Idiocy !

Posted on Aug 10, 2009 by Jayant Kadambi

I’m not sure who David Koretz is, but his use of the word “idiot” in the title of his needlessly inflammatory article “Ad Networks Are For Idiots – And Here’s the Math to Prove It,” is a bit misplaced.

Idiot is not only a Hindi/Bollywood film based on Fyodor Dostoevsky’s novel “The Idiot.”  (Dostoevsky also wrote the small tomes, Crime and Punishment and the Brothers Karamazov, which will probably be bringing painful memories for those of you with a tinge of a classical eduction).  It is also a fairly derogatory term that is used quite loosely nowadays, it seems, especially by Mr. Koretz.

Now never mind that tarring all advertising networks with the same brush (remember CBS’s Audience Network is an ad network, as is Yahoo’s aggregation of properties) is seemingly moronic, but definitely grouping the search business, the display business and the emerging video business into the same bucket as each other is borderline imbecile.  I can go on the record to say that average CPMs for video ad aggregators is not $.27 cents.

But what does seem somewhat foolish is to argue that leaving money on the table is good, given the history of the online advertising business.  It’s grown amazingly well, year over year, allowing both premium and non premium (whatever that means) publishers to efficiently monetise their inventory.  Let’s start with an example that I’ve given before, which is the retail business for shoes.

Customers can buy Prada in an elite Prada store.  They will be treated well, probably get tea, crumpets, ice water and will be spoiled for choice by a bevy of store attendants.  Sizes, colours and all the latest models of shoes will be available.  It will also cost a lot.  They can’t get Ferragamo’s there.

Customers who want expensive shoes, but want choice or variety can go to Macy’s.  Macy’s will offer a variety of different manufacturer’s shoes, including Prada.  There will probably be less choice in Prada’s, but more overall choice.  Odds are the Prada’s that are available will be cheaper than in the Prada store, but not bargain basement.

Customers who don’t want to pay full price or don’t mind wearing last year’s model or whatever is available, but want a Prada, can go to an outlet store or Filene’s Basement.  Choice may be limited, and the price will be lower, sometimes significantly lower, but the customer will get a Prada or a Ferragamo.  Nothing will be wrong with the shoe, but the availability of the size or colour may not be guaranteed.

This, folks, is the retail business.  It’s been around for years and years and years.  And there is no reason to believe that this retail model doesn’t apply to ad inventory.  To argue otherwise is idiotic.

- Jayant Kadambi