2006: advertising increasingly automated, auctioned

I’m comfortably settled into the suburbs of Las Vegas, and the EVDO card is working. Hurray!

Next trend for 2006: publishers will aggressively cut the costs of ad sales and customer support by providing advertisers with automated signup, payment, and bidding options. As publishers learn the lessons of Google’s AdWords success, they’ll be reluctant to enter managed, one-on-one relationships with advertisers. The new automated ad buying systems will benefit advertisers by enabled finer ad purchasing decisions; as the share of advertising devoted to ‘run of network’ declines, truly strong pages will see their CPM rates bidded up as the miscellaneous chat forum crap goes unsold.

Why the transition? First, advertisers are getting increasingly frustrated with publisher opacity. I hate not knowing where my ads are appearing when I buy run of network advertising – I can’t optimize them for the sites they appear on, and I can’t weed out the low-performing crap. Second, publishers see a bidded model as a potential source of more revenue. John DeMayo has written two great posts on bidding as it applies to the lead generation model: “Sales outlet: Traditional rep or bidded environment model?” and “Traditional or bidded sales model II”. Third, competition between publishers and publisher networks is heating up. Aside from Google / Yahoo / MSN (and Amazon shortly, I suspect), a ton of startups are entering the space, looking for big payouts. Take a look at the numbers mentioned in Jay Weintraub’s “Finding the Sweet Spot, Part 1 & Part 2“; lead generation companies and ad networks alike fetch multiple hundreds of millions of dollars on the open market. Since they have nothing to lose, startups will drive innovation in an attempt to capture market share – allowing advertisers to bid will only be the beginning.

Time to go eat Christmas cookies.