Creating false scarcity in advertising

It’s absolutely absurd that The Wall Street Journal is reporting that major sites are running out of ad inventory. There is no end of inventory — that is to say, people interacting with content of all sorts and all subjects — in blogs and elsewhere on the web. This is exactly why those big sites should be setting up networks among them to support them — not buying them but finding the quality and trusted sites and including them in ad networks. This is always why it’s important for media companies and us in this new world to educate advertisers that being on the front page of a big site is no longer smart advertising. No one, especially advertisers, should want to recreate TV’s inefficient and overpriced upfront online.

Says the Journal:

As marketers shift dollars from TV and print media to the Internet, more Web sites are hanging “sold out” signs on their most coveted pages and dramatically raising ad rates.

The front pages of Yahoo Inc., Time Warner Inc.’s AOL and Microsoft Corp.’s MSN are sold out on big display ads for months in advance, ad buyers say. Web sites offering car-buying tips are booked so far in advance — up to 18 months in some cases — that they are selling ads for next year in a process similar to the way network TV spots are sold….

MSN says it currently charges between several hundred thousand dollars and $1 million for a prime, 24-hour ad spot on its home page. That’s up from about $25,000 to $50,000 four years ago.

“It’s starting to get into Super Bowl territory,” says Sean Finnegan, U.S. Director of OMD Digital, a unit of Omnicom Group Inc. that buys ads for clients such as Dell Inc. and Johnson & Johnson.

By contrast, the average price of a 30-second TV ad for last February’s Super Bowl was $2.4 million, while a full-page color ad in People magazine costs $228,275. A 30-second spot on this week’s episode of ABC’s “Desperate Housewives,” which had 26.5 million viewers, cost $574,504, according to Nielsen Monitor-Plus….

Still, the rising tide of ad dollars is lifting some smaller boats. The shortage of premium spots is driving advertisers toward smaller targeted Web sites that capture niche audiences and even into what is known as “remnant inventory,” or otherwise unwanted spots across a wide array of Web sites.

Watch that tide shift further.

Google, by the way, is way ahead of them, not seeing scarcity as a sales opportunity but as a problem to solve by reaching deeper into the web. That’s the right way.

Google is something of an exception because it has a different model from the big portals. Where other portals rely more on certain highly viewed pages, Google links its ads to keywords in Web searches and other online content; the ads are displayed when consumers view related content. Google doesn’t have a static amount of places to put ads. Rather, advertisers bid in an auction to have their ads displayed when consumers view relevant content and generally pay only when a consumer clicks on the ad. Such ads can appear on sites ranging from AOL to a one-person Web log.

“It’s agnostic toward inventory,” says Tim Armstrong, Google’s vice president of advertising sales. “It could be a home page, it could be page 4,326. Our inventory basically grows along with the Web.”

  • Mike G

    Let’s get real about how ad agencies work here.

    The people at the top don’t even know how to turn computers on half the time.

    Even the people in the middle don’t spend hours and hours learning about every blog. Any medium needs to be served on a platter to them. (Hence Pajamas Media, or whatever it’s called now. That’s one attempt to aggregate a bunch of sites/content for an easy sell.)

    The end result is, they wind up knowing the names of exactly five blogs. And when they’re sold out, well, oh no, scarcity! As absurd as it is. Of course it’s not absurd when your agency has bought them up and then can say to you the client, well, your competitors can’t buy X, but WE can get you on it.

    This is SOP for ad agencies and media buyers, alas. The young twentysomethings of the media department buy what they know and what they don’t know doesn’t exist. I was at one three-initialed giant a few years ago when Readers Digest made a big push, setting up kiosks with free copies in the lobby. Here was the second or third largest circulation publication in America– and to watch the staffers approaching the kiosk likes apes approaching the monolith, it was obvious that most of them had never touched it in their lives. Which is why ad dollars flow to hip urban publications with tiny circulations, while a red-state stalwart like Readers Digest was quite literally overlooked. (Flyoverlooked.)

  • Jeff,

    I have to agree with Mike here. As an agency person for 20 years working in media, we are lazy, don’t seek out new opportunities and only react to what is placed in front of us. It’s horrible but that’s how it is. If the “knowns” are sold out, it’s assumed everything is sold out. I do agree with you though that there really is no such thing as an ad inventory problem ion the web, It’s false. It’s a story, perhaps planted, simply to raise rate for publishers.

  • Duneview

    Want to compete with TV’s “inefficiency and overpriced upfront?” Create value. Show advertisers how you can aggregate customers for them. Stop moaning about “false” scarcity- it isn’t false at all. It’s physics. Time is perishable. Once the moment is gone – it’s gone. TV demonstates to advertisers that the way they use time is valuable – it delivers masses of customers efficiently.

    The notion that we are suddenly in a “post-scarcity” world is hogwash. Print people have never been burdened with scarcity. They can expand the book any time they want. But they have to demonstate to advertisers they have value. Want to lessen the demand of the front cover (or Big Site front page)? Make the back of the book more valuable.

    Want more advertising dollars? Get more customers.

  • Running out of ad inventory. That’s so 1.0. Where there is consumption there is advertising …it’s just that no one has developed a better model yet for 2.x advertising…

  • The quote I’m far more interested in is: “Despite the Internet’s vast size, the biggest 50 Web companies are attracting 96% of the ad spending, according to PricewaterhouseCoopers. Most goes to the top four portals — Yahoo, Google, AOL and MSN.”

    I call bullshit on those numbers, specifically the Google ones since much of their revenue is forwarded on to small publishers. The number seems to have come from this PDF on the bottom of page 8. As it stands, those numbers aren’t very Longtailian.

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