AOL and Yahoo have traditionally been the kings of online advertising, but technological change happening all around them threatens their dominance. More and more inventory is being bought programmatically. Where the portals once provided a “one-stop shop” to scale, technology can now provide scale, along with a host of other benefits.
The portals still enjoy tremendous brand equity and huge user bases, not to mention premium publisher prices and enormous inventory. The evolution of machine buying does not have to be bad news for their future — if they can break the mold.
The cooperative model that Microsoft, AOL and Yahoo recently announced — in which the network sales forces for any of the portals can also sell the remnant inventory of the others — is a step in right direction. But in the end, it will simply extend the shelf-life of the old model. More inventory will be available to the door-to-door sales efforts of each network, and their audience and data value proposition will improve, but the challenges of arbitrage pricing, limited scale and in-market competition persist.
The solution is simple and offers the portals an opportunity to make more money than they think. Instead of offering Class 1 and Class 2 premium and remnant content, they should unlock their media and data assets via private exchanges, with automatic bidding that favors the premium publisher.