Advertisers still value old-fashioned reach more than targeted advertising

The idea
"Advertisers used to want reach but now it’s targeting".  The story goes something like this:
In the world of television dominated inventory, advertisers paid highest prices for ad space that brought reach. This is changing. Now with the advent of the web, the story goes, they now place top value on specific audiences based on demographics, profile, timing, engagement etc.

This is rubbish.

Whilst targeting is a nice idea, our research shows it is NOT VALUED today by advertisers. It might one day but it will take a long time. 

Evidence

You want proof?  The best example we had from research was the interview with the agency who tells its publishers to stop talking about their niches because they are still too small to make much economic sense. I quote;
“Publishers shouldn’t worry about targeting right now.  I mean, if you offer advertisers too much targeting that you’ll do all that work just to generate 30 impressions. You’d get far more cash by just offering them the cash”

There is, of course, a terrific irony here that it is the agencies who try to differentiate themselves on their sophisticated ad servers for segmenting and tracking audiences.

What does this mean for entrepreneurs & management teams?

If you are running a niche site, and you believe that one day an advertiser brand will pay more for 11 targeted eyeballs than 1000 un-targeted ones then you need to work out when. 

If you are offering sophisticated targeting tools, you’re in a great position, just calling the timing for mass adoption is tough.

Meanwhile there are a few opportunities for entrepreneurs:

1) Aggregation networks.  There are opportunities today for entrepreneurs rolling up a series of niche publishers.  A critical mass of either owned or syndicated web properties means you can offer advertisers both reach and targeting.  This is the business model of Glam.com, FM publishing; two great businesses.

2) Alternatively an entrepreneur might believe that the value lies with the guys selling the picks and shovels, allowing other people to create aggregation networks.  This is people like Adify.

3)  Common cookie space advertising is another way of solving the problem of low value ascribed to niches.  This is essentially where an advertiser will build a criteria of people that they want to target.  They then create an openID of the characteristics that they want to target and if a publisher can exactly match this request with their audience database they can get a match.
This is still a nacent part of the market but one that really excites me.  Like a dunnhumby for multiple retailers. 

If you have or know any other businesses operating in this sector I’d love to find out more.

Comments

[James Penman]

A caveat. I worked for a PLC that built an automated niche ad network from 2000-2002. It failed not because of the scale of inventory/reach but rather because advertisers didn't get sufficient clicks/conversions. The poor quality of the inventory outweighed reach. Targeting wasn't the issue, reach wasn't the issue. It was conversion to click or sale. Performance.

Then set up a company to run our own UK specific niche ad network for which we still have the code and although it made money it was clear that niche publishers who were willing to aggregate used Google's AdSense for its flexibility in terms of placing ads anywhere on site or thought the little cash they made from advertising wasn't worth the effort.

Remember that advertisers want it both ways - reach and conversion - which is perfectly right and good luck to them but it does muddy the waters relative to entrepreneurial ventures in this area.

The above relates to experience up to around 2005 from memory so, sure, things have probably changed in last 2-3 years.