Digital advertising: distribution, the true disruptor
Similarities between stock exchanges and ad exchanges, despite not trading the same commodities, are undeniable.
But it’s ad exchanges that are playing the most significant part in enabling investments to follow consumption. It makes buying and selling easier. Just as stock exchanges have done equities.
Privately held businesses (Pty Ltd) generally have less access to readily available funding, and attracting external investment is a cumbersome process of valuation, deal-making and restating privately-held shareholding agreements.
Listing businesses (Ltd) on stock exchanges enables business owners to manage shareholding via public-share offering, gain access to funding much more readily, but most fundamentally, remove the cumbersome process of privately negotiated share offerings, valuations and deal-making.
The exchange fluidly determines share values and, thereby, business valuation.
Stock exchanges are some of the most important parts of today’s global economy. Countries around the world depend on stock markets for economic growth.
Before the integrated and technology-based systems stock exchanges of today, and before investors used to yell across trade floors and throw order forms into the air, they conducted business in coffee shops.
Early stocks were handwritten on sheets of paper, and investors traded these stocks with other investors in coffee shops.
Now doesn’t that sound a lot like how we traded advertising?
Advertising has pretty much been traded like Pty Ltd stocks. Each Pty Ltd (media owner) looks to offset its stock (ad inventory) to willing investors (advertisers/agencies) through a personally negotiated trade. The media owner pushing the valuation of its ad inventory over the rest of the market, whilst the advertiser/agency looks for best buy against other opportunities presented by the market.
Like trading Pty Ltd stocks, the process is prohibitive:
Sellers can reach only a limited number of prospective buyers, and, similarly, buyers can engage only a limited number of sellers
Sellers define product value in isolation and probably mostly based on biased business return requirements (sell high), and, similarly, buyers evaluate product value in isolation (no idea what same product was offered to competitors at) and probably mostly based on biased business procurement requirements (buy low)
Net results for both sides:
fragmented sales/procurement processes
fair value doubt
potential opportunities missed
Unless, of course, you had superhuman sales reps, absolute superior products and lacked fierce competition, or had more in-market clout than anyone else. Then, of course, as Pty Ltd (media owner) it was plain sailing.
And the same applies to investors (advertisers/agencies), if you had superior procurement processes and controlled significant budgets, then it was easy pickings.
But it hardly ever is, and with the changes in the media landscape, those limiting conditions have all but been eroded.
Yes, digital disruption has played a part – it’s shifted media consumption – international platforms have muscled in on the clout of historic big in-market players. But it’s ad exchanges that are playing the most significant part in enabling investments to follow consumption. It makes buying and selling easier. Just as stock exchanges have done equities.
Trading off digital disruption
Digital disruption and its shifted media consumption opened the sluice gates on advertising opportunities – effectively, it’s flooded the market with stock, and with supply in abundance – it’s a buyers’ market.
One would assume an oversupply of opportunities to be an advertiser/agency nirvana, and, conversely, cataclysmic for media owners – but that’s not necessarily the case.
Distribution: the true disruptor
One of the key issues stock exchanges addressed for businesses was to make equity stocks available at scale, and for investors to have access to a multitude of stock options at the same time.
Distribution has been a severe disruptor for various industries. It’s a well-known anecdote in traditional media: “Whoever owns distribution, owns the market.”
Think large newspaper and magazine publishers “owning” retail outlets or premium shelf space in those retailers – how does a small publisher compete? Think satellite TV broadcast licensing, if you have the licence, you control signal distribution.
The internet facilitates the immediate distribution of content; a severe disruption to the news and media industry, with significant knock-on disruption to the advertising industry. Ad exchanges facilitate distribution of ad inventory, instantaneously, at enormous scale.
It affords small sellers access to large buyer markets and vice versa, it affords small buyers access to large supplier markets and vice versa, it affords media sales and buying at significant volumes and values at a speed previously incomprehensible and definitely beyond what any sales reps or media buyers could facilitate in a boardroom or coffee shop.
Author | Gustav Goosen | first published on Bizcommunity.com