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Value Of “Quality Inventory” In Driving ROI In Digital Advertising

The purpose of advertising at the end of the day is to ultimately increase brand awareness and revenue for an organisation

Photo by Joe Yates on Unsplash

According to a recent article, PepsiCo says the Covid-19 crisis has led it to become “more selective” in the type of advertising and marketing it runs, stopping activities that had a lower return on investment (ROI) and focusing on those with greater returns. This resonates with the sentiments I’ve gathered from my discussions with the marketers in the region. Brands are looking at creating greater value in their campaigns in terms of generating higher ROI, driving performance, maintaining their brand recall, and more with reduced budgets – of course! The pressure to scrutinise and optimise the media spends to prove ROI has never been more nuanced. 

Value of ad verification 

If you look at the digital media landscape through an economic lens, you will see that there are some significant market failures that need to be addressed if the promise of digital advertising is to be delivered on. Worryingly, digital’s promise that everything can be measured has turned into metric overload, and many advertisers are now confused by the dozens of metrics they find in their campaign reports (will spare you the avalanche of acronyms).

In contrast, most CMOs actually care very little about specific digital metrics. They are focused on growth, brand love, and sales. Meeting their needs means being smarter about the digital metrics and matching them to desired business outcomes and not just getting lost in the pool of data to fish out the metrics and then get constricted by the- a classic case of paralysis by analysis. 

Central to this debate is “wastage” which is caused by ignoring Brand-Safety, Viewability, and Ad Fraud- the three pillars of the ad verification. A viewable ad out of geo or one that is delivered to a bot is worthless; an ad in a high-quality environment that is not viewable is worthless; and an ad that is viewable to a human in a context that may be damaging for the brand is not only worthless but can potentially have a significant negative value for the advertiser, too. A quality impression is one that meets all the above requirements and the role of ad verification companies becomes extremely important to remove the wastages mentioned above and make sure that advertisers only bid on quality impressions to maximise the impact of their media budgets.

Long term view on quality inventory

It is not a perfect market in the sense that the allocation of inventory is not efficient, and while programmatic trading is trying to address that through the application of targeting and optimisation solutions, the focus has been on audiences and not on the quality of the media itself. As a result, we have significant price distortion- the prices that advertisers pay today do not reflect the value afforded to an advertiser of showing prospective customers an ad, the low prices reflect the vast amount of bad/fake supply in the market. There is no cap on the volume of fake supply that can be generated, and that bad inventory trades at similar prices to the good supply because advertisers cannot differentiate the good inventory from the bad or fake inventory. This is really an issue of information asymmetry (information asymmetry occurs when one party has some key knowledge that the other party doesn’t have).

The purpose of advertising at the end of the day is to ultimately increase brand awareness and revenue for an organisation. Advertisers naturally want to spend their ad budgets on the campaigns that are producing the highest return on investment. If advertisers knew what was good inventory vs what was fake or bad inventory, they would obviously buy the good inventory. This would effectively put a cap on supply and as demand would increase for good inventory, prices will go up but importantly advertisers would not necessarily be spending more overall because wastage will have been removed from the market.

Advertisers are also partly to blame because – immediate awards exert a disproportionate attraction on marketers. Many marketers will take 10 clicks today over a longer-term ROI gain. Many of them will take reach, unique views, and frequency over long term brand awareness. This practice filters through the supply chain. Even though there’s a lot of pressure on the bottom line and increased pressure to generate ROI which quality impressions drive, marketers are going to be well advised to keep a long term view (brand) while running their short term campaigns (performance).

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Laura Quigley
Written By

Laura Quigley is the Managing Director, APAC at Integral Ad Science. Based in Singapore, she builds strong partnerships with clients, agencies, and publishers and helps them solve their pressing business challenges with the use of cutting edge IAS technology solutions. Follow her on LinkedIn.

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