Lululemon, one of the indisputable new consumer apparel brands of the last decade, was recently the victim of a “transparency” debacle. The brand was subsequently the punch line of several jokes, but with every business challenge there is a lesson and an opportunity. Sometimes transparency can bite you in the yoga pants, but that is not the case in the world of online media. Transparency is a very powerful concept for today’s progressive-thinking online marketers, as well as a potential threat to the business models of agencies and publishers.
Online media has nothing to do with the see-through nature of expensive yoga pants, of course. Digital marketing’s transparency issue runs deep into the business, which was built on opaque selling practices, scarcity, and aggressive margins. Because transparency extends to so many components of marketing, you could even argue that the true meaning has been lost. Mention transparency at a digital marketing summit, and the crowd will think of any or all of the following:
- Site transparency: Where do ads appear on the web?
- Viewability transparency: Where on the page does the ad appear?
- Audience transparency: Who sees my ad? Where does the data come from?
- Fee transparency: What are my agency’s margins?
Yet the center of all transparency conversation comes down to pricing. Historically, publishers have defined media costs, typically on a flat rate CPM basis. This equation includes heavy operating and selling costs in addition to an opaque profit margin. It worked in an era of inventory scarcity, but we now have more inventory options than ever before. Buying media the opaque way is like building a stock portfolio without knowing anything about the revenues or profits of the companies in which you are investing.
Technology has disrupted the pricing dynamic, and the market now dictates media cost on a dynamic basis, one impression at a time. Pricing transparency allows marketers to buy individual impressions with valuations based on performance. This buying method has demonstrated dramatic increases in display effectiveness, and there is no stopping the impact technology will have on the industry. Some publishers have resisted dynamic pricing to protect their margins, but that resistance will ultimately limit their opportunity to drive revenue. A programmatic marketplace will define publisher value, just like the stock market defines a company’s value.
When brands have clear views of media cost, ability to buy one impression at a time, domain transparency, viewability, and audience definition, they see not only what they spent, but where they ran, whether the ad was seen, and know who saw the ad. This insight into every factor and the ad’s ultimate outcome unlocks something even more important – attribution, which is the byproduct of a transparent media investment strategy. Armed with all of this knowledge, marketers are empowered to repeat a desired outcome at a known price point. This is what advertisers dream of, not only online, but across all media.
Lululemon will overcome its transparency issue by adjusting its manufacturing process. For agencies and publishers, it’s time for them to rethink their business models. Those that embrace the new paradigm will see their businesses grow by driving better performance on behalf of the marketer. Giving brands (which control the dollars) a clear view at what they’re paying and how it impacts performance is the blueprint for growth in online advertising.
Transparency is foundational to online marketing’s success. Technology has disrupted the way media is bought and sold, just as it has disrupted the flow of business before. If history has taught us one thing, it’s that businesses need to evolve with technology – look at the retail business, music industry, book publishing, and newspapers for proof. Technology is now rebuilding the media industry, one impression at a time.