Yahoo, AOL Can Thrive Again By Rethinking How They Sell Ads

Portals Need to Unlock Assets to Bids and Programmatic Buying

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AOL and Yahoo have traditionally been the kings of online advertising, but technological change happening all around them threatens their dominance. More and more inventory is being bought programmatically. Where the portals once provided a "one-stop shop" to scale, technology can now provide scale, along with a host of other benefits.

The portals still enjoy tremendous brand equity and huge user bases, not to mention premium publisher prices and enormous inventory. The evolution of machine buying does not have to be bad news for their future -- if they can break the mold.

The cooperative model that Microsoft, AOL and Yahoo recently announced -- in which the network sales forces for any of the portals can also sell the remnant inventory of the others -- is a step in right direction. But in the end, it will simply extend the shelf-life of the old model. More inventory will be available to the door-to-door sales efforts of each network, and their audience and data value proposition will improve, but the challenges of arbitrage pricing, limited scale and in-market competition persist.

The solution is simple and offers the portals an opportunity to make more money than they think. Instead of offering Class 1 and Class 2 premium and remnant content, they should unlock their media and data assets via private exchanges, with automatic bidding that favors the premium publisher.

To make this work, the portals' sales forces will have to change drastically. The portals have to get good at selling 10% of their inventory with unique and amazing integrations. The other 90% they must sell programmatically -- and do it better than anyone else.

In both cases, they should focus on marketer results rather than media properties. The best way to grow ad revenue is to let the ad buyers determine what's most valuable to them. An impression has no intrinsic value for all buyers, and is instantaneously perishable.

Consider an impression in front of a single CIO of a midsize tech firm. Cisco and Symantec might find that impression valuable, whereas Nintendo and Mattel would value an impression seen by a parent who's a regular e-commerce shopper looking for gifts for young children from home just before the shipping cutoff date for Christmas.

If you don't have an advertiser ready to buy the ad, and to thoughtfully "vote" for the value of that user through the lens of "how much is this particular impression opportunity to this particular user worth to me," the 50-millisecond moment passes and a random ad is jammed in the space at truly remnant prices.

Portals have incredible assets. They serve as beacons of well-lit, premium, transparent impressions in the programmatic world. As more demand flows into the channel, and applications move beyond direct response to branding, portals can command more than their fair share.

It's all in the data. Portals' rich data assets include terms of service with their audiences that allow them great insight into intent and interest. They own their pages, allowing them to develop contextual categories that can link ads to their environment precisely. By allowing this data to power decisions, they can share in the value they create for brands.

They can flip the model. They can stop putting more and more resources (sales people, marketing muscle, business muscle) into protecting and creating scarcity around the diminishing asset of the traditional media buy. Instead, they can shift that focus and those resources to leverage the growing market of programmatic buying, and unlock the tremendous value their properties have in the new world.

ABOUT THE AUTHOR
Joe Zawadzki is CEO, MediaMath.
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