A recent study by the Interactive Advertising Bureau and Bain & Co. indicates a possible conflict between web publishers and ad networks.

This very timely research, which launched an important discussion on AdAge, iMediaConnection and other industry publications, finds a link between the amount of inventory publishers release for sale through ad networks, and the CPMs those publishers can charge when selling their own inventory directly.

According to the newly released Digital Pricing Benchmarking Study, publishers are selling inventory through ad networks at up to a 90% discount versus direct sales rates – a trend particularly foreboding for branded publishers who traditionally have earned between $10-20 CPM.

"Online publishers are producing more inventory than the market demands and risk devaluing the premium nature of their brands, particularly in light of ad networks' growth and their dramatically lower pricing,” said John Frelinghuysen, a partner in Bain's Global Media Practice and author of the study. “Building more effective relationships between publishers and ad networks is critical,” he adds.

But there’s much more to this pricing issue than market supply, which the Bain report doesn’t pursue:

Allowing publishers to monetize their product is critical, not only because it creates an efficient market, but because it rewards publishers investing in quality and unique content.

It is also important for advertisers, as they constantly seek to place ads on quality sites that will provide good quality traffic and will not dilute their brand.

Publishers shouldn’t be penalized for having ‘too much’ inventory. Rather, they should be incentivized to and rewarded for creating original, quality and niche content – which is what brand advertisers crave.
If it's quality content, or if a publisher generates valuable, targeted traffic - they can and should be able to secure fair market value for it.

The link between the amount of inventory publishers make available to networks, and the price those publishers can charge when selling direct is clear. And there is very little publishers can do to set higher CPMs, if they sell most, or their entire inventory through a network.

This is where some advertising exchanges offer the most value for publishers - by allowing them to set their own prices, and to easily control the amounts of inventory sold at any given moment.

Some exchanges - depending on the level of transparency and control they provide, also allow publishers to select their buyers and to sell inventory bundles at different prices, depending on seasonal availability and the advertiser. Very much like their direct sales efforts.

In the case of the TRAFFIQ exchange, publishers can choose to do all of this in private, negotiating directly with select advertisers - which gives them the freedom to maximize revenue for any amount of available inventory, and in turn, allows advertisers the opportunity to negotiate terms and secure quality or rare inventory.

It is this alignment of supply management and advertiser access that enables an open market to exist, and it’s the only way to ensure supply and demand are met - bringing together quality inventory and advertisers, and ensuring positive business results are achieved for both sides.