Targeting on Publishers' Websites May Be Due for a 'Natural Correction'

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Data-driven targeting on publishers' websites may be headed for a "natural correction," according to Chris Copeland, president of ad-tech platform Yieldbot.

The correction, Mr. Copeland argues, will come as marketers trim spending on certain consumer targeting to compensate for rising minimum prices on publishers' inventory.

His view isn't universally held -- more on that below -- but Mr. Copeland said several red flags have already materialized. In August, for example, No. 1 advertiser Procter & Gamble said data targeting had limited effectiveness for certain products.

"I think what brands need to understand is what targeting is really a needle mover and what targeting makes them feel all warm and fuzzy," Mr. Copeland said. "It's a bit of, 'Do you really need a seven-course meal if a three-course meal is going to fill you up?'"

In this scenario, the key change is the proliferation of header bidding ad technology, which has let premium publishers see that their inventory is often worth more than the bids they used to accept.

"What header bidding meant for the marketplace is suddenly inventory that was historically bought at a lower price starts to rise," Mr. Copeland said. "There's more competition and different valuations to different inventory. And floor prices are being put into place."

Should floor prices rise, sophisticated data overlays -- such as targeting that can tell marketers whether a given web surfer shopped at Walmart last week -- will get a hard look from advertisers.

Chris Copeland, president at Yieldbot.
Chris Copeland, president at Yieldbot. Credit: YieldBot

"Now everyone is better at understanding where their place is, what the cost is," Mr. Copeland said. "And I think we will start to see everyone reconsider where they invest and how they invest because it won't be as cheap as it was two or three years ago."

Eric Eichmann, CEO of ad tech powerhouse Criteo, doesn't agree.

"First, let's start with the premise of supply and demand," he said. "Advertising demand is not expected to change dramatically. And publisher inventory is not changing dramatically. The only thing that has changed is header bidding."

Header bidding has increased revenue for publishers and costs for advertisers, but the disruption will "flush itself out in a couple of quarters," Mr. Eichmann argued.

"Marketers will adapt their bidding strategy to reflect the fact that they are in a different bidding environment," Mr. Eichmann said. "Over time, we think the effects of header bidding will be substantially less, and the people who will win are those who are smart about how they bid in an environment where everybody is bidding at the same time."

If that means publishers can't hike their minimum prices, data overlays won't face new scrutiny.

Header bidding has gained widespread adoption from publishers -- and even retailers to an extent -- because it lets everyone bid on ad inventory at the same time. The previous prevailing system of so-called "waterfall auctions" went through groups of buyers in turn, accepting the first decent offer without getting bids from later groups in the queue.

Buyers who don't have the technology to properly handle header bidding will wind up paying "$10 instead of $9," Mr. Eichmann said. But tactics will evolve, he said. "Fundamentally, the publisher inventory hasn't changed and the advertising demand hasn't changed, so over time I think the dynamics won't be as dramatic as you had in the beginning."

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