WhizzCo’s Bill Nolte discusses the role of content-recommendation vendors in advertising.
Data, or lack of it, was a major theme in digital advertising in 2021.
Whether we’re talking about mobile marketers losing ad-targeting data on Apple devices, or the protracted sunsetting of the cookie, and growing privacy-friendly legislation in California and elsewhere, data was, and still is, on everyone’s mind.
In light of these data challenges, it’s not surprising that content recommendation vendors experienced strong growth last year in this $3 billion market. With marketers eager to run ads as content at the end of articles, and publishers looking to buy distribution, content-recommendation market leaders Taboola and Outbrain successfully went public in 2021. Because content-recommendation ads are served by the vendor and not via a programmatic marketplace, personally identifiable information (PII) data isn’t used to target content-recommendation ads.
But the lack of auctions in content recommendation also means that publishers are denied the data they normally receive when they analyze ad performance via programmatic exchanges.
For example, with programmatic advertising, if a publisher blocks Ford and GM to run ads from Toyota exclusively, they can still see how much Ford and GM bid on those impressions via the exchange, enabling them to calculate the real cost of running Toyota exclusively. This data is used to determine if, and when it’s time to terminate said exclusive deal with Toyota and accept ads from other automotive manufacturers.
It’s the transparency inherent in the programmatic auction process that provides participants with a truer value exchange. An advertiser losing a bid understands that they will need to bid more in the future. For every bid won, that advertiser can calculate with some proximity the incremental value of that ad to understand how much should be bid in future auctions. Beyond knowing the winning bid, the publisher also understands the value of each user across each content section, based on the amount, quantity, and source of bidders. This data gives publishers greater control to make more intelligent decisions, regarding advertising as well as editorial matters.
In addition to transparency, programmatic exchanges also offer publishers a competitive marketplace, where switching is relatively easy, and costs are low to do so. Programmatic exchanges compete with each other and must, therefore, work harder to support publishers through features including integration with multiple DSPs and pre-bid solutions, dynamic-floor pricing for greater publisher control, ad-quality filtering, and support for header bidding monetization solutions.
Furthermore, as many publishers are locked into annual or even five- and ten-year contracts, switching content recommendation vendors isn’t easy. Additionally, when publishers work with more than one vendor, reporting results are not normalized across differing platforms – making apples-to-apples comparisons difficult.
So, who’s benefitting from the publisher’s lack of data, transparency, and control? – Content-recommendation advertisers. These advertisers know exactly how many cents to bid for each ad to earn a desirable return on investment. And they benefit from the publisher’s lack of knowledge regarding the opportunity cost of running their ads instead of others.
The increasing importance of content to advertisers provides publishers with an opportunity to take back control over content-recommendation advertising. First, they can make quality ads and content a priority, rejecting lower-quality advertisers while working with the vendors and advertisers to ensure that they only accept advertisers that meet their guidelines, as they do with display, video, etc. Second, they need to demand greater transparency from their content-recommendation vendors regarding bid volume and pricing to empower making smarter advertising and editorial decisions based on more complete data.
By working more closely and more transparently with a broader range of publishers (not just the tier one publishers), content-recommendation vendors can improve publishers’ decision-making capabilities. One way content-recommendation vendors can enable publishers to overcome the revenue shortfall driven by privacy legislation and app targeting changes is by helping them deliver intent-based ads against contextually relevant articles and videos. Ultimately, this will improve ad quality which in turn will drive more high quality, branded advertisers to content recommendation, increasing revenue for publishers and content-recommendation vendors alike.