We Love a Parade.

by Doug Weaver on November 15, 2012 at 9:59AM

Over the past week, I’ve been asked at least a dozen times about Federated Media’s much ballyhooed decision to “shutter” its direct ad sales business in favor or “programmatic buying and native advertising” businesses.  In Adweek, Tim Peterson described it as a move that “…could presage a foundational shift in the online advertising landscape.”

To which I would say, “Settle down Tim.”

Because of Super-Storm Sandy, The Upstream Seller Forum Dinner was rescheduled for Wednesday night November 28th and The Seller Forum to Thursday November 29th at the Thomson Reuters Building.  Because of the change, a handful of seats have become available for qualified CROs, EVPs, SVPs and VPs of sales.  If your company would like to be represented at this important event, please reach out to us right away.

Let’s look at the facts.  While the business press loves a good paradigm shift story — and Federated would very much like to run in front of the parade that’s already forming — individual publishers are making these kinds of decisions every day.  Just without the grandstanding.  In the Upstream Seller Forum events we host, there’s been a thoughtful running debate for close to four years around the role of ad exchanges and programmatic channels in the publisher’s world.  To these thoughtful publishers, the revenue world looks like a series of dials and switches to be carefully turned and calibrated.

So why the big announcement and all the breathless press coverage and Twitter chatter about Federated?  In one of her press interviews, CEO Deanna gave a pretty good indication when she pointed out “…when you’ve got an independent company like ours that’s venture-funded, we need to make bets that we know will [see] return.”   I would suggest that the “return” in this case is actually ROIE:  Return of Investor Enthusiasm.  Federated and its bombastic founder John Battelle have always had a bigger profile on conference stages and inside the boardrooms of Sand Hill Road and Silicon Alley than they have in the daily give and take of the media and advertising world.  Tying the company’s future to a press release that includes both programmatic and native makes all the sense in the world.

In the past five years, the venture community has been over-funding the ad technology space with the subtle precision of drug dealers handing out stacks of Benjamins.  Some kind of “validating event” — like, say, a high-profile publisher firing her high priced sales team and betting everything on technology and self-service — is the hopeful narrative that keeps the house of cards standing a while longer.  But the quiet, careful recalibration and streamlining of the media and marketing worlds has been going on for years, and will continue for years more.  It’s not as sexy and dramatic a story, but it’s the truth. The revolution will not be televised.

Will the programmatic, data-enabled buying and selling of ads be a bigger part of our business?  Absolutely.  Is “native advertising” also a meaningful growth area?  The jury is still out:  if it is, it’s influence will be unevenly distributed to a handful of players.  Is it time to start firing direct sellers?  That’s laughable.

Will we continue to over-react to showy press releases and other forms of corporate misdirection?  That’s up to us.



Reader Comments (7)

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  1. Mark McLaughlin November 15, 2012 at 2:23 pm

    When a new cable TV network is launched, the rule of thumb is “do not build a sales force until you are carried in 30 million homes.”

    In other words, analog media properties realize that paying for a sales force does not make sense until your audience is big enough to make sense for advertisers to look at you.

    Not online. Hundreds of content publishing websites are created with ad revenue as the only revenue stream. The first thing they do is hire a good sales force because digital media buyers are the only buyers who do not pay much attention to real audience data. Monthly unique visitors calculated by Google is not real audience data.

    Federated did not take a great leap forward towards a modern form of ad sales. Federated came to the realization that the audience is so darn small that the sales force has nothing to sell.

    To be clear, pure direct response ads will go anywhere via any machine so long as the price is low and going lower. That’s different. Brand advertising which is planned strategically does benefit from the talents of a human sales force but it does not matter how great the sales force is, when you have wonderful content but no audience scale, the revenue stream from brand advertisers will dry up quickly.

  2. Brian Quinn November 15, 2012 at 4:59 pm

    Brilliant post Doug. Not sure what I liked better: you calling Batelle bombastic or… To which I would say, “Settle down Tim.”

    You certainly fleshed out the reality on this one. Here at Triad we are embracing the inevitable progression of programmatic buying and advising our premium e-commerce publishers that their well-lit, 1st party data intensive environments will thrive in this new ecosystem. But, only if they (we) manage it in tandem with their premium display/sponsorship programs.

    We also believe that a great benefit to programmatic buying will be to take out the incredibly inefficient sales process we see now: RFPs, optimizations, DART Advisor, etc…

    Conventional wisdom states that programmatic will only hasten the “race to the bottom” for CPMs. It will surely do that to Federated, but not to smart, disciplined, integrated, premium publishers.

  3. Graha November 16, 2012 at 8:06 am

    Great perspective. Direct sales as function within large premium publishers is not going anywhere but is actually going to be key to driving revenue growth. Ad tech vendors need to step up and support direct sales with enabling technologies that help them grow their businesses and sell more high cpm deals. There will always be unsold/remnant to monetize. The problem today is that there is too much unsold/remnant and the venture/ad tech world is solely focussed on how to sell all of it as quickly as possible. This the race to the bottom.

  4. Raj Chauhan November 16, 2012 at 3:34 pm

    I don’t think today’s version of programmatic trading – rtb audience and cookie based buying – will be the dominant model. If it does we’re all in trouble. The buyers are paying such a low CPM for this targeting that we risk the high rate guaranteed revenue that is 80% of the display ad market and what keeps publishers afloat to create great content. The operational efficiences + targeting capabilities of RTB combined with agency pursuance of their trading desk margin is driving spend to non guaranteed space. We have an under investment in our industry for guaranteed trading technologies. If we focus on that, we all win.


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