Market Liquidity: Mobile Advertising’s Strategic Imperative
Market liquidity in mobile advertising has become a fairly common topic in the blogosphere lately – and for good reason. Mobile advertising’s strategic imperative is realizing market liquidity where sellers can readily find buyers that will buy, buyers can readily find the products they want, and buyers and sellers will trade at a mutually determined, fair market price.
With the market growing leaps and bounds, market liquidity is expressly an achievable goal, but there are some dams in the flow of commerce. The three “dams” are (1) complexity in the market, (2) scaling challenges across business models, and (3) a lack of transparency to inventory and/or inventory pricing.
Overcoming Challenges
Mobile advertising has been washed with the accusation of complexity; some of it deserved due to fragmentation, some of it merely signals the distinctive differences between mobile and online. Don’t get me wrong, fragmentation is real—there are many buyers connecting to many sellers in many different ways. The inefficiency diverts resources—time, money, people—away from directly building the market versus just managing complexity. And it screams for a simple market model where sellers and buyers tap in, trade (and trade often) and grow their respective businesses.
In defining that market model, we come across “dam #2”, scaling challenges across models. Let’s start with direct-sold models that have enormous strength and internal support. Direct-sold models are superior in managing the amount of inventory available to maximize eCPM and to control the way publishers want to run their business. The challenge is scaling these businesses as revenue targets outreach the extent to which they can protect eCPM values. The theory is that to increase ad revenue and avoid channel conflict, the publisher would deliver remnant inventory as blind onto the network or real-time bidding (RTB) exchange, intentionally driving revenue through fill rate gains at lower eCPM. It is, in great part, a relic of the online business that considers how third-party data defines the economic reality.
The challenge is scaling these businesses as revenue targets outreach the extent to which they can protect eCPM values. The theory is that to increase ad revenue and avoid channel conflict, the publisher would deliver remnant inventory as blind onto a network or real-time bidding (RTB) exchange, intentionally driving revenue through fill rate gains at lower eCPM. But going blind (dam #3) devalues their own inventory—especially given the lack of third-party cookies in mobile—such that publishers can artificially suppress demand and lower eCPM results. This can impact revenue performance, and of course, limit liquidity gains.
In essence, the combined models create awkwardness on both sides: artificially scarce inventory at artificially high prices, combined with an intentionally obscured and devalued inventory.
Driving Liquidity
All three dams make sense in how they came to be and why they persist…in great part because there has not been an easy way to arbitrate among them. But like other efforts to remove dams, it focuses on innovations and fresh thinking. We need to build large independent markets to simplify and encourage liquidity, underpinned by RTB to enable impression-level audience targeting that is critical to advertisers (to unleash the big spend), using private exchanges to enable publishers to control how they want to sell their inventory and opening the spigot on going transparent (with all due brand safety rules in place) to drive up volumes AND protect price.
Today, mobile advertising is in a quasi-liquid state, but tides are rising. To build an efficient, fully liquid and vibrant mobile advertising market, we need to think through how to address the current dams that are slowing or shunting the flow of commerce. Part of this is evolving the approach to market; part of this is taking advantage of technologies and solutions available today, so that buyers and sellers safely and successfully convert the great opportunity of mobile advertising to business reality.
HANG TEN!