How content rec advertising fell behind (and what we can do about it)
Once upon a time – a long-long time ago – display ads of all sizes were served by ad networks.
Ad networks were agencies that bought ad placements for their clients, the advertisers. As the technology developed, their practice changed from manual, over-the-phone buys to what we call today programmatic advertising.
Programmatic advertising enables advertisers to buy ad placements through a real-time bidding process. The highest bidder gets the placement, and their ads are featured within milliseconds.
Publishers – the websites showing the ads – use supply-side platforms (SSPs). These platforms are connected to multiple demand-side platforms (DSPs) – the newer, programmatic version of ad networks. They make sure that their clients receive the best placements – in terms of price, ad quality, and relevance, while SSPs are delivering high-paying ads to publishers.
Thanks to the high number of advertisers bidding for placements, and the high number of publishers offering placements the market stays open and competitive, benefitting all parties.
What happened to native advertising then?
Content recommendation advertising began its evolution just like display advertising. Initially, content placements were negotiated on a one-on-one basis, and then through ad networks. The demand side developed along with the available technology, but suppliers (publishers) failed to get organized.
This lopsided system directly and dramatically influences today’s native advertising landscape.
Native advertising networks/platforms demand exclusivity.
Many times, Tier-1 native platforms require exclusivity from their publishers, making sure that only their ads are served. They might show the ad with the highest CPM, but only within their limited networks. Based on WhizzCo data, even the best provider is only offering the highest bid 40% of the time – when compared to other platforms. According to WhizzCo’s data, real competition between ad vendors increases publisher ad revenue by 37.7%, on average.
Publishers have little to no oversight.
Since the native ecosystem is heavily tilted towards the advertisers and is focused on their needs, many times publishers don’t have access to crucial information and data that could help them further optimize their monetization strategy.Furthermore, even when the platforms provide detailed information, the data is not standardized. Not to mention, that checking 3-4 different dashboards for results can be a tedious chore.
While display ad exchanges open up bidding for placements to all demand-side suppliers, content recommendation advertising networks only work with their own connected advertisers and publishers. Without competition, placements are taken by the highest bidder within a single network. According to WhizzCo’s data, publishers lose out on $1 billion worth of ad income every year by being locked down in exclusivity agreements.
It’s not just publishers.
Advertisers need a better system, too. Reach and transparency matter. To reach specific, high converting audiences, an advertiser/agency would need to work with at least 10 of the leading content recommendation vendors as opposed to working with one programmatic exchange. Moreover, because advertisers don’t know what their effective CPC needs to be to win the auction (because content recommendation ads aren’t purchased via real-time programmatic auctions), they’re unable to optimize their bids for their most coveted placements.
Digital advertising has been with us for 30 years now. The technology is steadily improving, but native advertising, like the fabled youngest prince, needs a hand; a sturdy supply-side ecosystem and open exchanges. For true competition. To replace a system that does not serve any of the (non-Tier-1) players right.
Then, this little prince of ours will be able to slay the dragons of exclusivity, monopoly, and zero transparency – and will become the king we all know he can be.