Asked by an analyst about the relative pricing between print and online for help wanted, Tribune’s president Scott Smith said, “What we’ve done is aggressively raise online prices, keep print prices relatively stable. If you looked at a big market today, you’d see an average print ad costs about what an average online ad costs” (story).

Wow. While he’s talking about a specific set of comparable ads (help wanteds in print and online), this is still amazing. Not too long ago online was the “value-added” or “bonus” exposure that print, radio and TV sales reps tacked onto deals for their advertisers. Newspaper sales execs once famously faced an exquisite option: sell a $100,000 full page ad and call it a day, or develop, present and implement a creative online program with multiple placements, response methods and metrics to run over a period of time for one tenth the revenue. Not much of a choice for a leisure-loving sales rep.

It’s still a publisher’s duty to make smart choices about monetizing every impression according to value provided. The good news is that the market now recognizes the value of online media and is ready and able to pony up accordingly. The sad news for sellers of other media is that they took their dominant place in the world for granted for too long and now they’re having to catch up from an unfamiliar place at the bottom of the media buyer’s pile.

Online sellers: let’s remember that the worm can turn at any time. Keep providing value; keep demanding value; keep getting full value in return.

Fairfax Digital’s The Age says online publishers down under are dropping prices by up to 60 percent as massive amounts of new, lower-priced inventory hit the market (Low-cost online rivals hurt major net publishers). In contrast, the article also quotes a major buyer who expects only a 5% to 10% price drop, and a publisher who suggests that deflation will end and prices will rise again when brand advertiser budgets start kicking in next spring.

Regardless of whether Australia is a bellwether, the concerns of buyers and sellers about unstable inventory and pricing are universal. In the U.S., total display inventory has more than doubled over the past 18 months according to AdRelevance, while prices have continued to rise for both premium and non-premium ads (eMarketer).

Working with research provider Insight Express, Right Media recently surveyed top 200 web publishers for their views on inventory and pricing and the outlook for 2007. Among pertinent findings, the research shows that publishers who have invested in a dedicated yield management effort - i.e., they’ve committed the organization to measurable goals, assigned accountability to people with authority, and implemented appropriate systems - are more optimistic about the future.

These publishers simply have more confidence in their ability to spot material changes in supply and demand ahead of time and to make necessary adjustments before significant changes become crises.

On the flip side, publishers who have not invested in people, process and philosophy appear to be counting on a buoyant market continuing to carry them. Perhaps they are still unaware that tools are readily available to help them get the most out of every impression - regardless of whether the inventory is sold by their own sales team or by multiple ad networks.

Watch this space for details about a white paper detailing the study, “How publishers think about, manage and monetize non-premium inventory.”

The IAB Annual Members Meeting in New York on November 29 was jam-packed with exciting developments and upbeat forecasts. Not only did the industry record its first ever $4-billion quarter (story here), but ad revenues for the first three quarters of 2006 are nearly equal to the total for all of 2005. When the counting’s done, 2006 online ad revenues will exceed $16-billion, nearly triple the tally at the bottom of the dot-com bust in 2002.

Speakers offered many reasons for our good fortune, but they also worried about our ability as an industry to support continuing rapid growth with outdated systems and processes and without measurement standards.

On the upside, nearly every major advertiser will increase commitment to online advertising again next year. Online as a whole still commands less than ten percent of total ad spending, in spite of the fact that consumers spend more than 25 percent of their media consumption time online. Individual advertisers are accelerating their internet spending dramatically, however. HP, for example, dedicated more than 20 percent of its worldwide ad budget to internet this year, while more than doubling the number of sites bought. (more…)

If you’re involved in your site’s ad sales or operations, you probably get lots of calls like these from networks:

“We’ve got great new advertisers, but you’re not giving us enough inventory. We’ll guarantee you $1.00 cpm for the next three months if you move us up the chain.”

“Our new targeting technology increases results across the board by as much as 1,000 percent. Give us more of your better inventory so we can show you how to generate more repeat business at higher prices.”

Everybody wants your inventory. Let’s celebrate!

Or not. Put on your premium sales hat and now it’s you telling a different story:

“Our site delivers your target audience and keeps them longer than any of our competitors. Our brand-building programs help you capitalize on their loyalty and that stickiness.”

“If we lock up this deal today, I’ll get you the 300×250 on the section front and bonus you an equal number ROS.”

Sometimes it seems like you can’t give it away.

So you keep doing what good publishers must to increase demand: produce better content; find and keep the right audience; package the inventory for easy sale; recruit and train great salespeople who buyers trust.

Then you dump your remnant inventory with those nagging networks and settle for a few additional dollars every month.

It’s ok to admit that you relate to this scenario. For the most part, this is how publishers prioritize and run their ad sales business.

At the iMedia Brand Summit in Henderson, NV, in September 2006, Dave Steinberger, VP of Operations for Tickle, Inc., hit a nerve when he told a room full of publishers how his management team purposefully took a completely new approach to remnant. They had to change their philosophy, their worldview, their perception of the true role of remnant inventory in their overall business plan.

For example, they realized that if they pursued a partnership with several other sites to create a strong ad package for brand advertisers, they would have many times more remnant inventory to deal with. It didn’t make sense to take what might be billions of impressions and hand it to a few networks. Doing so meant that those networks would determine the value of those assets. They would pay the new Tickle Grapevine Network based on their numbers, which wouldn’t distinguish one property’s value from another.

With no ability to see what the networks are doing and how they are valuing the inventory, Steinberger and his partners would never know if they were getting as much as they could for the assets.

Fortunately, Steinberger found Right Media and the Publisher Media Exchange, which made it possible for Tickle Grapevine to scale a large and lucrative network for their remnant inventory.

PMX enabled the publishers to earn market value for every impression, minimize overhead, and maintain full control over what runs on their pages. One person is largely responsible for managing more than 60 advertisers running 3 billion impressions monthly on 12 sites. (Read the full story here)

Ask yourself if you may be undervaluing your inventory. Maybe you’ve put a significant chunk of it in the hands of a few networks and you’re ok with getting a few checks. If you take a closer look, you may realize that you’ve left a lot of money on the table. Get your team together and ask some questions:

• Do we understand how our networks value the impressions we give them?

• Do we know where every ad comes from and how it is performing?

• Can we automate the way we manage our network relationships, consolidate their reports, and approve or ban ad creatives?

• Does our current ad technology ensure delivery of the highest-priced ad on every ad call?

• Do we have a good reason for every house ad we serve instead of a paying ad?

Give it some thought. You may discover that it’s a good time to change the way you think about your remnant inventory.

Mediapost published an update on the plans of an advertiser task force, championed by Julie Roehm of Wal-Mart, to test an eBay-like auction marketplace for buying and selling tv ad space. The article focuses a lot of attention on network resistance to the idea, based on the belief that an exchange commoditizes their inventory.

The article states:

In May, the President-COO of NBC Universal’s television operations, Randy Falco, was even more definitive in his opposition to the proposal. “That’s ridiculous,” he said. “We’ll never do that. That commoditizes your product.”

The counter-point is presented in the article as well:

A top executive at the AAAA’s with ties to the task force said that he is hopeful the networks will reverse some of their initial opposition and opt to eventually participate. Michael Donahue, AAAA’s executive vice president, said the online auction could be a way for networks to boost revenue for lower-tier inventory. “Would I expect a network to put up a ‘CSI’ spot for auction? No,” he said. “I don’t think they need to sell it that way—and frankly, I don’t think the advertisers want to buy it that way. Is it possible they’d want to put up a 3-rated spot on a summertime re-run and maybe hope that they get a better rate than by selling it in scatter in the summer? They might want to do that—who knows?”

This is the one issue that will have the greatest impact on the future of exchanges for advertising. Will publishers be able to get over the fear of commoditization that goes hand in hand with exchanges? We hear this all the time: “Won’t participating in an exchange cannibalize my brand sales efforts and make it impossible to get advertisers to pay rate-card? If I allow any of my ad space to be commoditized, won’t it all become a commodity?”

Publishers are right to ask the question, and right to be wary. I may be a bit of a black sheep amongst exchange advocates, but a great deal of advertising inventory is not appropriate for sale through an exchange today, and may never be.

Yahoo should not be selling its home page or premium positions throughout its network via an auction, nor should The New York Times. Martin Nisenholtz, CEO of NYT Digital, said the following to me in a recent conversation: “There is something magical about a brand. That is a lot of what advertisers value. If we allow our inventory to be sold in an auction, don’t we risk destroying that magic by commoditizing the brand?”

Martin is right—there is magic in brands, and that magic needs to be protected. For many advertisers, that magic is the brands they associate their brands with. After all, how can Proctor and Gamble believe in the power of the Crest brand, but not believe in the power of the brands they associate with Crest? To these advertisers who buy based on brand value, a media auction is an utterly foreign concept.

On the other hand, there are many advertisers out there—spending huge amounts of money—who don’t think that brand magic is important. They believe in data and response metrics. They buy based on analytics, not based on the perceived value of a brand. There’s little that any publisher can do to convince these marketers to buy premium positions based on brand value. They simply don’t buy that way. To these advertisers, a media auction feels like Nirvana.

So how do publishers use exchange dynamics—which they know will make them more money on inventory they can’t sell at a premium—to sell to response-driven advertisers, without compromising their ability to sell premium to brand-focused advertisers? The answer is elusively simple: as long as a publisher creates a clear and consistent distinction between that which is “premium” and that which is “commodity,” the risk disappears.

Brand advertisers buy premium positions. They commit a budget, get delivery guarantees, and often receive other benefits such as first right of refusal and exclusivity. They get granular vision into exactly where their ads run. Premium targeting may be used such as demographic or behavioral segments.

Response driven advertisers tend to buy bulk positions, based on metrics such as cost-per-click, lead or sale. They’re usually comfortable buying without delivery guarantees, without vision into exactly where their ads will show up, without exclusivity or right of refusal.

In short, brand advertisers and response advertisers buy different ad products. Most large publishers just need to create that distinct product offering for response-driven advertisers, instead of sending non-premium inventory to ad networks or running house ads. The most efficient strategy is an open media exchange, where buyers can comfortably bid for inventory and each impression is auctioned in real-time to the highest bidder.

That distinct solution will ensure that publishers sell anything they don’t sell at a premium for as much money as possible, while never compromising the magic of a brand.