What is the Lemon Market Problem?

In 1970, George Akerlof wrote one of the most influential papers in economics, titled “The Market for Lemons.” This paper illustrates how trade can diminish in markets where sellers have more information than buyers. Akerlof’s example involves used cars, where a “lemon” refers to a car with hidden defects, and a “peach” is a reliable car. Since buyers cannot distinguish between lemons and peaches, they lower their offers to mitigate risk. This discourages peach-sellers, some of whom leave the market, increasing the likelihood of buyers encountering lemons and driving prices down even further. Consequently, it becomes impossible to sell a peach for its true value.

This is exactly what’s happening in digital advertising: Buyers (advertisers) can’t tell the difference between a high-quality impression (a peach) and a low-quality one (a lemon). As a result, they opt for the cheapest CPM, leading to ad spend on low-quality placements.

Publishers can´t compete on the price for ad impression as the social media giants and clickbaity, made-for-advertising (MFA) sites will deliver more ad impressions for a lower price. Without meaningful metrics, advertisers hesitate to pay more for higher-quality media, leaving premium publishers struggling to justify their value.

How to Stand Out in the Race to the Bottom

When publishers focus on ad impressions alone, it’s a race to the bottom. Price and quality become disjointed, and premium publishers can’t win. However, every ad impression served by a premium publisher offers much higher quality in terms of attention, quality environment, and the right users in an attentive mood.

Let’s look at some numbers to illustrate this:

• On social media, ad visibility is alarmingly low, with only about 50% of Facebook’s and 37% of Instagram’s ad impressions meeting the Media Rating Council (MRC) standard of being in-view for at least one second. This quick scrolling results in ads being visible for less than a second, severely limiting their impact.
• Additionally, 70% of online programmatic ads never reach a human, and 30-50% of display ads are non-viewable.

In contrast, ads served by premium publishers are more likely to be seen and engaged with by real people, providing genuine value to advertisers:

• 11x higher attention to display ads.
• Average visibility of over 5 seconds in-view time.
• High impact formats like our Smart Ads solution with carousel and engagement elements can hold attention for up to 8 seconds and more.

Okay, so how can publishers showcase their “Peaches”?

Shift the focus from ad impressions and click rates to attention metrics like viewability, in-view times, and engagement. By highlighting these metrics, publishers can tell a more compelling story about the value of your ad inventory.

Imagine a local publisher who sold a display ad to a local car dealer with 100,000 impressions for a $10 CPM, resulting in a $1,000 campaign. Instead of just reporting to this advertiser that they served 100,000 impressions, they could highlight that their ads were visible for an average of 5 seconds, generating more than 8,000 minutes of visibility in the trustworthy environment of the local newspaper, on articles especially relevant to the community where the advertiser operates. This not only shows the effectiveness of the campaign but also justifies a higher price compared to competitors, as it’s a stark contrast to ads that appear on random sites or in the chaotic feeds of social media platforms. Proactively ask the advertiser to compare the attention with their ads on Meta, Snap or Google Ads.

Conclusion

By focusing on attention metrics, premium publishers can demonstrate the superior value of their ad inventory. This not only helps in justifying higher prices but also gives publishers a unique storyline and USP, setting them apart in the competitive digital ad market.

Remember: ad impression ≠ ad impression. It’s the quality of attention that truly matters. Stop selling on clicks and impressions; start selling on the story of attention and engagement.

By doing so, you can stand out in a crowded market and ensure that every ad impression you serve is valued for what it truly is—a connection with a real person in a meaningful environment.