Google’s announcement towards the end of last year that the Google Display Network (GDN) would now allow advertisers to pay only for viewable impressions, rather than all impressions served, was a positive move in the rapid rationalisation of the display market and one that garnered a good deal of press attention, even outside the search industry.

This mainstream attention may have led a casual observer to believe that Google’s ‘Active View’ update was the first of its kind and a revolutionary leap in the technology behind display advertising. They might even be led to believe that the move represented Google sacrificing ad revenue for the benefit of advertisers. In fact, the truth is that the change was both evolutionary in terms of the market and beneficial to Google in terms of long-term revenue.

The reason behind this is the simple fact that for many years display advertising has been a market with a grossly outdated pricing model. The reasons for this are historical: while PPC, for example, is an advertising channel with its roots in the technology (namely search engines) that support it, display advertising transitioned online from a long-established foundation in print. 

Print and online ads have little in common

When advertisers started buying online display they were used to buying ad slots in newspapers, magazines and yellow pages. When publishers started selling online advertising slots they expected to price them in exactly the same way. That is, display advertising was sold by old-media types over boozy lunches, with ad slots typically sold on a residency basis with prices backed by nebulous site traffic figures, vague branding goals and little else.

In 2003, this may have been the best that could be expected, but a decade later it has become painfully clear that this approach simply is not good enough. It effectively led to a few years of publishers selling ad inventory at CPMs of tens or even hundreds of pounds while advertisers had virtually no means of establishing the ROI of this investment

A few years of  plummeting CPM prices and collapsing revenue for publishers followed, as advertisers realised they could spend and measure their advertising investments much better elsewhere.

Online display advertising is not a channel to be dismissed. For many site owners, display represents a key monetisation opportunity. With great potential for building brand awareness and enormous reach, the potential for advertisers is huge, as long as spend in this area can be made properly accountable.

Shifting accountability

Google’s Active View rollout is a small step in this movement towards accountability in the display market. This is a journey that has seen improvements in contextual, demographic and then behavioural targeting options. There has also been a significant and ongoing improvement of tracking and attribution modelling methodologies along with the inception and intensive evolution of user retargeting.

The development of demand-side platforms offering real-time bidding opportunities has helped along with too many other improvements to list here. I would argue that it is the latter of these changes that is by far the most significant, dwarfing the importance of measuring viewable impressions.

The reason I make this argument goes back to the historical problem with the online display market – pricing. As an advertiser, paying for media on a CPMV (cost per thousand viewable impressions) basis as opposed to a straight CPM is certainly an improvement. However if that pricing model is being determined via the rate card of a publisher’s ad sales team, it may still bear no relation to actual value.

With real-time bidding that fundamental problem is addressed: a split-second auction process on every page view allows advertisers to compete for each ad slot, establishing a true market value.

Alignment of pricing and actual value

In a mature market, where advertisers have robust tracking and attribution in place, this process naturally aligns display ad pricing with the actual value that it delivers to advertisers. More than any other development, this achieves the accountability those advertisers require.

I often describe this evolution to clients in terms of its relation to PPC search marketing. For years Google’s AdWords, along with the comparable offerings of other search engines, have been providing clearly accountable advertising opportunities where pricing is driven by real-time auctions to establish true market value. This is the key reason that AdWords has grown to be by far Google’s biggest revenue stream and one of the most important marketing channels for a great deal of businesses.

The evolution of display, as it becomes more like search, will undoubtedly have hurt the bottom line for many publishers, as well as for some traditional media agencies who have failed to move with the times. Although there is a doubt that it is good for the market.

In the era of highly data-driven marketing, display needs to be accountable to be viable and Google understands this better than anyone. So while offering pricing by viewable impressions could potentially have a short-term impact on revenue for the search giant’s vast display network, it helps to align advertising spend with actual value, shoring up the future for continued growth in display spend and continued growth in Google’s display revenue.