Advertising on Times Square, New York City
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Jim Spanfeller, who is leaving his role of CEO of, recently wrote a provocative piece about online advertising entitled, “Publishers Are Killing Web Advertising’s Potential With Misguided Pricing.”

His compelling complaints have to do with publishers undervaluing online advertising, putting the wrong conceptual model around it, and not pursuing the value of it aggressively enough.

Spanfeller believes publishers have been convinced that online advertising lacks scarcity — that the amount traffic and number of positions make it virtually endless in its capacity. Therefore, vast tracts of it go unsold, so publishers think they should sell these remnants for a fraction of the price. It’ll be gravy.

Well, while the scarcity/abundance model has shifted for information, it hasn’t really shifted for advertising:

[buyers and sellers want to say that] unlike with offline media, there is no scarcity online – that there are countless unsold impressions that are going to waste and that we now have the technology to at least achieve some value around this inventory. But while that’s a commonly held theory, it isn’t completely accurate. The only medium in recent history that has had true advertising scarcity is network television, and, with this year’s upfront, one might suggest that even this is no longer true. In every other case there has been either unlimited inventory available (magazines and newspapers) or limits that have rarely, if ever, been reached (radio, cable and spot TV).

Spanfeller’s right. In print, if you sold more advertising, you added pages to the book (or created splits) until you reached some magical postal service proportion, one that most publishers never exceeded (especially in STM publishing). The same held for radio and television. The answer to a capacity limit was to simply run more ads.

In fact, online advertising might have more scarcity in scholarly publishing since we have such stringent prohibitions against advertising in or near content. This makes the spots we do have more valuable.

Countless research has shown that almost all positions in magazines and newspapers have similar impact with readers. Print publishers have aggressively argued this for years—for the most part, successfully. They have not backed away from this even in the current brutal media marketplace.

Reaching the audience is what has value. And while there are no click-throughs for print or television ads, their proponents have done a much better job asserting and demonstrating their value — as advertising.

Imagine if I could sell you a print ad that, in addition to doing everything you’re paying $X to get now, would also ensure — virtually guarantee — that 0.x% of customers seeing it would go to your online store. You’d pay me $X++, wouldn’t you?

Instead, online advertising has gone the other direction, into the realm of remnant inventory and ad networks that liquidate precious inventory for pennies on the dollar.

Online advertising’s lack of relative success has perplexed me for years. How could a medium that reaches a more desirable demographic (younger, richer, more tech-savvy, more information- and product-centric) sell for a fraction of the cost of passive print advertising?

The answer comes from the unfortunate fact that online advertising was viewed as measurable. And who did publishers look to for analytics about a measurable form of marketing? Their direct marketers, of course.

Because of this, the notion that advertising only mattered when it was clicked on, and should be priced accordingly, drove down the prices of advertising thanks to the anchor of performance metrics. Who cares if it attained the same goals as print advertising (be seen, remembered — you know, advertise)? Instead, experts quickly proclaimed that online advertising only shows its value when it’s clicked on.

Google’s AdWords, which uses text ads to drive clicks, only reinforced this notion. (Interestingly, Google just announced that it is selecting ad networks to participate in Ad Sense).

Text ads are more like direct-response marketing — there’s no real branding accomplished, no visual or aesthetic experience created, no palpable advertising draw. And they work because they’re there in response to a search query.

Text ads fulfill demand — they don’t create it.

And that’s how advertising is different — advertising creates demand. As Spanfeller says:

we have allowed the internet to become a demand-fulfillment medium almost exclusively, to our detriment.

This situation has spawned ad networks, which aggregate ad positions publishers have given up on selling and sell the bundles at distressed prices. How are these ad networks viewed? As David Koretz put it in April:

They are a cancer that slowly eats away at you from the inside, doing severe damage even though you feel fine. They are a cancer that has spread to nearly every publisher, and threaten to do irreversible damage to our industry.

How imbalanced are things? Koretz calculates that ad networks get $0.27 CPM compared to publishers who make an average of $20.17 CPM. In other words, publishers make 74.7 times as much money when they sell advertising.

It is time for publishers to spend our collective efforts to crack the code on display advertising and start innovating on ad formats, reporting, measurements, and sales channels.

In addition, ad networks gain the connections publishers need to make it with online advertising, further separating them from the online advertising world.

Is your audience valuable? Do advertisers want to reach them? Sell advertising, not something less. And look hard at the ad network spiel. You may be undervaluing your audience by 75 times.

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Kent Anderson

Kent Anderson

Kent Anderson is the CEO of RedLink and RedLink Network, a past-President of SSP, and the founder of the Scholarly Kitchen. He has worked as Publisher at AAAS/Science, CEO/Publisher of JBJS, Inc., a publishing executive at the Massachusetts Medical Society, Publishing Director of the New England Journal of Medicine, and Director of Medical Journals at the American Academy of Pediatrics. Opinions on social media or blogs are his own.


6 Thoughts on "Online Advertising — Are Publishers Squandering the Opportunity?"

I worry that we’ve been trained from the early days of the web to ignore advertisements online. All the pop-ups, flashing and moving banners and such have created a level of focus where anything that looks like an ad goes unnoticed. I can’t recall a single banner ad I’ve seen in the last week.

Although to be fair, I use an adblocker in Firefox (some ads do slip through), which is another problem altogether: with more and more people using adblockers, and more and more people using DVR’s to skip commercials, are any of these conventional means of advertising going to last much longer?

I think advertising will have to change, which is nothing new. I’ve been interested to see how smart television people are adapting to DVRs. For instance, on ESPN, “SportsCenter” now has a running menu of what’s coming up, so that fast-forwarding is more reliable. Overall, they probably will get more people recording it, and stopping at more places, so that ads get seen more (and their program remains tops). And, while I hate to admit it, clever ads get me. The Mac ads make me stop. There’s an insurance ad with a dog worrying over his bone that I have to watch every time (the long version, at least). And so on.

As for online ads, I’ve tried ad blockers, but they often blocked other things I wanted to see, or left me feeling in the dark about the capitalistic world, so I removed them. As the story you link to points out, “. . . if their inevitable domination of the Web is in progress, it’s happening really slowly. For another, every major purveyor of Web browsers except Opera is either a major advertiser or a major seller of ads, or both–even Mozilla makes millions from the Google ads its default home-page search displays.”

I think one of the real difficulties in online advertising is reaching the level of engagement you mention above for several ads. There’s only so much a banner can do, and often, trying to do more is seen as an annoying intrusion.

But I think that’s partly the point — online advertising isn’t about creating really a deep level of engagement, but is about being part of a campaign that creates awareness in stages that leads to demand. Advertising has to work on multiple levels and across media. If online advertising is the only advertising a company is doing, shame on them. They need print, TV, radio, point of purchase, and space advertising (billboards and the like). Online advertising is an increasingly (some might say, central) part of advertising in the broader sense, yet we undervalue it for reasons that don’t really stand up to scrutiny. We have great audiences, scarce spaces available, so we should have valuable advertising real estate.

I never would have seen that series of Sony ads if the Scholarly Kitchen hadn’t called my attention to them. And I passed them on. . . . So although I think I’m like David Crotty and ignore advertisements, I realize that I pay a _lot_ of attention to _certain_ ads (like the ones Kent watches and remembers). Think of what _those_ ads are worth. . . .

Over here in the UK, we have something called the red button for the SKY satellite TV service. An advertiser can construct an advert that makes use of this and thus have a direct call to action from the tv advert – Pressing the red button on your remote can take you to special content, to info with discount codes, whatever. It’s barely used by the advertisers.

I’m sure there’s some complex reasons for that, but one thing keeps coming back to me, that perhaps quantity is being confused with quality.

Seth Godin made an observation about Firefox users – 15% or so of your visitors have gone to the trouble of looking at their browser experience and then gone and done something about it. That tells you something pretty important about them.

But that info isn’t used (by publishers let alone ad people). It should be. Neilsen ratings are probably near to useless now as a measure of TV programming reach (See here: – the equivalent in the UK probably isn’t any better. What value are the ABC metrics in a world where the first choice for information is online?

Like a drunk looking for his keys under the lamppost – because that’s where the light is, I think advertising is clinging to the things they know rather than the things they need to be figuring out. I cannot help but notice, that when you can offer figures on something – you tend to get forensically examined on the matter, if you can avoid that and get away with woolly terms like “brand awareness” Not only do you avoid that tricky issue, but in fact when you do get some numbers, nobody wants to know.

You are right – there is only so much a banner can do… Mostly it’s annoying. But what if a banner got you to do some of that cool AR stuff we were chatting about the other day. What if the banner put something up that your mobile phone could recognise. What if the banner was in some way related to what you were looking at when you went to the newspaper site? Yes NYT I’m looking at you! I’m in the UK – how useful exactly are the ads for Sprint Mobile Phones?

I think there is a solution: The Geek Marketer – It’s a new role for a new world.

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