News today that NBC Universal has ended its ad relationship with Google. For the last two years, NBC had outsourced its ad sales to Google using the Google TV Ads online market place. That marketplace is a platform giving advertisers considerable flexibility as to how to structure campaigns. Clearly, the end of the relationship suggests something is amiss.
There is a strong sense whereby the traditional media outlet model whereby ad space on outlets is sold by an internal sales force is outdated. One of the great challenges advertisers face is managing the number of impressions they are able to put in front of any given target consumer. On one level, they want to get the frequency of those impressions right. Ad executives I have spoken to suggest that the optimal number is between 3 and 5 impressions but most of the time consumers are actually seeing the same ad more than 10 times. That’s too much. The advertisers are paying for waste or, if they pay for clicks, the click price is likely to be higher than sustainable.
The reason for this waste of ad space may come in part from difficulties in tracking. It is hard enough to track what a consumer sees on your own outlet’s website or TV station, let alone what they see as they switch between outlets. Browsing and channel flipping have become more common and with that the possibility of waste.
An advertiser can avoid some waste by confining their campaigns to a small number of outlets. Given this, it is hardly surprising that popular outlets can command premiums for their ad space. But other advertisers – especially those going for wide reach – need their campaigns to be cross-outlet and cross-media. That is where the wasted impressions problem really arises. And this bites outlets who need to discount ad space because of that waste and inefficiency. It is not a stretch to imagine that the fall in, say, newspaper ad revenue is the result of this type of problem.
It is technologically conceivable that such inter-outlet waste can be avoided by using tracking technologies that keep account of what consumers see across outlets. This is what Google is aiming for. The ultimate in perfect tracking would be for an ad platform to offer advertisers a deal: “we will put a 3 and only 3 impressions in front of consumer X in the next two days.” No waste, no mess.
There are many issues standing in the way of this ideal – privacy, the reach of an ad platform and technology – but the NBC Universal pull-out highlights another challenge: to enable better tracking will likely require outlets to cede their ad sales function to the likes of Google. Today’s news looks like a step back away from that ideal.