“A fine quotation is a diamond in the hand of a man of wit and a pebble in the hand of a fool”.
- Joseph Roux
Diamonds. Everyone knows the story, they are essentially worthless. But the cunning machinations of De Beers, starting in the early 20th century, turned a commodity into a luxury good. Combining clever marketing with ruthless domination of supply and distribution this common crystal is the only commodity whose price has increased steadily since the 1930s. In December, Business Insider had a great piece detailing the history the rise of De Beer’s.
Online advertising is an interesting modern parallel, a commodity of nearly limitless availability, generating (occasionally) vast revenues for clever manipulators of access and pricing.
It is not due to the genius of any single player (well, there is Google, more on that below) but a combination of fragmented access and the diabolical conceit of inventory based pricing (read: CPM).
The fact is, there is just a ridiculous amount of online ad inventory. Choose your own expletive based measurement unit – mine is fuckton. There are a fuckton of impressions available. And, if in some magical way, you could get unfiltered access, there are just so many, the price would approach zero.
The curious thing is that the producers of online advertising inventory, almost without exception, base their businesses on the creation of more not less inventory. The poster child being HuffPo. When CPM is the currency of the realm, who can blame them.
When advertisers begin to demand audience not imps, well, most players are not prepared.
The ad tech companies get it and are attempting to perfect their respective blackboxes in order to extract value from this ocean of imps. But publishers and ad networks are a different story. Their business models are based on selling impression volume.
And of course, there is Google. With the move into network display and rumors of a data-exchange, they are on a trajectory to become online’s De Beers.