Most of you who know me probably know about my obsession with analogies and my love for sushi. Today, I'm going to use the Tsukiji Fish Market in Tokyo to explain why we should rethink the industry's largely accepted practice of revenue sharing as a means of compensating premium publishers for their data.
More than 700,000 metric tons of seafood are handled every year at Tokyo's three seafood markets, with a total value in excess of $5.5 billion. Located in central Tokyo, the Tsukiji Fish Market is the biggest seafood market in the world, and also one of the largest wholesale food markets of any kind. The market handles more than 400 different types of seafood from tiny sardines to 300-pound tuna. This marketplace, in a physical sense, is impressive. But in my opinion, its auction methodology and fair compensation for quality is one that our industry can learn from.
It all begins with the wholesalers estimating the value of their goods and then setting a "starting bid" for the auction. This is based on the freshness, quality, and uniqueness of the specific item. There may be hundreds or even thousands of similar fish for sale, but the pros (on both the sell and buy sides) can spot the best.
Point No. 1 -- Things of higher quality cost more, especially if there are fewer of them. I don't foresee any argument there.
Point No. 2 -- Wholesalers set the base price for their goods. (Remember that one.) Market buyers (including restaurant agents, food processing companies, and marketplace stall operators) inspect the fish for quality and then determine the price they will pay based on how they would prepare it, and how much they can then sell it for -- adding in a reasonable mark-up.
Point No. 3 -- Buyers add incremental value with preparation and technique, but the core value is still in the ingredient. For example, a buyer of the fish cannot take low-quality fish and add an unreasonable mark-up to it. Well, they can, but they will quickly be out of business.
And what does this have to do with our industry and current publisher rev-share models?
Unlike the economy that drives the price of goods at the Tsukiji Fish Market, the online industry does not fairly compensate publishers based on the quality of their data. Instead, much of the value is placed on the media on which a particular ad is placed.
For example, Publisher A and Publisher B both contribute user data to a particular ad campaign. Because their data are mixed together to drive one campaign (which isn't running on their own sites), there is no way to attribute more value (read: rev share) to one over the other. In an unfair way, all publisher data is treated and compensated equally, despite the quality of the data that they bring to the table. It is as if the bluefin tuna and ordinary eel are both valued and sold at the eel base price despite the difference in value it can bring to the buyer's menu and bottom line.
Let's apply some media numbers to this scenario. Let's say an advertiser is running a 2 million impression campaign and paying $5/CPM ($10,000). The data driving the targeting come from two different data sources -- one that has low intent behavior and the other that has pure commercial intent behavior. While a majority of the campaign results are driven by the quality of "intent" data, today's rev-share model does not compensate that data source accordingly.
Paying for the ingredient components ends up rewarding the high-quality data producers. This is far superior to today's rev-share model, which would eventually drive out high-quality suppliers.
Before premium data sellers willingly participate in a data-sharing model, they must make certain to get fair compensation like the Tsukiji wholesalers. They should seek an independent price for their data based on quality, separate from the value of the media where they will be deployed.
Going back to our analogy, the core value is in the quality of the fish itself, and that is what drives the value chain. While ad creative and inventory are also very important pieces of the recipe, the intrinsic value is in the data.
Omar Tawakol is CEO BlueKai.
