How technology will save media planning

The topic of "media as a commodity" sparked by a brief debate between Jim Meskauskas and Jeff Minsky on Facebook recently. This discussion resonated with me, as I have written on this topic in the past, and I've flipped back and forth on the issue as I've thought more about it.

Ultimately, I do believe that most media is becoming commoditized, and the question is -- what does this trend imply? Is media doomed? Does it matter if it's commoditized? Gold is a commodity, after all, and because it can be easily traded, it is more "liquid." That's actually not a bad thing at all.

Let's start as Minsky did with the Wikipedia definition of a commodity:

A commodity is some good for which there is demand, but which is supplied without qualitative differentiation across a market. It is a product that is the same no matter who produces it, such as petroleum, notebook paper, or milk. In other words, copper is copper. The price of copper is universal, and fluctuates daily based on global supply and demand. Stereos, on the other hand, have many levels of quality. And, the better a stereo is [perceived to be], the more it will cost.
Commoditization occurs as a goods or services market loses differentiation across its supply base, often by the diffusion of the intellectual capital necessary to acquire or produce it efficiently. As such, goods that formerly carried premium margins for market participants have become commodities, such as generic pharmaceuticals and silicon chips.

When we look at the state of media today, there are definitely elements of media that are becoming commoditized. A raw impression is certainly a commodity -- that is, an impression without any differentiating attribute. The ad networks of the world have figured this out, and take in a raw material, a "blind" impression, and add some categorization and targeting to it, creating a processed good.

But because these businesses only operate with any significant revenues and margins when they sell lots of impressions at a low cost of goods sold, even these "processed" impressions sold by ad networks could still be called commodities (e.g., auto shoppers or teens). And in this current hand-sold world, and even in the first generation of more automated buying processes -- like paid search -- these broad categories of audiences and content are being commoditized. A keyword is such a standardized unit that numerous disparate advertisers can bid against them in very straightforward way.

In the past, media planning and buying were arcane arts that intermingled very soft, difficult-to-measure methods with complex human relationships between buyers and sellers. As media has fragmented at an unprecedented rate, software has entered the mix to help automate planning and buying, and many of the various buying parameters have been streamlined.

The next generation of technology will change the way this works fundamentally. The matching of advertiser goals with publisher available inventory will lose its hard edges as we begin to translate goals into hundreds or even thousands of buying parameters. These types of matching, optimization, and filtering problems are far more complex than humans can manage. This is a classic hard problem that is perfect for software to address.

I envision a world where media planners will spend the bulk of their time defining the goals of the advertiser, and translating those goals into complex instructions that can be interpreted by software. The ad platforms of the future will match these instructions against available ad inventory that is enriched with targeting attributes based on user behavior and content associations -- and then optimized in an automated fashion by very smart systems.

We can already see some companies beginning to offer this type of technology. Companies like Invite Media, Turn, MediaMath, [x+1], AppNexus, and many others are beginning to apply this type of technical innovation to the various ad exchanges already. And this is just the first generation of these types of technologies.

The next few years hold many opportunities for the media world to evolve in ways that are pretty game changing. Media agencies that are not investigating these nascent technologies will be caught flat-footed.

Eric Picard is the advertising technology advisor to the advertising platform engineering team at Microsoft.

On Twitter? Follow Picard at @ericpicard. Follow iMedia Connection at @iMediaTweet.

 

Comments

Zach Coelius
Zach Coelius October 12, 2009 at 9:07 PM

Eric,
While I completely agree with your conclusion, I think the discussion of the commodification of media is a entirely wrong. By using technology to look at each impression as a function of the user and the content and bidding for it uniquely, technology can finally unlock the individual value. That is the absolute opposite of commoditization. I think what this discussion is really about is the disaggregation of the valuing of the impression from the supposed value add of the media sales organization and the content's brand value. To the extent that machines are buying impressions based on measurable and repeatable results, a lot of ephemeral differentiation of media simply disappears.

Randy Haldeman
Randy Haldeman October 8, 2009 at 5:28 PM

I agree with Jeff that most media is not a commodity but I believe that Eric has highlighted an inflection point in the industry. The companies he mentions, and others like a new one called Rocket Fuel, have brought forth a "step-function" improvement as to the way ads can find the right target audience. With these new algorithms, campaigns can be tested, tuned and tweaked without human intervention all at the speed of light.

So even though most content is not a commodity, this technology can adapt to serve the right ad to the right person and the right time. Everyone wins. For the media planners and buyers that take advantage of it, it will make their jobs more productive and more creative as they can spend less time on determining which message should go to which audience.

Eric Picard
Eric Picard October 8, 2009 at 10:24 AM

Sorry about that Jeff, it was clearer when I first wrote it, but after several edits, I inadvertntly edited out the position you actually held. Apologies.

Jeff Minsky
Jeff Minsky October 8, 2009 at 2:08 AM

So the way this article is written makes it seem that i'm the one that called media a commodity. For the record, I do not believe that most media fits the definition of commodities despite the fact that many want to put it in that bucket. We have to develop a deeper understanding of the relative values based on context and resist the urge to go strictly on superficial efficiency vs. the real effective value of each placement.