Jim Spanfeller, President and CEO of Forbes.com, who also happens to be treasurer of the Online Publishers Association and Chairman Emeritus of the Interactive Advertising Bureau spoke his mind on the state of the online advertising industry in a guest post at PaidContent.org.
He had some interesting things to say, with his main point essentially being that online publishers are driving down the prices of ads by adhering to a similar model that the airlines have used by offering lower rates when they need to fill spots. Naturally, in that industry, consumers wait as long as they can to get the lower rates, and it has not worked out the best.
Spanfeller says that as publishers have adopted a similar model with advertising, they have changed the success of metrics from ones based on “demand creation” to ones driven by “demand fulfillment.”
“Until recently, we had seen the growing use of ad networks to ‘liquidate’ the unsold remnant inventory that was [the] result of people spending more and more time online while the ad-dollar migration from offline failed to keep pace,” said Spanfeller. “The IAB (where I’m chairman emeritus) and Bain Consulting did a study on this about a year ago that showed a huge increase in the percentage of inventory sold via ad networks on a sample of seven member sites (5% to 30% increase in just one year).”
“What this study also showed, though, was the incredibly low amount of revenue that these impressions garnered as the pricing for inventory sold in this manner was outlandishly low (less than 2% of total ad revenue was generated by these impressions and the pricing from ad networks has fallen even further since this study was done),” he continued.
Spanfeller’s piece should prove to be an interesting one to publishers and advertisers alike, but some think it is just simply too late for the industry to adopt a different model. Publishers that try to go a different way face the very real possibility that their advertisers won’t follow them, when they can simply get lower rates elsewhere.
