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Sell Side Advertising: A New Model?

By - August 26, 2004

new improvedA while ago I read Ross Mayfield’s post on “Cost Per Influence” advertising and thought to myself “That feels important, but I don’t get it.” Something was missing, or, put another way, I was missing something. So I gave Ross a call last week and we hashed through it. What I realized during our talk was that the premise for how he got to the idea of CPI was, to my mind, far more interesting than CPI itself, at least in the near term.

Allow me to explain. Ross’s musings on CPI turn on the concept of “transitive advertising” – a very interesting idea that flips current advertising models upside down. In essence, this new model for online ads reverses the relationship between publishers and advertisers.

In traditional advertising models, the advertiser holds all the cards. They decide what they want to spend, and most importantly, where they want to spend it. But the rise of pay-for-performance networks like Overture and AdWords/AdSense has changed this relationship in significant ways. First, advertisers are only paying when their ad performs – this alone is a huge shift in media. But as I’ve pointed out repeatedly, these networks also disaggregate advertisers from publishers. The advertisers are no longer choosing the publisher with whom they are doing business, they are instead choosing keywords, concepts, context. OK, but not very good for publishers nor for audiences, in my opinion.

But here’s the heart of Ross’s transitive advertising model, or what I’d like to call Sell Side Advertising. Instead of advertisers buying either PPC networks or specific publishers/sites, they simply release their ads to the net, perhaps on specified servers where they can easily be found, or on their own sites, and/or through seed buys on one or two exemplar sites. These ads are tagged with information supplied by the advertiser, for example, who they are attempting to reach, what kind of environments they want to be in (and environments they expressly forbid, like porn sites or affiliate sites), and how much money they are willing to spend on the ad.

Once the ads are let loose, here’s the cool catch – ANYONE who sees those ads can cut and paste them, just like a link, into their own sites (providing their sites conform to the guidelines the ad explicates in its tags). The ads track their own progress, and through feeds they “talk” to their “owner” – the advertiser (or their agent/agency). These feeds report back on who has pasted the ad into what sites, how many clicks that publisher has delivered, and how much juice is left in the ad’s bank account. The ad propagates until it runs out of money, then it… disappears! If the ad is working, the advertiser can fill up the tank with more money and let it ride.

I love this model because it’s viral and it’s publisher driven – it lets the publishers decide which ads fit on their sites. Publishers won’t put ads on their site that don’t perform, and they’ll compete to put up ads that do. Now when I say “publisher” what I really mean is “blogger” – in particular the kind of blogger that uses AdSense – or would if it worked well enough. Bloggers like, well, me, and Rafat, and Om, and loads of others who provide a service that readers appreciate. This allows us to proactively vote for ads we think fit our site, that we think work for our readers. It’s also a big win for advertisers, as their downside is protected by pay for performance, and upside is that the market is optimizing the ads through both the network effect, as with AdSense, as well as honoring the crucial endemic relationship between publisher/author/blogger and reader. Publishers are, in a very real sense, endorsing the advertiser, and that publisher’s endorsement carries weight with the reader. (Publishers who endorse lame ads, or ads that take advantage of the reader, will be punished by the readers voting with their feet…)

Now, here’s how CPI comes into play. The ad tracks not only where it is at any given time, but where it came from. So when I copy an ad from, say, Om’s site to my site, Om gets a piece of the action for being the referring site. The ad reports that I got the ad from Om, and then if the ad performs on my site, he gets a bit of the juice for that. Presto – you are getting remunerated for your network of influence.

Certainly there are any number of major issues and problems with this model, and I Iook forward to hearing what you think they are. But in the end, this idea is no crazier than the PPC model itself, and, to my mind, worth figuring out how to implement. Thanks Ross, for propagating this neat meme. What do you all think?

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45 thoughts on “Sell Side Advertising: A New Model?

  1. Bart N. says:

    What I think made PPC so big, is the fact that publishers only have to place a few lines of javascript code in a page and everything gets taken care of.
    With CPI, publishers would have to search for good advertisements themselfs, which is something I think most people don’t want to spend time on.

  2. pb says:

    Sounds like an affiliate program.

  3. ed says:

    I agree with PB, it sounds very much like what Linkshare does. The difference being that Linkshare is the source for the ad rather than the ad being available for copying from any site. Seems like you could add that feature onto an affiliate service like Linkshare.

  4. Yes, it is like affiliates, but more viral, and ideally, more…high end in its inventory as the ads come from the source.

  5. Kevin says:

    Automation is key. Publishers (especially small ones) want to focus on creating content, not manually picking ads.

    However, you can imagine a hybrid approach where the publishing tools such as Blogger suggesting a handful of ad links (along with price/performance info) that might be relevant to the content and the author makes the final decision. You can imagine this only taking an additional 30 seconds per post.

  6. Gabe says:

    All of the above.

    Automation is valued for some, much less so for others. The hybrid concept sounds useful too. Maybe a variation on that: you give the add broker your blog URL, and it gives you suggestions or refines your search in some way.

    John, I like the idea.

  7. ed says:

    I like where this is going… From an ideal UX perspective I see a publisher embedding code once, then “subscribing” to ads as they find them on other sites. “Subscribed” ads then get added to the rotation on the publisher’s site.

    The mechanism enabling the subscribe could be a small meta tag attached to the ad itself, much like the way trackback and rss subs work.

  8. Is there any way to build in elements like branding to this system? And what about advertisers whose ads tend to work well, but not right away (eg, the ad’s for a hotel package, but the visitor compares some deals before returning to the advertiser to buy).

    In general I like the populist concept of it, but if this were to come to fruition and catch on, some advertisers could lose out.

    There are of course a lot of ifs involved, and that advertiser will have other options, but this is just to show that some of the good advertisers could lose out.

  9. This reminds me of something I’d imagined we might see, more than a decade ago (and posted to com-priv, though I don’t think there’s an archive of it back to the early 90s, when this was)… CU-See-Me was the phenomenon du jour, and my speculation was that we’d see the rise of amateur p0rn streams; one of the revenue aspects was being able to select and include video ads, i.e., Jane (or John) Entrepreneur could point the camera at the bed, fire up the outbound video feed, and have the system mix in ads fetched from some service.

    Dang… wish there was a source for decades-old com-priv postings, so I can see what I’d actually written.

    I’m also reminded of “The Space Merchants,” a wonderful dystopic future SF novel, where nation states have been supplanted by Madison Avenue…

    [fyi... I had to edit this post, as MT seems to disallow the "P-word."]

  10. ID:entity says:

    Ok, having read the post

  11. Mike says:

    Easily the most interesting concept I have read on your blog. As a blogger I will accept ads I wish to display. In a sense it is similar to the original idea of website advertising. You put up a site and court local businesses to pay to put their ad on your site. Of course this is automated and contextually more in sync with your sites intent.
    First to market with this scheme will become popular very fast.

  12. Mike says:

    Easily the most interesting concept I have read on your blog. As a blogger I will accept ads I wish to display. In a sense it is similar to the original idea of website advertising. You put up a site and court local businesses to pay to put their ad on your site. Of course this is automated and contextually more in sync with your sites intent.
    First to market with this scheme will become popular very fast.

  13. Mike says:

    I swear I only pressed once. LOL
    Sorry about that.

  14. Peter Adams says:

    Targeting is the core of what makes Internet advertising work and the process of publisher inventory/placement management efficient. This model seems to assume that the publishers will be able to easily make good targeting decisions (this ad should be shown on this page, etc.) Unless the pricing model is CPA (cost per action/sale/lead/whatever) why would the advertiser want take that risk? Nothing could be worse then a publisher putting an ad on their site, having the ads generate clicks but no sales/conversions. Under that scenario the advertiser’s budget would quickly get depleted on a CPC basis due to bad targeting on behalf of the publisher.

    This is what makes contextual targeting so appealing – as it provides a level playing field of ad targeting quality across a very disperate set of publishers.

    I could, however, see a model where the publisher bids for the right to place the ad on their site, in a sense reversing the CPC auction. That would at least keep the publishers honest, but again without standardized quality of targeting this would have to be a CPA pricing model.

  15. I think the problem with this model is that advertisers do not have the luxury of *hoping* that publishers will pick up their ads, no matter how strong their brand, creative, or offer is.

    Advertisers have to spend ad dollars in specific timeframes and with a goal of awareness or ROAS within that timeframe, because they have products that need to be sold before they go bad/rotten/out of style, and in conjunction with the requirements of just in time SCM and lean inventories.

    There’s a reason affliate programs constitue 15% of online advertising and no more – most advertising efforts are tied to a required outcome in a required timeframe.

  16. To Chris’ point: We may need a Buy Side model:

    http://www.corante.com/many/archives/2004/08/26/does_sell_side_advertising_need_a_buy_side.php

    And this may be less of a fit for depreciating inventory. The whole idea is Ads we appreciate.

    However, if Ad Buyers are buying with the constraint of time (budgets are capped in the Sell Side model) it capps their thier options.

    Affiliate programs and sponsorship are only one-hop commodities (not viral) compared to the ruthlessly automated commodity markets of keywords. Together they used to account for just under half of online advertising, when more people were influencing their results (however inefficiently). Tomorrow we will see, and what we move to influence.

  17. Andrew Bunner says:

    As I understand it, this doesn’t make sense for advertisers.

    Say Nike is paying Om $X per click-through. You paste Om’s Nike ad onto your site and then you get $Y per click-through while Om gets another $Z per click-through of “juice” money.

    If $Y < $X then you should’ve pasted the ad from whatever site Om got it from!

    If $Y = $X then the advertiser would rather you pasted the ad from whatever site Om got it from. That would save them $Z per click-through! The advertiser doesn’t want a “tall pyramid” of affiliates if every layer above the payout costs them.

    If $Y > $X then… well that’s crazy.

  18. Andrew Bunner says:

    As I understand it, this doesn’t make sense for advertisers.

    Say Nike is paying Om $X per click-through. You paste Om’s Nike ad onto your site and then you get $Y per click-through while Om gets another $Z per click-through of “juice” money.

    If $Y < $X then you should’ve pasted the ad from whatever site Om got it from!

    If $Y = $X then the advertiser would rather you pasted the ad from whatever site Om got it from. That would save them $Z per click-through! The advertiser doesn’t want a “tall pyramid” of affiliates if every layer above the payout costs them.

    If $Y > $X then… well that’s crazy.

  19. If there is no $X then there is no $Y. But when $X influences $Y, you get not only $Z, but $A for Advertisers.

    When $X = $Y, its still two placements.

    Mostly $Y

    If $Y > $X, then someone jumped the power law by influencing the right people, which gives them a sizable $Z under CPI. This is a very good thing.

  20. ID:entity says:

    Now someone put me on track here if I’m wrong – commenting on Andrew’s & Ross’s last posts specifically – does CPI require a form of a “PageRank” algorithm underpinning the CPI model? It just sounds very similar as to the original concept of link based content assessment.

    If yes, then….well lets just wait and see, but it does make you think about asset management – well depending who you work for!!

  21. This was an idea that was incorporated into AOL’s Digital Cities interface during the late 1990s and was one of the most popular aspects of the personal and local services Digital Cities offered (it was not blogging, but the idea was that people could post information about their hobbies and form local groups, e.g., around jogging or dog training). Users could set their personal page advertisements, specifying what ads from among an inventory could be displayed on their pages

  22. Very interesting Mitch. We’ll chat. Main differences would be the metric that focuses less on impression and the transitory nature of the ads.

  23. What they learned from the project may be the glue that ties the transitory ad to the advertiser’s perception of value: The fact that an ad was an implicit endorsement may have multiplied the price the advertisers were willing to pay.

    The transitory idea is a cool twist, but for an advertiser culture built on CPM a viral ad model isn’t going to make the sale. It will probably scare most advertisers, who would think they weren’t in control of their inventory. If instead it is pitched as a viral endorsement system, where the number of sites that have picked up an ad

  24. Jeff Jarvis says:

    John: Brilliant post. I added to it here by suggesting that the really ballsy thing is to let consumers not just place ads but also create them.

  25. umair says:

    Killer stuff. I have been thinking for a while about evolutionary models and this is pretty close, esp with Jeff’s contribution. Very cool!

  26. Robin Good says:

    This is exactly what independent publishers like me have been asking, seeking and expecting until now. This is no revolution. It is long-awaited evolution.

    To me there some aspects, that may be as important as the ones so beautifully described here that would need to be considered too.

    This is a true paradigm shift in terms of how advertising is carried out and as you correctly say it turns traditional advertising on its head.
    That can’t happen partially. Either you turn it completely upside down or in my view it won’t work.

    So there are issues about conttrol, personalization, voice and transparency that would seem to require at least as much attention.

    The Cluetrain Manifesto spelled this change out beautifully, and in my view, that vision still holds true.

    It is in that direction that I would humbly suggest further questioning and refinement of this concept.

  27. Cindy says:

    I wonder how one would do with income tax?

    And would the payment be via systems such as PayPal?

    Legally is it viable? I purchased and downloaded a few items via internet. But these aspects of buy and sell always puzzled me.

    And of course to take things a step further is about services-provided and wanted? If I take a job in a foreign country I would need work-permit If I take an assignment from a company located in the US, on-line, how would I be paid? Would I still need a work-permit?

    Cindy

  28. mopacfan says:

    What a PITA. Thanks to Google, I added a few lines of code and I’m done. I know when to expect my check and for how much. This model would totally alienate publishers and the ads would never get displayed. It’s a good theory in concept, in practice, it’s a misserable failure.

  29. Not sure how this alienates publishers. I think it empowers them (especially micro-publishers) and makes advertising part of the conversations they are engaging in.

    On a separate note, I see this taking off more as an extension of AdSense and/or Overture. AdSense adds a component to their advertising allowing participants in the AdSense program to select ads to appear in their AdSense rotation. CTR over time then would govern which ads stay and which ones go.

  30. Pierre Wolff says:

    Perhaps another way to think of how this might come together is through the confluence of a few things. First, having an entity or ad network like a DoubleClick that already aggregates ads make these accessible to publishers.

    Second, incorporate a tool or ASP service that functions like AdSense (a tech similar to Applied Semantics’ which is what underlies AdSense) to facilitate the publisher’s ability to locate contextually relevant ads based on their content and pick these for their site. Where they might be comfortable w/all of the ads that came back fm such a search, then like AdSense, this process could be automated to have the ads fm the contextual query result automatically appear on their site w/o having to constantly do the manual contextual matching search each time.

    Third, add the Linkshare affilitate hook.

    Finally, there’s one other piece of technology which has recently received some interesting patents, but this piece would satisfy the ability to embed a full application into the ad graphic (if we’re leveraging banner ads) which could communicate w/a Linkshare affiliate system as the ad is copied on to other publishers’ sites.

    The pieces are there, it’s just a matter of putting all together. The business models are there to support this as well, though perhaps a new intermediary for the advertisers to provide their creative to, would be required since their biz model would need to be different than DoubleClick’s existing one, since DOubleClick may not be game for such a use of their inventory.

  31. Venu Gopal Nair says:

    All this stuff is extremely interesting for a product or service that has a predominantly online quotient.

    I can’t, for eg., see it being used to peddle soaps or shampoo or any one of the mundane things that conventional advertising sells. Can you see any self-respecting blogger deign to put up a soap ad on his blog?

    I also have my concerns about the initial seeding of the ads. We need a far more robust system than what has currently been outlined.

    That said, the idea of an ad campaign virally propogated is profound. It has legs but where they fit at the moment needs thought

  32. Sam Romero says:

    My primary concern is that, as an advertiser, I already know the majority of the sites that will reach my target audience. I would therefore be spending rather a lot of redundant time defining sites for which my ad would be suitable, and still more defining sites for which my ad would not be suitable. It seems that, in the end, my energy would be better spent just focusing on that small set of sites I already know to be a good match for my ads, rather than wiggling around hoping that my ads land somewhere worthwhile.

    Of course, this is in addition to the obvious technical hurdles such as mechanisms for preventing the unscrupulous from posting my ads on their site and getting large numbers of unqualified people to click through in order to inflate the pay they would receive.

  33. James Trotta says:

    This is sort of like affiliates except that many affiliates decide which publishers to let into their program. This model gives publishers less control.

  34. Marcus Kirby says:

    Seems like this thread is winding down a bit. Perhaps in the main because of Sam’s very valid “advertiser’s view”. Of course if the publisher knows the psycho-demo-graphic profile of his/her audience/readers he may well be able to provide advertisers with valueable clicks. This all reminds me of conversations long ago about consumers selling their eye-balls. The better your profile matches the target the more you get paid to view/read/hear the message. The idea also links in to that of targeting key influencers – those whose purchasing habits (and views) others “ape”. To some extent many bloggers are of this type.

  35. phil jones says:

    Also reminds me a bit of Weed, which uses a similar model with music filesharing.

    http://weedwarehouse.com/index.php

    Marcus, I don’t know how much I trust this “valid advertiser’s” view. What Sam is saying is “I know all the sites that would be worth advertising on, don’t make me think any more”

    But it seems Sell-side ads are a dynamic, self-adjusting system. As the audience shifts from site to site with the vagueries of fashion, these ads will “track” that. New sites that suddenly get popular will see they have an audience, and will bring the ads to their site.

    Sam thinks his “expertise” in tracking audience demographics will outperform such a system. But such self-styled experts pitting themselves against the wisdom of the crowd, seem to be getting themselves knocked over every day.

  36. esrmtech says:

    worldwide distribution of electronic components with emphasis on obsolete and hard to find devices

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  38. Many thanks for creating this blog site. this is really helpful for me and my friends!

  39. Marcus, I don’t know how much I trust this “valid advertiser’s” view. What Sam is saying is “I know all the sites that would be worth advertising on, don’t make me think any more”

    But it seems Sell-side ads are a dynamic, self-adjusting system. As the audience shifts from site to site with the vagueries of fashion, these ads will “track” that. New sites that suddenly get popular will see they have an audience, and will bring the ads to their site.

    Sam thinks his “expertise” in tracking audience demographics will outperform such a system. But such self-styled experts pitting themselves against the wisdom of the crowd, seem to be getting themselves knocked over every day.

  40. Abdul Jaleel says:

    Here is Sell Side Advertising web service – http://www.adfeedr.net

  41. fatih says:

    And would the payment be via systems such as PayPal?

  42. Darmowe gry says:

    Great work ! I really enjoyed browsing through this site. I will recommend it to my friends. Greetings

  43. gaurav says:

    I am seriously impressed with your knowledge on internet marketing.

  44. Maurizio_B says:

    Before the economic view, we need a social view.

    Today, in advertising process, there isn’t a connection between advertiser-publishers-people.

    We need to define new models of on line advertising. We need to free our minds from the successes of traditional advertising. We need to start from scratch.
    I think that the future is the “Social Advertising” (http://socialadvertising.wordpress.com). Social isn’t the place (Facebook,etc), but the way we develop the advertising process.

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