Now Is The Time For Digital Marketing To Embrace Scarcity
Columnist Rob Rasko explains why publishers need to come to terms with a world of fewer ads — and why it will actually give them more leverage.
What is scarcity, and why does it matter, anyway?
It’s how Uber gets you to pay more for a car in a rainstorm when everyone else in the city is trying to stay dry. It’s the last slice of pizza in the box when you and your friends are still hungry. It’s the last cold beer on a hot, sunny day.
And how much would you pay for those things?
That’s right… You’d pay whatever it costs to get them.
In life, scarcity is more common than abundance. Sometimes it is artificial; sometimes there are only a few items left, and sometimes you may get really concerned about missing out or losing an opportunity. Scarcity in the face of demand is what creates the market and defines price pressure.
During our company’s (614 Group’s) Brand Safety Summit, I delivered an opening call to action to the industry. I told a story about a remark that CBS CEO Leslie Moonves made during his Q3 earnings call.
He said, “In our broadcast TV group, stuff is flying off the shelf. Our sales guys are killing it, and you better come and get some.”
In essence, I explained, what we heard was a really great salesman creating scarcity and pricing pressure on a huge stage in front of Wall Street and the world. Moonves made no hesitation to use this earnings call as his platform to share this observation — a point the marketplace should sit up and pay attention to.
Don’t get me wrong — all of these challenges are real, and all of them need solutions. But when you evaluate these thoughts in their entirety, where do you net out?
Less Means More
The future of digital publishing will be a world of fewer ads. The concept is straightforward, but for some reason, I don’t hear anyone else saying it.
As a result of fewer ads, the ones we will and do have — the unblocked, non-fraudulent, viewable ones (and boy, they sure are valuable, and they sure are scarce) will cost more because they won’t be available for long.
Why are we afraid to point our finger at those? Why are we afraid to embrace scarcity and come to the table to collect for the value we provide, the way Moonves would? With a rapidly growing digital audience, the supply and demand balance will continue to add more value to publishers.
During The Brand Safety Summit, Jon Hsia, managing partner and Digital Investment lead at GroupM, shared the same sentiment during a panel focused on “Making Money with Brand Safe Inventory,” saying:
[blockquote]The unlimited supply [of inventory] allows marketers to go out there and demand more for less money because there is always other inventory to buy. The more we clean up the inventory collectively, the more we can introduce scarcity into the market, and maybe then supply and demand will take hold, and we have an actual marketplace to trade on as opposed to made up numbers.[/blockquote]
On a separate panel on “The State of Viewability,” IPG Mediabrands’ Mitch Weinstein also expressed openness to paying for higher-quality, scarcer ads, saying:
[blockquote] I think there is an appetite to pay a little bit more for better quality. We have to. As an industry, we are hooked on low CPMS that we’re buying programmatically that are junk. We are going to our clients saying, “We got you an 18C [cents] Cost Per Acquisition because we are taking credit to all of these ads that are never seen, but yet someone ended up converting that was associated with that cookie.” That’s not good for our industry — not for pubs or agencies or clients. I think there is a possibility of paying more for more better quality, premium quality, as we currently do anyway. We pay more for premium sites than we do for networks and programmatic.[/blockquote]
In September 2015, eMarketer released statistics indicating that digital ad spending is expected to reach $198.3 billion in 2016, accounting for 32.7 percent of total media ad spending. By 2019, digital ad spending is expected to reach $283 billion, accounting for 39.3 percent of of total media spending.
But while ad dollars continue to flow into digital, publishers are under increasing pressure to offer more for less. And as Condé Nast’s Jason Baird pointed out during our event, “If you want the right audience next to the right content, we can do that, it’s just that there is less inventory. It’s great to hear that there is demand, but if we have 30 percent less inventory, you’ll pay 30 percent more for it.”
The Way Forward
But how do we get there? How can we ensure that we are connecting the dots between the buyers who will have an open mind and the sellers who need to properly represent value?
In my opinion, and one that is understood by some of our smartest clients, the way forward is workflow efficiencies. But how does workflow connect with rates, you may ask?
Well, let me explain. In a world of fewer ads, we must ensure that our sellers know exactly what they have to sell and that they understand how to properly price their goods. The larger the organization, the harder this is, but it all starts with the workflow.
Now is the time for publishers to recognize that embracing scarcity will give them more leverage than they’ve realized they had in the past and room to push back when necessary. Ready or not, in 2016, scarcity is the new normal in digital advertising.
In some cases, it will be imposed by marketers and in other cases, by consumers. All of this may seem a bit scary, but it’s happening.
Publishers must operationalize their business and arm their teams with the information to make quick decisions around pricing and negotiations. There is only one last question to be considered here: Will you deal with these changes from ahead or from behind?