As my colleague Roman Lenzen pointed out in his recent blog (link to blog here) DMPs have to continue to evolve to meet the ever changing needs of advertisers and publishers. However, barring an act of Congress that might eliminate or limit the capabilities of DMPs, they are here to stay. So for online publishers it’s not a matter of whether or not to embrace DMPs, but rather how to defend against the threat of audience commoditization that they represent.

What do I mean by audience commoditization in this case? The value that DMPs provide is the ability to deliver a predefined targetable segment based on combinations of geo, demographic and behavioral data collected across the web. So advertisers can purchase DMP segments regardless of publisher site and be ensured they are getting a consistently defined segment that aligns to their objectives. This is a good thing for the advertisers and in the short-term can be a boon for publishers. But why would the advertiser pay a premium CPM at one publisher’s site to reach a DMP created segment if they can reach that same segment at another site for a lower CPM? By integrating DMPs publishers run the risk of turning their audience into a commodity where they will have little control over CPMs given the interchangeable nature of segments from one publisher to another. Nor will they have as much control over budget cannibalization when their advertisers decide they can get the same segments with much greater scale on a Yahoo or AOL site. As a result CPMs will be depressed, overall revenue will be at risk and publisher margins will suffer in the long term.

So what should an online publisher do? Unless the publisher has significant scale and multiple properties where they can essentially create an in-house scalable targeting solution, abstaining from third-party DMPs is probably not a winnable strategy. So here are 4 pro-active strategies online publishers can take:

  1. Sell context. Most likely already part of a publisher’s sales strategy, but here its selling the DMP segments within the context of the site’s content and audience value. What makes the DMP affluent segment distinct on publisher A’s web site vs. the generic segment.
  2. Sell engagement. Incorporating key metrics such as avg exposure time for display ads and average % complete for video ads by DMP segment on the publisher’s site vs. industry averages can be a key differentiator for publishers where the results are above the norm.
  3. Leverage proprietary data. While DMPs do an admirable job creating segments based on data collected across multiple sites, publishers have their own treasure trove of data that often is under leveraged for ad sales purposes. Between self-reported demographic data to rich behavioral and transaction data publishers have an opportunity to create complimentary and in some cases more accurate competing segments to what DMPs offer. Use of third parties to help validate the distinctiveness of these segments can build market credibility. While in some cases these segments garner CPMs 2x higher than non-targeted segments they may not offer as much scale as third party created segments. However, publishers would not incur fees from DMPs for selling these segments since they will be produced based on their own data. Thus they would have higher margin than their DMP counterparts.
  4. Provide value add reporting. There is a tremendous opportunity for publishers to provide more detailed campaign performance reporting back to advertisers. Ad impressions and clicks are a given. Providing reports such as exposure time or % of video consumed by segment and creative can be tremendously insightful to advertisers and their agencies as they look to improve performance. Publishers are sitting on this information and it has value to their advertisers. So why not monetize it? At a minimum, its inclusion can help defend on the commoditization front and help with CPM erosion.

DMPs are no longer the flavor of the month. While no doubt they need to continue to evolve and we are likely to see consolidation among the different vendors, they have become an ingrained part of the digital publishing ecosystem. While a boon to digital advertisers in terms of improving efficiency and effectiveness of online ads and a shot in the arm for publisher ad sales, DMPs pose a significant threat to publishers in the form of audience commoditization. The steps I’ve outlined above can help publishers defend against this threat.

Questions for your consideration:

Are there other ways that you would recommend publishers protect against audience commoditization?

Putting your consumer hat on, what is your opinion of the ability of DMPs to collect and utilize your clickstream data?

If you were a member of Congress, what legislative measures if any would you look to impose that would curb the current practices of DMPs?