Here’s One Way to Improve Digital Advertising: Charge Less to Run Good Ads

Publishers could create a new financial incentive for quality

If quality were factored into ad pricing, would it encourage better ads?
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The market for media is dysfunctional, in large part because consumer attention is mispriced.

At a high level, the concept of media is pretty simple: publishers use content to capture people’s attention and, every so often, they loan that attention to an advertiser who runs a message against it. After the message is consumed (or ignored), the remaining attention is passed back to the publisher to begin the process again.

Marc Guldimann, CEO, Parsec Media

So how is that loan of attention between the publisher and advertiser monetized? In other markets, the price of a loan has to do with the credit risk of the borrower. But not media. In media, the interest on borrowed attention is priced simply on the size of the loan: the number of impressions bought, the length of a video ad or the dimensions of a banner.

When attention is loaned, the risk is around the impact of advertisements on that attention. Will an ad cause you to change the channel, or bounce off a website? Or maybe it will engross you and cause the intensity of your attention to increase. The quality and relevance of advertising has a dramatic impact on the condition of attention as it’s passed back and forth between publishers and advertisers.

So in media risk can be quantified as the quality and relevance of an ad. In order to properly price media, these factors should be baked in. This isn’t a bitter pill to swallow—shouldn’t higher quality advertising cost less to run than low quality advertising?

Measuring Quality

The measurement of ad quality is easy in certain circumstances. Today many digital platforms utilize politely interruptive experiences that put the consumer in charge of how long they spend with ads that capture their full attention.

The beauty of integrating quality into the price of media is that it creates an economic incentive for better advertising.

In these environments, like skippable video, feed-based ads and large in-line formats, the time a reader chooses to spend with an ad is a direct indication of its quality. This isn’t a new idea, with a number of platforms moving to time-based advertising and Facebook announcing it was using “time spent” as an indication of quality in its feed algorithm last year.

Pricing Attention Properly

We can measure quality based on historical time-spent and even begin to predict how long we think consumers will spend with advertising. Time as a quality metric can be applied to the price of borrowed attention in a number of ways. The simplest is to give priority to higher quality ads in a way that might look something like Adwords or even a credit market.

The beauty of integrating quality into the price of media is that it creates an economic incentive for better advertising. Publishers that adopt risk-based pricing models like this will attract higher quality advertisers and create better experiences for their readers. Advertisers who buy media in markets that value quality will finally capture the upside from the investment they make into creative while enjoying lower pricing as they stop subsidizing poor quality advertisers.

Marc Guldimann is the co-founder and CEO of ad-tech platform Parsec Media.