LOS ANGELES, Jan. 19, 2017 /PRNewswire/ -- As a former digital advertising executive I like to keep a close eye on the space. I'm always in touch with a variety of corporate leaders in the industry and have decided to take a closer look at the current state of the space. I've also had the chance to gain some insight from the CEO of Barons Media, James Larkin. I plan on publishing these insights along with others on my upcoming blog, http://CPM.NEWS.
The digital advertising landscape is an extremely complex web. Corporations have always strived to carve out their own niche in the industry. They see this as a way to distinguish themselves from the competition. You'll often hear "content is king" or some other proverbial words of wisdom in regards to their tech stack or publishing vertical. Unfortunately, it doesn't seem that there's one clear way to succeed in the space.
Currently it seems the only sure way to win in this industry is through conservative finances, diversification and a clear head. Surprisingly this is something of a rarity in the industry. Many of the industry leaders, Rubicon Project, Rocketfuel and others have succumbed to reality. In spite of millions in funding they've failed to achieve any impressive profit margins. Both Rubicon and Rocketfuel have seen tremendous drops in their stock price over the past couple years and they've both seen real struggles with profitability. Rubicon and Rocketfuel have more recently made staff cuts and Rubicon is actively searching for a buyer.
I've spoken to many in the industry and they've all reported this January to be one of the worst to date. There are a number of theories going around as to why this is. Many blame companies such as Google and Facebook, who have expanded their offerings in recent years. Others have placed blame on the more recent Methbot attack as reported by fraud prevention vendor, White Ops. Regardless of the cause, the result is further consolidation in the industry. Many relied on VC funding or overspent in Q4 and have now grown too large to weather a downturn. This is a common occurrence in the industry. There is often a downturn which triggers companies to close their doors, or if valuable enough, they're acquired by a larger company.
I was lucky enough to chat with the CEO of Barons Media, James Larkin. Barons Media is a small but profitable company with high aspirations. They've been in business for 10 years now and have weathered downturns while consistently staying profitable year after year. I asked James Larkin how he does it, here's what he had to say; "I've adopted a more conservative model than most. We have a small team which is able to move quickly and stay on top of industry trends. Fiscally I'm extremely cautious and with the advent of new fraud types, we've moved towards direct and exclusive publisher relationships. This in conjunction with MOAT and Forensiq partnerships have boded well for us and have virtually eliminated fraud on our platform."
While fraud prevention has become an important part of digital advertising it is possible it's also in part responsible for many of these downturns. With scare tactics being an important part of any fraud prevention company's PR, it can also trigger the Media Buyers in the industry to take a more cautious approach. With a pull back in buys everyone suffers, including the fraud prevention companies. It is difficult to maintain a healthy balance which both addresses fraud in the industry while coddling buyers, allowing them to spend their budgets. I think it's important to note that everything is built into the market. While fraud will persist, it is priced into the CPM's companies are currently paying. It's inevitable that a certain percentage of fraud will perpetrate the marketplace. That inventory, while bid on, contributes to a certain level of supply in the marketplace and in turn dictates current rates. While some look to Facebook or Google as a solution, they too are not impenetrable to fraud. In September last year Facebook admitted to "errors" in video view metrics. Google and Facebook are also victim to companies generating fake "likes" or video views. It's unfortunate but there is no foolproof solution to fraud. As a buyer you should do your due diligence and work with reputable companies who are contributing to this fight. Barons Media is clearly taking the appropriate steps. Are you?
- C.P. Madison
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SOURCE Barons Media