Are you a media price taker or a price maker?

For most industries, markets are the bedrock of how prices are set. People buy. People sell. And thus price is created from this mix of forces coming together. The freedom of price is what underpins most markets being effective distributions of goods.

We’re all taught that markets are the most efficient ways to procure goods. Except in many cases, they get distorted.

And there’s no bigger distortion today than the eternal hunt for cheap media.

Media companies called it ‘programmatic buying’. But in a sense, it was designed to create an auction market. You had people buying inventory and selling inventory on both sides. The rise of the ‘CPM’ was everywhere. Market principles were brought forward with such fanfare it was like the revolution of the market had come to media.

Yet as media transitioned to this new market economy, it felt like we were getting less effective. Less punchy. It felt like we weren’t getting much bang for our buck at all.

CPMs were the rise of the price takers

It was underpinned by a flawed dynamic. By making all marketers compete over the cost of media, more working dollars would be put into the same media assets. ‘Yield’ would be generated. To ‘win’ the auction (which was often rife with ad fraud) marketers had to spend more. They got their agencies to commit to CPM targets. All of this served to distort the market further.

The market incentive became clear: buy the cheapest rather than the best media inventory. Media buys began to optimise this way. Procurement teams ran pitches based on who had the cheapest CPMs. It wasn’t a race to the top but a race to the bottom. And at the bottom was the junk, the dodgy media, the audiences that damaged brands rather than built them.

It wasn’t bottom of the media barrel.

It was the sewer.

Because the cheapest CPMs forced media buys to converged with the worst incentives and actors. High quality audience became bots. Driving demand became capturing demand.

Marketing moved from growth to cost.

You could see it happen. No one spoke to their media agency about revenue. Instead, it was about how cheap of a media deal we’d get. That behaviour is a bit like buying a stock based on the cost of it rather than your potential returns.

In essence — madness.

As CPMs went rife, brands became price takers. A discipline based on cost rather than returns. This simply served to make marketing about spending rather than generating growth.

Digital attribution’s (slightly dodgy) positive contribution

In 2013 that changed. Google and Facebook, seeing display advertising as the first frontier to take market share, went in hard at ‘digital attribution’ (Google had done it, but poorly, since 2001). Digital attribution was the first scheme to link the idea that if you spent money on ads, you should expect money back. Google and Facebook did the job of showing the market that you should invest based on what an ad was worth.

The term ‘ROAS’ was driven by both companies into the mainstream as a result.

(Inadvertently both companies would pave the way for wider measurement schemes (some less favourable) to begin to emerge by doing this - more on that another time)

Only now it wasn’t marketers and their media agencies thinking this way - they’d been trapped by procurement practices dictating CPM above all else. Instead, a new department, digital, emerged to drive it. Digital marketers who were used to getting the short shrift now were called ‘performance’ marketers (annoyingly implying that the rest of marketing wasn’t performance - a stupid concept).

ROAS was great. Only, you couldn’t apply it cross-channel, so we all knew it was false. All marketing is performance. Brand is the ultimate performance asset ffs.

And getting to 2024, a weird confluence of incentives now blurred the market. Marketing teams had strong CPM incentives to their media agencies. But they paid those media agencies very little in fees meaning the agency had to find both cheap inventory and make a buck doing so. Performance marketing had lifted the businesses’ awareness that ROAS was how to think about ads. But then every channel outside of Google and Facebook struggled to show any kind of ROAS.

Some marketers had MMM dips, maybe annually. When you’re getting analytics basically weekly or monthly on ROAS for two channels, but annually for the rest, a strange thing happens. Humans basically tend to forget the annual dips outside of channel planning and all optimisation of the brand buys fall by the wayside.

Of course, this isn’t the right way to buy media. Media matters in a different way to different brands. How you execute in a channel (e.g creative) counts. The brand’s positioning. The consumers and the way they consume the message, the media, the category. The price point advertised.

All count towards whether that media you put into channel will be improved.

Which is why most marketers will now have to chase MROI. It’s not some crazy chase for CPM efficiency. It’s a quest to figure out which media assets will return more based on the brand. As all of these aspects become more confusing, price maker media strategy will be what’s required to win in the modern media market.

The rise of the price maker media buyer

So what is a price maker? A price maker is a marketer or media buyer who knows the worth of a media asset to a brand. They start by which media assets will return the most long and short-term value to a brand, knowing they have analytics to understand value.

They understand what media will return to a brand rather than trying to minimise what media costs a brand. Or in other words, they start with effectiveness over efficiency.

This type of strategy can’t be executed with qual or broad scale analytics. The way most will do this is through either sophisticated attribution stacks or fast, rapid MMM. That is the real unlock of modern platform based MMM. To unlock what media assets are working specifically for a brand and which channels, formats and creative assets, rather than brands being forced to buy by auction market rules.

Price makers move away from market distortion tactics. They buy based on the right market incentive — what media will return.

In 2024, it’s my bet most marketers will move from price taking media strategies to price making strategies. And in doing so, they’ll truly unlock how to be effective in the market without resorting to value-destructive CPM tactics.

It’s an exciting year to become a price maker.