Futures trading is common for all kinds of commodities like Home Heating Oil, but it won’t catch on in the current ad ecosystem. When a fuel supply company or a homeowner believes that an especially cold winter or unrest in the Middle East will probably drive up prices, they can buy heating oil futures. That is, they can enter into a contract to buy heating oil in the future at a price that is set now. We all know that there is an entire industry of speculative futures traders who buy up commodities hoping to sell at a higher price before those commodities are delivered. It seems that advertisers would also be interested in buying online ad space this way. When an advertiser believes that the economy will heat up or interest in a topic may increase, that advertiser may want to lock in a price for future advertising. Then at some point the speculators should arrive to heat up the market.
Prices of commodities fluctuate as supply varies with respect to demand. More supply than demand causes prices to drop while more demand than supply pushes prices up. Of course, very high futures prices can be an incentive to increase supply. Farmers plant new crops, and oil companies open reserves. These activities will eventually change the supply, but they do so slowly, so there is still a need for a futures market.
In the case of ad space, supply can be varied on demand. If an online publisher sells more impressions than are available on their travel pages, they can quickly generate new travel content and promote it on the rest of their site. Traffic can be shifted from undersold content to oversold content with relative ease. Travel impressions can be made to grow to meet the demand. The same is true for print where publishers can add pages to increase available ad space. This flexibility of supply is even more pronounced for native advertising, which creates the space and the ads to fill it in the single act of publishing the native advertising content.
So what functions can a futures market perform for the online publishing industry? In the case of a speculator who intends to resell the purchased space, no success should be hoped for. The speculator who has made an investment in the space must sell it with a markup or else he will not have a viable business. The publisher who can create more space exactly like that owned by the speculator and do so for very little cost will under-sell the speculator every single time. I don’t think speculation in ad space futures will ever become very popular. In the case of an advertiser who will use the purchased space there is no motivation to buy early. The inventory will rarely run out, and the seller’s motivation for selling will only increase as the time nears when the actual impression will appear. Pricing will go down over time, not up, so why should the advertiser buy futures?
If there will be no futures market for advertising space, what about audiences? There are only a limited number of people in the world and those interested in specific topics or products can be very limited indeed. Similarly, the number of minutes or pages of content that will be consumed by each individual remains fairly steady (steady growth, but steady none the less). Could there be a futures market in audiences? Given the transient nature of cookies, does any audience persist long enough to support a futures market?