The Third Wave of Advertising Modernization

In the first wave of advertising modernization, radio and television consecutively consolidated a hugely fragmented advertising environment from local newspapers. At first, the consolidation from radio enabled advertisers to reach large audiences through a limited number of channels. In 1870, New York City alone had over 90 newspapers with 118 editions. For large advertisers, the advent of radio reduced this channel complexity enormously. By 1942 New York City had 12 radio stations broadcasting to an area greater than ten times that served by its local newspapers. In the second phase of consolidation, the proliferation of radio stations along the dial was again consolidated by the advent of television. In 1960, there were only three television stations in New York City. I call this wave of advertising modernization the Reach Revolution.

While the Reach Revolution was instrumental in changing the advertising industry, a huge sacrifice was made in the efficiency of targeting. The low cost of content production and distribution at scale compared to print publishing made that inefficiency moot. Nobody really cared because it was so much better: efficiency through sheer scale.

Like the first wave of advertising modernization, the second wave was driven by a new type of media, the internet. While we are still in the throes of the second wave, one thing is clear. The second wave of advertising modernization focused on relevancy. The internet enabled audiences to be segmented across many publications, devices, contexts, and their individual geographic locations. The second wave enabled advertisers to see their audience with much more detail and understand how to increase the relevancy of their messaging by including many more variables than just age and gender. We are now at the apex of the second wave, Real Time Bidding (RTB).  I call this second advertising modernization wave the Relevancy Revolution.

And so, here we stand at the end of the second wave and the start of the third wave. RTB stands at both the apex of the second wave and the trough of the third wave. While RTB enables the targeting of individuals and provides the highest possible degree of targeting, it also enables the introduction of market forces to create a truly dynamic pricing environment. RTB is the tip of the iceberg and MASS Exchange is the iceberg.  The third wave is the Pricing Revolution.

In the coming years, the way in which all media transactions are priced will change. The new wave in advertising recognizes that advertising is not a commodity, that publishers may each have a unique brand value, that advertisers need volume discounts, and the media buying should be managed like a portfolio of advertising assets across media and devices.