03 2 45 kirby winfield omma display europe - com score on digital scarcity
1. Digital Scarcity
Reversing the curse of the unlimited impressions economy
OMMA Display Europe, 17 September, 2012
Kirby Winfield, SVP, comScore
2. … price is regulated by the proportion between the
quantity brought to market, and the demand
of those who are willing to pay…
- Adam Smith
‘The Wealth of Nations’, 1776
2
5. Demand Supply
Price
When supply is constrained,
price is extremely
sensitive to demand.
CPM
Impressions Quantity
5
6. … with more marketing dollars coming
online, CPM will go up, right?
7. The supply and demand model has two requirements:
Supply & Demand are Independent
Supply is Resource Constrained
8. Media Market Examples
Ad Medium: USA Network TV
Constraint: 32 spots per hour,
5 hours per viewer = 160 spots
Scarcity:
Ad Pricing: Increasing
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9. Media Market Examples
Ad Medium: Inventory sold through Display
Exchanges
Constraint: None! Cost are negligible,
ad space is virtually unlimited.
Scarcity:
Ad Pricing: Declining
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10. If demand increases,
Demand but supply is unconstrained
Price Does
Price
NOT Increase!
CPM Supply
Impressions Quantity
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11. The Problem
unlimited served
Counting
impressions hurts advertising
economics.
The Solution
Introduce Digital Scarcity to the system.
12. Achieving Digital Scarcity
Only count impressions that reached a real user
and had a chance to make a real impact.
were in-view
delivered in the target geography
displayed in a brand safe environment
not fraudulent
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14. comScore vCE charter study results
in-view rates across top 500 publishers
Sites
7 % in-view
100% in-view 69% in-view
? ? ?
best average worst
On average 69% of ads were in-view, meaning
3 out of 10 were never seen.
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source: comScore vCE charter study
16. Some Below-the-Fold ads are
actually premium inventory.
Below-the-fold in-view ranged from 3% to 67%.
source: comScore vCE charter study
17. impressions CPM % served
$5 ÷ 100% = $5
nominal CPM
impressions CPM % viewed
1,000 $5 ÷ 75% = $6.67
effective CPM
If only 75% of ads were seen the
Effective CPM is 33% higher!
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18. The Viewable-Impression-Guarantee Model:
Publisher Economics
Validate Value | If impression viewability is
guaranteed, publishers can sell current
non-premium inventory at premium prices.
Sell More | Publisher is able to sell 15% more
guaranteed viewability premium impressions than they
currently sell in gross premium impressions.
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19. Conclusions
Moving from served to validated
impressions introduces scarcity and
drives attractive economics:
1. Above/below the fold placement becomes irrelevant.
2. Most validated non-premium inventory becomes
premium.
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Before there was digital. Way before there was anything digital there was this gentleman: Adam Smith. This is a statue of him located in Edingburgh .In 1776 he published his seminal work ‘The Wealth of Nations’ laying the groundwork for modern laws of supply and demand by stating that ”The market price of every particular commodity is regulated by the proportion between the quantity which is actually brought to market, and the demand of those who are willing to pay”
Here is how that supply demand model works:For any given product there is supply. Firms will produce additional supply as long as the cost of producing is an additional unit is covered by the price people pay for it. At each price there is certain demand.Here where the supply curve and demand curve intersect, at the economic equilibrium, we have the market clearing price. The price where everything offered is sold.
Now if we shift the demand curve a little bit to the right, thereby increasing demand, –the price goes up!
Now if we fix - limit - the quantity so it can not change. What happens if demand increases
What does that mean for us in the digital ad business. We see - although reluctantly – more and more marketing dollars shifting online. That increased demand drives up the prices, right?
Unfortunately, this is not guaranteed. The standard supply and demand model from 1691 is based on two assumption, first that supply and demand are independent from each other (we have that) and that the production of more supply is constrained by a fixed resource.
Let’s see if that is true for advertising media.TV Scarcity: Limited to 36 spots per hour at 5 hours per viewer you are limited to 180 spotsYou can see the powereof scarcity here, because overall ratings are down, millenials are cutting the cable cord, the TV subscriber base is aging and dying out, yet CPM continue to increases.
This is opposite to the common digital impression. There is no scarcity, the incremental cost of putting out one more impression is academic and the ad space is virtually, literally virtually, unlimited. Without constraints there is no scarcity, and without scarcity CPMs are on a downward spiral. And we can’t act surprised when John Locke could have told us that three centuries ago.
Let’s apply this 312 year old insight to digital ads. We have the demand curve, here, but the supply curve is now a straight line, because digital ad supply does only have negligible production constraints. Adding a digital ad unit is virtually effortless, creating a new website, adding more ad space on a site, more ads below the fold, there is no constraint on increasing supply. The cost are CMP and the quantity is expressed in impressions. Now if we increase demand by shifting the demand curve, the CPM does not change.
So here is the problem the practice of counting unlimited impressions has destroyed the demand and supply model in digital advertising. Demand is increasing, but prices aren’t following. The solution is to restore the economics of demand and supply by introducing scarcity to the system. Because we know that a scarce supply drives up prices.
The current economics of impression counting led the industry down a path of declining CPMs and declining effectiveness. This hurts everybody, because it increases the reluctance of traditional advertisers to bring their marketing dollars online. We can stop that by achieving digital scarcity, by adding a quality to component to the mix, because not all impressions are created equal. Instead of counting every impression served we need to move to only counting impressions that actually had a chance to make an impact because they were actually seen.Ideally, we don’t stop their and ramp up the quality by only counting- not fraudulent.- delivered to the target audience and in the target geography.- And shown in an brand-safe environment.This is not an artificial way to construct scarcity, but it is a common sense approach that introduces quality control to system that desperately needs it. With the higher quality standards, the unlimited supply of bad apples is subtracted and the remaining supply of quality impressions is very limited, scarce in fact.
comScore conducted are study on this, because if there is no difference between the current way we count impressions and the proposed way, or only a marginal difference than all of this is academic.We called it the vCE charter study and it spanned 18 campaigns, across 380 thousand different sites and a total of more than 1.7 billion impressions, working with some of the top brands in digital advertising today.
The first thing we looked at were the in-view rates. How many of the ads served were actually in view, meaning at least 50% of their pixels loaded and unobscured for at least 1 second? We limited this to the top 500 publisher sites, so this excludes any fringe sites.What percentage of the ads were actually in view? 69%! 3 out of 10 ads were never seen. The best case is 98% and since sometimes another browser windows overlays another it is actually not reasonable to ever expect a 100% here.What is your guess for the worst case scenario – within the top 500 publishers? Turns out that only 7% were in view, meaning 9 out of 10 never had a chance to make an impact.
To clarify, being in-view has nothing to do with being above or below the fold. In fact, there are some myths the charter study helped to debunk. For some campaigns less than half of the above the fold placements where actually seen.
On the other hand some placements below the fold where in almost 70% of the time.