The Great Disintermediation


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If memory serves, the digital revolution was offered up to us as a great new driver of efficiency. Even at the most basic level of owning a PC, we were told that these new machines would organize our records and even clarify our ways of thinking. Really? Has anyone looked behind my desk lately? I have a couple generations of routers that are still plugged in but are disconnected from my cable modem and PC. I won't even venture back there to untangle any of those power cords, and I blanch at the prospect of plugging or unplugging anything. If the surge protector has another spot left, I just plug in the new router and let the old ones sit there ... until Armageddon or we move to a new house.

Something like this is occurring at many publishers' sites. The number of technologies that are running in and out of the business models is so dizzying, one doesn't quite know where to start unraveling them. For instance, a team of privacy researchers at the University of California-Berkeley recently licensed data from the browser plug-in Ghostery that scanned commonly visited websites to see how many web beacons and cookies from different ad- and behavioral-tracking networks resided on familiar content destinations. In many cases, major media brands were shown to let 20 or more beacons track usage on a site.

For privacy mavens, this represents one (generally troubling) thing. However, for those of us tracking how media sites make money, it represents something troubling in another way: The hunt for online revenue has created an almost crushing level of technological complexity and third-party fatigue that almost no one discusses when we talk about the great monetization problem. All of those dozens of web beacons or bugs the researchers found also represent a business relationship of some kind, and many publishers find these stultifying.

Consider, for instance, the stack of companies currently in the online advertising value chain that want to claim some piece of the ad budgets. It used to be a fairly straightforward chain involving the buying ad agency, the content publisher, and then perhaps the ad network. Now we have "layers" of additional technology, including ad exchanges, audience aggregators, inventory optimizers, and more.

Audience is starting to trump context, and that is a problem. Every time a publisher lets a third-party network track a user's activity on-site and target that same user elsewhere on the web, the content provider risks being left out of the loop.

If an advertiser must spend a $20 CPM to address your audience on the "premium" inventory within your site but is told by your "partner" ad network that it can reach that same user elsewhere for a $5 CPM, where does it spend? With you or the network? Even if you convince that advertiser through copious research that your user is more receptive to its brand message while on a premium site such as yours, how much more receptive will the user have to be to make up for that price differential?

Publishers have begun to ask all of these questions. The multiple technologies and relationships that content providers bought into over the years (and the ever-increasing complexity of this ecosystem) seem to favor the ad technologists more than the publisher. This is why companies such as ESPN, Turner Broadcasting System, and others are claiming to eschew involvement with ad networks, which some of them accuse of commodifying inventory and intruding on their relationship both with the user and the advertiser.

The surface arguments in this battle usually take the form of some oversimplified questions and inappropriate metaphors involving some kind of property rights: "Who owns the customer?" "Who owns the data?" Publishers like to claim that they created both the content and the context for this user experience and that other members of the chain are poaching.

If only it were this simple. I am sorry, I don't have an immediate, suitably sophisticated answer to it all. I do know that, in fact, we are now seeing the opening salvo in an argument that will rage for years over the importance of context and whether digital media has permanently disintermediated the user and the content itself from the brand that once gave the product part of its value. This is a question that publishers denied and postponed for years. Many publishers have learned how to distribute their content everywhere, but I don't know if anyone has demonstrated yet how one distributes (let alone establishes) a media brand in this environment.