Marketers Continuously Fail to Understand the True Value of Media

They’re often under or overpaying with ad spend

Brands spend billions of dollars on media during Super Bowl Sunday. The digital side of that spend generates mountains of actionable data for marketers, but one basic question will go unanswered: Did the price paid for media reflect the true value?

Research shows that 40 cents of every media dollar spent goes to middlemen. The so-called ad-tech tax isn’t a symptom of a broken market; it’s a sign that there’s no such thing as a media market at all.

Consider price discovery within the direct buy context. Publishers respond to RFPs with their rate card pricing, which at best may be updated based on RTB pricing details. That methodology ignores data inputs from the wider market, which is to say it’s not even close to the concept of a market price. But scrutinizing direct buy prices also creates a distortion that makes it appear as if marketers are quantifying media value when in fact they’re measuring the ups and downs of their relationship with the sell-side.

The so-called ad-tech tax isn’t a symptom of a broken market; it’s a sign that there’s no such thing as a media market at all.

Programmatic buys are more complicated, but they too distort the true value of media. To understand why this is true, marketers need to understand the evolution of media buying from ad networks to real-time bidding (RTB).

Initially, ad networks offered a way for publishers to sell remnant inventory. However, from the very start transparency was an issue and the user experience suffered. In theory, RTB was supposed to solve the transparency issue by matching buyers and sellers in real-time. But of course, initiatives like RTB 3.0 only underscore the fact that ad tech’s byzantine model for connecting buyers and sellers leaves everyone in the dark no matter which bidding model we use or what tech patches the IAB mandates.

Fixing RTB isn’t a question of picking the right auction model or rethinking the tech; it’s a matter of creating a real market for media. Instead of the black boxes of Silicon Valley, Madison Avenue should look to the open markets of Wall Street where buyers and sellers benefit from real-time price transparency. How, marketers should ask, does everyone in the financial industry know the real-time price of equities?

As it turns out, the answer isn’t just a matter of lightning-fast computers that match buyers and sellers in milliseconds. The reason the financial markets do price discovery so well is that they combine a spot market with a future market. This is essential because while buyers and sellers will always game the volatility of the spot market, the future market demands that buyers and sellers consider long-term value. By combining both markets, media pricing can achieve transparency for the first time in history.

Forecasting will give publishers the ability to plan in ways that subscription-based analog publishers once did. That stability will make for better content, user experience and audience development. In other words, the sell-side will make a better product, which in turn will benefit all stakeholders, including consumers.

A transparent market will create an equally large and beneficial transformation on the buy-side. Because marketing is increasingly about measuring media buys across channels and looking for ROI to drive real business outcomes, you have to know whether the price you’re paying for media reflects its true value.

Right now, marketers can be certain that they’re underpaying or overpaying. Or put another way, marketers can only be certain that their media dollars are going to waste in the dark. For the next Super Bowl media blitz, we should turn on the lights.