Google invites users to the auction.
After teasing its introduction several months ago, Google has launched a beta of its ad-minimization platform Contributor. Many seem to have heralded the platform as an ad-blocker or crowd-funding mechanism that will usher in a new age of funding the Internet. It is, however, neither of these things. While it was originally hinted that Contributor would give subscribers an advertising free experience for a mere $2 to $3 — the program as implemented has shaped up quite differently.
Now users are offered the opportunity to pay between $2 and $10 a month — allowing them to see anywhere from 5% to 50% fewer ads on participating sites (which number in the “millions). In fact, once you set up your Contributor account you have to option to spend as little as $1 and as much as $15. Even at the $15 level a graphic informs you that you will still see ads. Taking a dive into the fine print, Google is quite clear that publishers will be compensated at market rates, and that Google itself will keep a share of your “contribution.”
Once you’ve filled your account, you are ready to start seeing Contributor in action. If you aren’t keeping a sharp lookout, it’s easy to miss the effect, as ads are replaced by a subtle default banner with a subtle thank you message. (If you want, you can change your preferences to show cats — because Internet.) Once you start noticing these replacement ads it becomes clear that the only ads you aren’t seeing are ads served through Google’s DoubleClick network… that big eye grabbing rich media banner at the top of WSJ.com? Yeah, that’s still there. But when you scroll down, instead of seeing a remarketing ad for some pants you looked at three days ago, you see a Contributor banner.
Google isn’t blocking ads. It’s selling them directly to you. For every piece of eligible inventory Google decides to make into a contributor message it conducts a real time bidding auction to establish the “market price,” but instead of selling the impression to the top bidder it sells it to you. But Contributors aren’t full auction participants as they can’t set their own bids — instead the bidding is left to advertisers while a Contributor user guarantees payment.
Having participated in Contributor for less than a week, I have spent nearly the entirety of my monthly $10 “contribution” to remove 492 ad impressions. This has averaged out at an average CPM of a little bit more that $17.12 — a higher CPM than I have ever seen on any Google Display Network buy that I have been involved with. This is to say nothing of impressions for which I was charged a CPM in excess of $40.
While the mechanics of the Google RTB Auction and the place of Contributor within it are opaque, it is reasonable to speculate about Contributor’s impact on pricing. It is unclear exactly how Contributors’ prices are set by the auction. Do they pay the price that the winning advertiser would have paid, or does Google drop the second-price model it generally use and charge Contributors the top bid in the auction? Either way, the introduction of non-price sensitive customers to ad auctions is highly likely to exert upward pressure on prices.
Google stands to benefit from increased prices in another way as well. In order to use Contributor, users must create and stay logged into a Google+ account on all their devices — allowing for more accurate targeting, tracking, and attribution. All of these make each impression shown to a Contributor user inherently more valuable. And since, Google won’t sell you all of your impressions — advertisers will. Combine heightened bidding for available impressions with the guaranteed top bid on Contributor-eligible impression and you have a nearly constant feedback loop of upward price pressure. This is to say nothing of YouTube video inventory, which is not subject to Contributor at all.
Contributor isn’t the first crack in the edifice of online advertising, nor is it a groundbreaking new paradigm for the Internet. It is merely a well thought out program that has the potential to increase ad revenue while making a gesture towards making the world a better place. I’m sure some economists at Mountain View are very happy with their efforts.