David Carr’s column this morning recommending that newspapers band together to stop giving away their content on the web will no doubt raise the hackles of Jeff Jarvis, Felix Salmon and those who are viscerally opposed to papers charging online readers.
Be that as it may, I thought the most intriguing point he made was about advertising markets, which sell ad space on behalf of internet publishers, but have been delivering low yields because of the excess of supply over demand:
No more commoditised ads. Ad markets and remnant sales have been a lose-lose proposition, ginning up more and more ads for less and less revenue, turning a grim dollars-into-dimes model into a hopeless dimes-into-pennies proposition. Newspapers once thrived by selling scarce ad positions. The downside is turning down ads, and who can afford that right now?
I wonder if we are seeing a turning point for ad networks and ad exchanges, which once looked like being saviours for online publishers but currently seem to be, at best, a mixed blessing.
I wrote a column last year about ad exchanges, prompted by Microsoft’s bid for Yahoo, which included this passage:
This is the acquisition’s hidden promise and the motive behind Google’s planned $3bn purchase of the online advertising group DoubleClick and Microsoft’s $6bn acquisition of aQuantive. “If it works, and that is a big ‘if’, it is the core of the deal,” says David Hallerman, a senior analyst at the research group eMarketer.
The idea is that Google and Microsoft-Yahoo could use technology to place ads more cheaply and efficiently. Instead of media buyers negotiating individually with publishers for space on internet sites, the process would be automated. Ads would be bought and sold like shares on stock exchanges.
It sounds like a fine idea and it will be if it turns out to be correct. The problem is that it is unproven and there are reasons why it may not pan out. Internet publishers and brand advertisers such as Unilever, IBM and Procter & Gamble could easily end up shunning the machine.
Carr is now advocated precisely this – that publishers shun intermediaries and sell their own ads directly, as they do in the offline world.
Update: Razorfish, the online consultancy, seems to be getting on this bandwagon in its just-published Digital Outlook report. It says (on page 14 in the PDF version):
The traditional ad network world will contract as competition for declining ad dollars increases. There are simply too many broad networks competing for the same inventory and not telling a new story. Large publishers (eg the Fox Audience Networkand Turner Entertainment) will continue to take back control of their inventory and monetise it themselves, or they will work with fewer ad networks to ensure quality and maximise value.
