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Mediasmith Anvil |
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Volume 5, Issue 1 May 3, 2006 | |
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Is There an Inventory
Crisis? |
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By David L.
Smith Introduction Is there a web inventory crisis? Unlike Mick Jagger, it turns out that you can always get what you want -- assuming you plan far enough ahead and are willing to pay the price. In fact, some say that we don't have an inventory issue, we have a pricing issue. At any rate, there are issues, sidebars and issues on top of sidebars to this problem. In the interviews and research conducted by us for iMedia, we've tried to get a handle on the very complex problem. Whether the site side, the agency side or on the part of technology solutions to "the problem," there was no shortage of folks with input -- some on the record and some off the record. Shortages of preferred inventory do exist -- especially the closer you get to the scheduled start date. The recent declaration by the IAB and its members that they would start charging for schedules as ordered when creative was late (see The Late Creative Conundrum in iMedia Connection by Jim Meskauskas) is certainly related to tightness of inventory and a "sellers market" in some quarters. However, how big a problem it is depends on the category you are working in, your perspective, your ability to plan and your willingness to pay. |
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Mediasmith
Morsel |
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How is the web sold? Web inventory is not all evenly valued. At the top of the funnel is inventory that has high demand. Bennett Zucker, formerly of Tacoda and now of Right Media, estimates that as little as 25 to 30 percent of all inventory is "highly desirable." This includes both premium placements on portal home pages or channels of portals sold on a daily basis and categories like auto, financial services (on a year-round basis, but with exceptional pressure during the tax season), health areas (such as diabetes and cholesterol), retail mall, movie listings and anything where real time information is needed. In addition, contextual placements are generally accepted to be the most effective. The common perception among most clients -- and many agencies -- is that ad placements that are contextually appropriate within related edit are most effective. More about the uniqueness of the auto industry, the web's biggest advertising category below. As inventory that is in greatest demand is sold, whether it be for branding or direct response (DR), a different marketplace takes over. It is one of targeting, auctions and networks. The targeting can take the form of traditional demographic or psychographic (sociographic or lifestyle) or behavioral targeting. Can behavioral targeting help? Behavioral targeting involves following a visitor to a high-demand area through cookies and serving ads to them in other content. Before spinning off unsold inventory to the networks, many of the bigger sites use an auction model for large DR advertisers. The auction model permits the portals and other majors to get the highest rate possible for inventory after the natural demand has been worked through. Network distribution is the most common method of selling off unwanted impressions. Those that tout behavioral targeting regard it as the panacea for all inventory issues. The rationale is that any impression against a valued consumer who is "in market" for a specific product or service as indicated by specific content viewing can be effective. In fact, recent research for Tacoda from Bill Harvey , CEO of TRA, Inc. suggests that the surprise factor of finding an ad served through behavior technology -- but to the right demographic target outside of a contextual placement -- works better than contextual ad after the first impression. AOL research showed that its subscribers accepted the concept of behavioral targeting. This type of targeting is used extensively by many sites through the services of companies like Tacoda, Revenue Science and others. Yahoo was an industry leader in developing behavioral targeting early. In fact, this is now a key strategy for their inventory control. The numbers suggest that if behavioral targeting
were to be accepted on a universal basis, the amount of available
inventory that is regarded as preferred could grow substantially, easing
inventory issues. |
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Mediasmith
Morsel |
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What do sites advise? From a planning standpoint, the sites are quick to advise on best practices for making sure that inventory desired can be secured. There is no question that planning in advance is ideal. For ongoing advertisers in high demand content areas, annual planning and buying is advised. The portals advise getting the RFP discussion going two to three months in advance if specific types of high demand inventory are in the plan. Andy Wiedlin of Yahoo says that "when clients don't plan ahead you risk disappointment." He went on to reinforce that demand creates pricing inventory problems and parried the line that others in his company have voiced in public that having an agency involved is most beneficial to an orderly marketplace. He did not regard the crisis as an inventory crisis, but urged that we need better planning. Joanne Bradford, MSN's corporate vice president of global sales and trade marketing and chief media revenue officer says, "We're seeing demand outstrip supply in premium areas like the homepage. Demand has been unbelievable in the last 24 months. Four years ago ads on the homepage were $25,000 to $500,000 apiece; now they can be up to a million dollars a piece. We believe the reason for this is because direct marketers have figured out that online is a huge reach vehicle, creative has gotten better and companies are constantly improving targeting capabilities." She goes on to say that some advertisers try to book the MSN home page 12 to 18 months out. Kathy Kayse, senior vice president of national sales for AOL, contended that they were not in crisis mode. While she admitted that certain areas are often sold out, they have been able to find solutions and that there is still inventory there for most advertisers. The key, she said was to generate ideas outside of high-demand areas with content. "A good example was the opportunity to work with Target in Q4. They challenged us to come back with a great idea. We worked with our programming team and developed a ticker on the home page that created a wish list," she says. The idea involved sales, marketing, and programming. The automotive market is unique. New cars, used cars, aftermarket, dealers and regional dealer associations all vie for very specific inventory. The category is unique in that a major purchase is made over a short period of time (two to three months average in-market), then the customer is out of the market for at least two to three years. Competition is intense for the inventory, the result being a fairly organized organic upfront marketplace. At this point, some 70 to 80 percent of automotive inventory is sold for the current year and the upfront for 2007 is beginning to be defined. Actual up front orders for next year may not be cut until fall, but the marketplace is one of incredibly long lead times. From a publisher standpoint, there seems to be a perspective that advertisers need to be less demanding as publishers feel they cannot be as flexible for every ad program. Publishers also want more information from the buyer as to how the sale is going so that they can protect inventory. The late creative issue outlined above remains a
major sticking point. One estimate was that a portal loses upwards of 20
percent of inventory by an average of one to three days due to late
creative. The major sites say that they are going to start billing clients
for ads that are ordered but do not run due to non-arrival of
creative. |
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Mediasmith
Morsel |
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What are agencies saying? From an agency standpoint, there is a feeling that sites do not have good inventory control systems in place that their sales people can easily utilize. There is a strong feeling about putting inventory on hold. While this is a common broadcast (and print for covers) practice, the reality is that this hold is generally for a day or two, and web agencies seem to want activity to be held longer. That said, agencies say that sites don't really understand the hold concept. Many agencies say that sites represent that orders are on hold only to have all or part of the inventory disappear. One buyer likened it to being at a store with something on the check-out counter only to have someone come in, slap down some cash and run out with it. This seems to be another part of the industry that needs some standard practice. Another agency manager suggested that the hold practice would be too difficult as there are so many buyers in the marketplace. In addition to web and traditional agencies where the money is highly fragmented due to the number of agencies, there are still many free lancers and client direct buyers. A suggestion to formalize the market might have to do with agency accreditation with only accredited agencies allowed to put inventory on hold once systems and standards are developed. As a 15 percent commission generally comes with such accreditation in other media, such an idea will take some time to attain acceptance according to others. What can you do? Is this a crisis or an opportunity? Within this market tightness (few were willing to call it an all-out crisis); the solutions outlined in this article only scratch the surface. A number of people came forth with suggestions for resolution.
A version of this article originally appeared in iMedia Connection. David L. Smith is President and CEO of Mediasmith , an
Integrated Media Agency based in San Francisco. He speaks regularly at
industry events including ad:tech, iMedia and OMMA. |
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