Over recent years, global media companies—themselves among the highest profile brands of recent decades, companies responsible for creation of much of the world’s high-quality proprietary content—have seen their core businesses assailed. Cashflows have come under pressure. Many companies have either supplemented or fully replaced professional content-creation with lower-quality automated or user-generated content. The century-old contract between consumer, publisher and advertiser has been vacated: no longer may content creators reasonably expect to recoup their content creation cost basis (plus some moderate margin) by selling advertising.
Publishers Have Stark Choices
To continue to operate in denial of the structural shift underway across the media landscape is not possible for any long period. Four options are available to global media companies:
- Do Nothing: and go out of business
- Build a Paywall: charge for high-quality professionally-created content, but limit advertising revenues as a result of drastic inventory reduction
- Farm Content: replace professional content with amateur, shrinking cost structure, but as a result suffer reduced media pricing leverage due to lower quality content
- Stand and Fight: deploy systems for more effectively monetizing the advertising opportunity created via the free delivery to consumers of high-quality professional content. Put yourself in this camp if you’re itching for a fight
Just Because You’ve Made That Bed…
Media companies are partially to blame for their own circumstances. Complacence and investment in ineffectual ‘enterprise grade’ price optimization technologies has left many them begging for disruption. Entrepreneurs and venture investors identified how vulnerable publishers are, and have teamed to profit through buy-side, third party data vendors, audience data management platforms and ad networks. Ad tech is all-star at inventing problems, businesses and acronyms without making publishers money.
Further compounding publisher worries, user-generated content and social network advertising inventory has created a profound confusion in the minds of advertisers, as they struggle to make heads or tails of an oversupply of inventory. More confusingly, this inventory—the most base remnant due to the modality of the audience that generates it—is being jammed through the same automated sales channels alongside high-value inventory. We at Metamarkets see this profound monetization discrepancy across inventory classes in the global media markets, both spot and futures. Social, bit torrent and UGC inventory classes all price at pennies to the traditional content category dollar, regardless of targetability.
In recent years, the macro environment has compounded publisher difficulties, falling off a cliff just as scores of venture-funded technology companies have emerged to exploit the inefficiencies in the media markets and the fashion in which advertising dollars flow from demand to supply. As a function of the global economy and wholly independent of structural realignment in the ads markets, digital media pricing dropped off a cliff in 2Q 2008. At Metamarkets we see this in a visualization of a few hundred thousand campaigns flighted by one of our large customers over the past decade—there is a severe price drop-off circa March 2008 as orders dry up and campaigns shorten significantly.
When faced with risk and volatility, it’s human nature to turn tail. Many media companies have done this—maybe they evacuate high-cost content creation, maybe they turn over monetization to third-parties, whether they be networks, exchanges, data platforms or optimizers. For other fearful publishers, they are bounced from one new problem to the next by the ad tech echo chamber, not focusing on any one solution or strategy for long enough to assess whether the problem is worth addressing. The ad tech frenzy du jour surrounds the FTC coming to call. Whether or not regulation is pending, whether or not the publisher data management River Jordan will one day be crossed… rest assured, the crowd will soon fly to a new problem.
All the while, the contrarian stands his ground and prepares to fight a pitched battle for revenues. We at Metamarkets see immense opportunity for publishers whose content is proprietary and has retained inherent value—whether by virtue of content creation discipline, monetization discipline or some combination of both. And, just as recent trends in venture investment and macroeconomics conspired against global publishers, we are now on the cusp of a profound environmental change that will greatly favor well-positioned content-creating businesses. The accelerating shift to digital consumption of content—and the yawning monetization gap—represents a market opportunity worth fighting for. Aggressive, forward-looking global media companies can position themselves to ride the momentum of this megatrend for many years to come. Publishers must deploy monetization infrastructure better fitted to new market realities.
…Doesn’t Mean You Need Sleep In It
While the Mary Meeker chart above has already been misconstrued as the rising tide that lifts all boats, it is anything but inevitable that ad dollars will find their way to the internet and close the content consumption/monetization gap. This slide recommends what should happen, what could happen should global media companies deploy the critical analytics and pricing infrastructure to effect the channel spend shift Meeker predicts. If not, then nothing of great significance happens: we’ll be looking at a widening consumption/monetization spread for the next decade. Spend migration cannot happen on its own, and it certainly won’t happen uniformly across all publisher participants. For many publishers, the money will never, ever come. Businesses will continue to fail, moving counter to the secular trend, even as overall digital migration accelerates.
To prepare, publishers must prepare to do essential and difficult work:
- Provision media transaction, targeting and clearing data
- Process this data in real-time; store at hand for aggregation and recompilation
- Post-Process by mapping data to publisher-supplied, third-party and industry category indexes, tags and benchmarks, along with exogenous economic data to uncover dependencies and correlations driving price signal
- Analyze and Predict factors that drive pricing, infer bid activity among buyers, uncovering pockets of value, dynamically allocate tranches of inventory across sales channels and market platforms
- Scale and Repeat this operation across hundreds of millions of events in real-time, storing granular event information and aggregated reports, all the while compiling a massive information clearinghouse to deliver publisher competitive advantage
The summary view: massive scale data ingestion, price discovery, transaction analysis, real-time decisioning are first-order problems to be immediately addressed. They are the basis for dynamic monetization and global media risk management. These are the opportunities Metamarkets was founded to address.
Remember: it’s easier to create a new problem than it is to solve an old one. From our vantage point, first-order problems represent the largest and highest leverage (and highest ROI) problems for a publisher to solve. The fact that other companies have addressed this opportunity with Soviet-era big iron infrastructure is a specious argument. This does nothing to obviate the need for a scalable solution whose elegance is worthy of the magnitude of the problem.
The Rewards: Pricing and Margin Leverage
This is not pro bono work that publishers must do. This is margin enhancing, revenue generating activity. Metamarkets visited earlier this month with early customers who have seen a 20-40% aggregate price improvement as a result of deploying price discovery, analytics and visualization across their transaction streams.
To many in the ad tech echo chamber, ‘price discovery’ or ‘predictive analytics’ may sound like a ‘Web 1.0’ problem to solve. It may conjure images of the aforementioned Soviet era big iron enterprise servers, supply chain or airline pricing optimization systems, Matlab and burly neckbearded sysadmins. There’s no doubt that serious infrastructure chops are required to address the problem set Metamarkets focuses on: we are stream processing billions of daily events, analyzing and post-processing even before events are written to disk. This requires an advanced, emergent technology stack and vanguard toolkit. Metamarkets helps global media companies sit on top of the global stream of high velocity electronic media transactions, providing publishers the tools needed to manage, analyze and profit from what they see, learn and predict.
Metamarkets Delivers ‘First-Order’ Solutions
At Metamarkets, we are focused on solving ‘first-order’ problems. We are building a scalable infrastructure to ingest, process and analyze billions of daily events on behalf of leading global media companies. We enable our customers to simplify and de-risk their core business: namely that of creating proprietary content to be monetized via the sale of advertising to the content-consuming audience.
Some in the media technology industry have rather pejoratively labeled the problem of media price discovery and predictive analytics ‘first-order problems.’ Dismissing an unsolved problem doesn’t make it go away. Discovering price signal in irrational and volatile markets is not easy and for 15 years has remained an unsolved and largely unaddressed problem for publishers. There is real value to be delivered to media companies in deploying a dynamic, global infrastructure for analysis of billions of global media and targeting events across multiple sites and sales channels. But… it’s easier to ignore or rationalize away a problem than it is to build the infrastructure and analytics products required to solve it. To outsiders, this might seem to be an industry of rationalizers. And let’s face it, most in the industry have moved onto new problems and their acronymous solutions: bright, shiny objects that are more alluring than something as mundane and difficult as effectively pricing and clearing media.
Metamarkets’ entire business is about building first-order solutions. While many in the industry can’t be bothered with such old school problems as pricing and revenue, for Metamarkets, solving ‘first-order’ problems on behalf of the world’s largest media companies is more than enough to get us to stand and fight.