12 November 2019
This is an answer to a question I got about adtech consolidation.
The Wall Street Journal ran a great piece by Keach Hagey and Vivien Ngo, all about how Google is finally helping to fix the design of that terrible "Lumascape" slide, by letting them add some whitespace and make the logos bigger.Who says Google doesn't do great things for graphic design? Here it is: How Google Edged Out Rivals and Built the World’s Dominant Ad Machine: A Visual Guide - WSJ
So, is adtech consolidation bad for publishers?
Not really. Adtech consolidation is overdue. Any normal Internet business would have consolidated a long time ago. (Ever notice you get mostly Zoom meeting invitations now, and not links to rival conferencing systems?)
What matters is the adtech/publisher split.
In a sustainable ad-supported business you have a split of about 85% publisher/15% intermediaries.
The web is 40%/60% with the publisher getting the small slice.
It doesn't matter if the 60% goes to one company, a few companies, or a Lumascape with thousands of companies. It's still unsustainable for the publisher. When publishers look at the diagrams showing multiple advertisers bidding for an impression on their sites, they're ignoring the other side—the same advertisers bidding for the same user eyeballs on cheaper sites.
Content is commodified, the publisher lacks market power to command a decent price for ads delivered to their own audience, and no tweaking of market share in the adtech business will change that. Real-time bidding works today because too many people have the user's data, and can target them.
Today's big tech companies come at every problem with the same tool: take whatever business is adjacent to me, and try to turn it into a commodity. That works great when your product is an internet service and the business adjacent to you is an operating system. A copy of Linux is a commodity, but it's actually worth more than a copy of HP-UX or Solaris.
But commodification is not the highest value model for the advertising business, which depends on feedback between brand equity and content reputation. Brands are worth more in a market with high-value content sites, and ad-supported content sites are worth more in a market with high-value brands. So what matters to the publisher is not the number of adtech vendors participating in the market. What matters is the number of saleable ad impressions that are in direct competition with your ad impressions. (A site trying to sell an ad on a story that cost $10,000 to report, edit and shoot is competing against a site running an ad on a recycled racist cartoon or a pirated Nickelback song that cost them nothing.)
Adtech's job is simple: to facilitate putting impressions on cheap content into the same market as impressions on expensive content. It might matter a little bit how many companies are involved, but that's not the main story. The survival of any ad-supported site depends on market power, and part of reclaiming market power is making it harder or more expensive to reach your same audience on cheaper sites. That depends on privacy tools and regulations.
The good news is that CCPA is coming January 1. CCPA is not just a compliance issue or a cost center. If we handle it right, it's a way to reclaim some market power by limiting the number of saleable ad impressions on low-reputation sites.