Supply, Demand, and The Bruising World of Online Advertising
“If you spend 15 minutes studying business, you’ll have wasted 14 minutes. I’ll tell you everything you need to know: supply and demand.” – Chael Sonnen
I always take quotes from people who get punched in the head for a living with a grain of salt. Mike Tyson interviews were entertaining, but they were hardly TED talks. However, Chael Sonnen is a bit of a different quote machine. Not only is he a former UFC title contender and current multi weight-class veteran, he has also been a politician, actor, business owner, realtor, and even has a degree in sociology. Some of his more devoted fans are known to feature him in parodies of The Most Interesting Man In The World commercials, and he has leveraged his status as a record-setting MMA pay-per-view headliner into a book deal and successful podcast. Quite the LinkedIn page, right? It makes me feel a little better about quoting someone who gets punched in the head for a living.
Supply and demand is essentially a universal truth, and it is one of the foundations of online advertising. Whatever the platform, there is a set amount of ad real estate, so to speak. Before we go further, let’s unpack what is meant by ad real estate. Everything from websites, to mobile games, to social media newsfeeds all have designated spaces on which they show ads (we refer to these as placements). The number of placements available to an advertiser at any given time is dependent on:
a) How many users are viewing the websites/games/newsfeeds on which ads can be placed
b) How much content the users are consuming per session
For example, if 10 users visit a website in a given day, with 3 ad placements per page, and they each look at 4 pages per session, that means there are 120 available ad impressions that day. If any of those numbers increase, so do the amount of available ad placements. Though it’s true that internet users and the amount of content they consume is still on the rise, more and more advertising parties are purchasing ad real estate online as well. The supply is going up, but so is the demand, and if you’re not selective about which ad real estate you buy you will potentially burn through your budget quicker than you wanted, with less results to show for your hard-earned money. Ever see those HGTV shows about flipping houses? It’s kind of entertaining watching some wannabe property mogul go too big with a project, spend too much, and watch their ambition drain faster than their bank account.
We have had many clients over the years call us in a huff because they saw a competitor’s ad outrank their own in Google search, or that they saw one of their display ads in a smaller format than another company’s massive, seizure-inducing gif at the top of the page they were visiting. While the team at Strathcom’s advertising department can proudly offer dominant paid search strategies, and boast one of the best design teams around, capable of making large, attention-grabbing gif ads, we are also proud of our ability to maximize your advertising budget. We can work with whatever your goal is, but we do have to know what your goal is. Would you rather show up in position 1 in Google search when users enter a given keyword 20 times, and not show up at all the other 80 times? Or show up in position 3 when users enter the same keyword 80 times, and only miss the other 20 times? Those two things can be mutually exclusive, because budgets are finite. Would you rather use strictly large format image ads, or get the most possible qualified users to your website? Again, those two things can be mutually exclusive, because budgets are finite. Quite often, the answer to those questions from clients is “I want both!” and our answer is “absolutely, we can do that for you — but you might not like what it will cost.” The cost, mind you, isn’t going to our bottom line, it goes towards the cost of delivering the ad in your desired way to your desired audience. Because there is a finite amount of each kind of real estate available.
You’re not the only one advertising to your prospective customers. You might be shrewdly targeting that 25-35 year old with a young family to get them to consider a new minivan, meanwhile, Babies-R-Us is trying to make that same person aware of their latest stroller. And, while both products might have a 12-speaker stereo, heated seats, and anti-lock brakes, no two advertising parties can occupy the same spot at the same time; and so, the winning ad in a given placement is decided by a live auction which takes place in milliseconds, taking into account the bids and conditions from all available parties. Supply and demand.
My takeaway is this: avoid fixating on the optics of an ad, but rather its efficiency of results. If you have an ad campaign which is delivering you an excellent cost per lead, it means you are getting more of the desired user actions within your budget. To trash an ad simply because you would like it to be flashier, or in a more dominant page position, could mean that you are hurting your cost per lead since you’re not the only one coveting the top-end real estate, and you’re past the point of diminishing returns by paying a premium. Could it be worthwhile? Yes, it’s possible, and it’s probably worth testing! As your advertising provider, it’s our goal to take the ego out of the evaluation and compare what gets you better results. Our request is that you do the same, and let the market speak for itself.