traders in the value chain – the advertiser media buying in terms of its marketing plan will not change dramatically; only the players. So the spot market grows but not as fast as it should…..