The Frontier Of Innovation In Advertising

The evolution of advertising technology innovation is shifting. It used to be pipes. Now it is something else.  In the last few years, technologists have been hard at work building an interconnected network for delivery and bidding across the media industry. Now, the network has reached critical scale. This is when things change. There are many day-to-day technologies that we take for granted because the networks they built have already reached scale - credit cards, telecommunications, and social media to name a few.What good is a phone if there is no one to call? Why would you use a social network if nobody that you knew was on it? What use is a credit card if you can't find somewhere to buy stuff with it? Networks are awesome! Networks create a whole new set of value propositions to their users. The value of the network isn't just that it provides a simple way for members of that network to communicate. Does a traditional phone call between two people have the same value proposition as a conference call, just smaller? No. One conversation among many people is not the same as many conversations between two people. That math has no power here.

The evolution of advertising technology is shifting to the "conference call." The reason that you have seen fundamental innovation in our industry stall is that the basic rules of the media plumbing are set. Innovation among  the major players now focuses on scale, speed, and cost of operation. That's cool, but those are not fundamental problems facing the advertising and publishing industries. Media buyers and sellers just don't have enough communication in the market about what is going on. Communication in the market can bring about amazing outcomes.

CLOB.jpg

In an AdExchanger article, members of the Facebook technology team discussed 'the"people-based" marketing opportunity.' The idea being that Facebook is scaling targeting resolution across the entire internet. In an environment with this level of complexity, everybody needs to be talking to everyone else so that there are enough 'conversations' being had. A single 'conversation' only tells you price. A conference call tells you value. Would you rather be a buyer and know the price of something or what it was worth?

What if publisher Somethingsnappy.com decides that they want more money. The Somethingsnappy.com management team undertakes to monetizing their platform by buying bot traffic and other such shenanigans. Over time, as the buyers of Somethingsnappy.com media realize that there are problems, they start to pull media buys and reduce the demand in the market. In a "conference call" market the change in demand is seen as fewer buy orders and lower bid prices on the order book. This process sends a very important signal to Somethingsnappy.com buyers who are still in the market, something may be wrong with Somethingsnappy.com inventory; the price is dropping. This kind of value can only come from  "conference call" market innovations. The "conference call" identifies poor value faster. But, this is a fair market, so the pendulum swings both ways.  If Somethingsnappy.com's media performs really well, outstanding in fact, then more bids and or higher bids will creep into the market. The "conference" call identifies better value faster too.

In a second price auction, only the winner knows when demand is dropping, and they only know it if it happens at the second price. That is a pretty blunt instrument for measuring broad demand.

If powered to do so, a network can be its own built-in policing mechanism. The price of an item in the market is a reflection of demand. In a "conference call" market you know something is good because it sells for a premium. The price is the voice of the market and the collective expression of the members of the network. Quality in the market is much easier to identify. Intrinsic policing is just one of the many benefits of the "conference call" market.

While that is all true, there is one caveat. Price, or any other signal from the market is the result of data, lots of data. This is where the network actually is. It is not the pipes, because the members of the market act through the pipe, the activity of buyers and sellers is what  flows through those pipes. It is the information communicated across the network, not the network itself. The market is our understanding of historical price information and the representations of future supply and demand. Together this data forms our view of the market. This is where the next wave of ad tech innovation will take place. There are a few companies in this space, but I'm not sure that even they know that they are in this space...