Ad Networks and Content Marketing

The Potential to Do More With Less

By Q McCallum
August 16, 2022

In a recent Radar piece, I explored N-sided marketplaces and the middlemen who bring disparate parties together. One such marketplace is the world of advertising, in which middlemen pair hopeful advertisers with consumer eyeballs. And this market for attention is absolutely huge, with global ad spend weighing in at $763 billion in 2021 revenues.

Most of that money is spent on digital ads, like the ones that follow you across websites to offer you deals on items you’ve just bought. Those are typically based on your online activity. Ad networks trail behind you as you browse the web, trying to get an idea of who you are and what you’re likely to buy, so they can pair you with hopeful merchants.

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While merchants are clearly happy with targeted ads—at least, I’d hope so, given how much they’re spending—consumers have, understandably, expressed concerns over personal privacy. Apple took note, and limited iOS apps’ ability to track users across sites. Google has announced changes that would further limit advertisers’ reach. Who knows? Maybe the next step will be that the ad industry gets stronger regulations.

There’s also the question of whether targeted advertising even works.  While the ad networks aren’t required to disclose their stats, there are even people inside those companies who think that their product is “almost all crap.”

Maybe it’s time for a different approach? Recently, Disney’s video streaming service, Disney+, threw its hat into the advertising ring by announcing a new ad-supported plan. (Credit where it’s due: I originally found this in Les Echos, which may be paywalled. Here’s the official, English-language press release from Disney.)

It may be easy to disregard this Disney+ move, since so much of the online world is ad-supported these days. But I think this merits more attention than it may seem on the surface.

To be clear: I have no inside information here. But it at least looks like Disney+ can run its ad platform in a fairly low-tech fashion while also preserving privacy. That’s a pretty big deal for Disney, for consumers, and for the wider space of online advertising.

Everything old is new again

To understand why, let’s first consider the idea of “content marketing.” This is a new term for the age-old practice of selling ad space next to curated content that aligns with a particular theme. For example, let’s say you’ve created a magazine about cars. Motoring enthusiasts will read your magazine, which means advertisers (merchants) who want to reach them will place ads in your pages. The content is what draws readers and advertisers to the same spot.

What’s nice about content marketing is that the ad’s placement is based on the content, not the specific person reading it.

This addresses the privacy concern at the core of targeted advertising, because content marketing doesn’t require that you build a detailed profile of a person based on their every browsing habit. You’re not pairing an ad to a person; you’re pairing an ad to a piece of content. So you shift your analytical focus from the reader to what they’re reading.

The mouse has a large library

Now, consider Disney: its catalog spans decades’ worth of cartoons, tween sitcoms, and movies. Its recent acquisition of the Star Wars franchise gives it access to an even wider fanbase. And don’t forget that Disney owns ESPN, which adds sports content to the portfolio. It now makes that content available through its video-on-demand (VOD) platform of Disney+.

Disney already has to keep track of that catalog of content as part of its day-to-day business, which means we can reasonably assume that every show, movie, and sporting event on Disney+ has been assigned some number of descriptive tags or labels.

From the perspective of content marketing, all of this adds up to Disney+ being able to place ads on that content without having to do much extra work. The parent company, Disney, already owns the content and it’s already been tagged. The depth and breadth of the video catalog will certainly attract a large number and wide variety of viewers. That shifts the heavy lifting to the ad-matching system, which connects advertisers with the content.

Tracking your ad budget

You’ve likely heard the John Wanamaker adage: “Half the money I spend on advertising is wasted; the trouble is, I don’t know which half.” It’s a well-founded complaint about billboard or magazine advertising, since an advertiser can’t really tell how many people saw a given ad.

(Some early advertising pioneers, David Ogilvy among them, learned to supply coupons with print ads so stores could track which one had resonated the most. While this added a new level of analytical rigor to the field, it still wasn’t a perfect solution to Wanamaker’s plight.)

Delivering content-based ads through a well-curated streaming platform addresses that somewhat. Disney+ can provide an advertiser a detailed analysis of their ad spend without revealing any individual’s identity: “N number of people watched Variant V, your ad for Product P, during Show S, with the following breakdowns for time of day…”

And that leads me to my next point:

Minimal ML/AI

When you review the setup—a curated and labeled catalog, with broad-brush marketing characteristics—Disney+ has the ability to run this ad service using minimal ML/AI.

(Once again: I’m speculating from the outside here. I don’t know for sure how much ML/AI Disney+ is using or plans to use. I’m working through one hypothetical-yet-seemingly-plausible scenario.)

Disney+ can use those content labels—”pro football,” “tween comedy,” “gen-X cartoon”—to pair a piece of content with an advertisement. They may not get a perfect hit rate on these ads; but given that they’re building on top of work they’ve already done (the catalog and the streaming platform) then the ad system can run at a relatively low cost. And providing stats to advertisers is a matter of counting. Since those calculations are so trivial, I expect the toughest part of that BI will be scaling it to Disney’s audience size.

Can Disney+ still use ML/AI in places? They most certainly can, but they don’t have to. Disney+ has the option to run this using a smaller team of data scientists and a far smaller data analysis infrastructure. Whether you call this “smaller budget” or “higher margins,” the net effect is the same: the company ends the day with money in its pocket.

Disney+ can task that ML team with building models that better tag content, or that improve matches between content and advertisers. They don’t have to spend money analyzing the specific actions of a specific individual in the hopes of placing ads.

Future-proofing the ad system

Assuming that the Disney+ ad system will indeed run on a content marketing concept, that means the company has one more card to play: They have just sidestepped potential future privacy laws that limit the use of personal information.

Yes, Disney+ can get a person’s contact information when they subscribe to the service. Yes, the company can track customer behavior on- and off-platform, through a mix of first- and third-party data. But, contrary to targeted advertising, they don’t need all of that to run ads. All the company needs is to pair content with an advertisement. Given that this is the modern-day equivalent of a billboard or newspaper article, I imagine it would be difficult for Disney+ to run afoul of any present-day or upcoming privacy regulation with such an ad setup.

There’s still some room for trouble…

Going back to our car magazine example, Disney’s library is the equivalent of hundreds or even thousands of magazines. And if a single magazine is a hint as to a single interest, what can a larger number of magazines tell us?

By tracking what content a person watches, how they watch it (phone, tablet, TV), and what time of day, Disney+ could infer quite a bit about that person and household: the number and age of adults; marital or relationship status; age and number of children; whether this is a multi-generational household; and even some clues as to viewers’ gender. (I emphasize the term “infer” here, since it would hardly be perfect.)

In turn, Disney could use this for ad targeting, or to provide even more-detailed breakdowns to advertisers, or even find ways to share the data with other companies. This could get creepy quickly, so let’s hope they don’t take this route. And based on what we’ve covered thus far, Disney+ has every opportunity to run an ad network that preserves a reasonable amount of privacy.

Could the tail someday wag the dog?

Another possible wrinkle would be in how advertising weighs on future content.

Disney already has a good eye for what people will want to watch. And right now, those viewers are Disney’s customers. But when Disney+ becomes an ad marketplace, they’ll officially be a middleman, which means they’ll have to keep both sides of the ad equation happy. At what point does Disney use the Disney+ advertising as a compass, feeding back into decisions around what content to create?

And would Disney ever stretch beyond its own character lines, to build TV and movies around someone else’s toys?  It’s not too far-fetched of an idea. In The Great Beanie Baby Bubble, author Zac Bisonette points out that:

[A TV show deal] was the kind of product-based programming that was responsible for billions per year in sales and could turn toys that no one wanted into hits through sheer exposure. Lines such as He-Man, My Little Pony, and the ThunderCats had all become hundred-million-dollar brands with the help of the product-based TV shows that accompanied their launches.

Creating content in one side of the businesses while running ads in the other, it’s not unlike running an investment bank and retail bank under one roof: sure, it can lead to all kinds of interesting business opportunities.  It can also lead to trouble.

When it comes to content marketing, you need to strike a balance: you want to create evergreen content, so you can continue to run ads. And when that content is going into the Disney catalog—some of which currently spans multiple generations—it has to be absolutely timeless. Giving in to the whims of a single advertiser, or a single fad, can lead to short-term gains but also short-lived content.

Beyond the Magic Kingdom

Despite those challenges, content marketing has huge potential for generating revenue, preserving privacy, and avoiding future regulation that could hinder targeted advertising. By building this system on BI and content tagging, Disney could do so at a smaller price tag than an AI-based, targeted-ad marketplace.

And this isn’t just a Disney opportunity. I’ve focused on them in this piece but other VOD providers have already seen the benefit in monetizing their catalog. According to Jason Kilar, former CEO of WarnerMedia, “Close to 50% of every new [HBO Max] subscriber is choosing the ad tier. Hulu, the last stat they shared publicly, is they are north of 60%.” Amazon will rename its ad-supported IMDb TV service to Freevee. (I first saw this in Der Spiegel; I’ve since found a US  press release.)  And Netflix, long a holdout in the ad-supported space, hinted at plans for a similar offering.

To be clear, content marketing at this scale is not exactly a get-rich-quick scheme. It works best for groups that already have a large amount of content—video, image, text, audio—that they can monetize. This certainly holds true for the platforms I’ve just mentioned. Maybe it’s also true for your company?

It may require getting creative as you comb through your attic. And maybe there’s an option for a new kind of ad marketplace, one that groups people with a small amount of content into a larger content ecosystem. Sort of like what EthicalAds does for developer documentation. If low-cost, non-invasive content marketing is an option, it can’t hurt to try.

Many thanks to Chris Butler for reviewing an early draft of this article. I always appreciate his insights. The section on the tail wagging the dog was based on his idea and I give him full credit for pointing this out to me.

Post topics: Operations
Post tags: Deep Dive

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