Reverse Auction for Your Own Audience

Posted by: Matt Shanahan

In addition to producing media, publishers also produce audiences. It is the combined uniqueness of the media and audience that are the source of revenue in their models. Unfortunately, that uniqueness is being systematically eroded and has largely been overlooked.

Here’s why.

Uniqueness of a product is critical characteristic if a supplier wants control over pricing. Look at the recent iPad offering as an example of where great margins are being earned due to the uniqueness of the offering. As competition enters, we’ll see the price of tablets drop dramatically.

As discussed in this blog, publishers are selling audiences — audiences generated from their media. In audience selling, uniqueness is derived from the targeting data a publisher has about the audience. If an advertisers wants access to audience members of specific demographics or with a specific intent, it is data that allows the publisher to broker the delivery of advertising to the target. The extent to which the targeting data is unique is the extent to which the publisher can control supply and pricing.

Data aggregators and ad networks leverage their presence on multiple sites to learn as much as possible about the audience. Targeting data about a member (e.g., intent) collected from one site can now be used to target that same person on another site. By giving targeting data to the data aggregator, a publisher is effectively producing new supply on other sites. If the targeting data given away was unique, the publisher quickly loses control over supply and pricing.

In the end, data aggregators become market makers and place publishers in a reverse auction to supply ad impressions to their own audience. Unknowingly publishers are commoditizing their audiences and consequently their media — or at least the advertising value of the media. Under the auspices of revenue sharing, publishers are supposed to benefit from data aggregators who use their data. The reality is that their uniqueness is being given away at a fraction of its value.