Marketers continue to salivate over the prospect of being able to reach millions of unique users per day, the power of which translates into rich advertising potential. Or does it?

To truly understand the value of a “unique”, it is essential to understand the advertising-based Internet economy at a macro level. For there is a ceiling on how much time consumers can physically (and mentally) spend online—and while this time is finite, the explosion of Internet-based content is not. And so for every dazzling story of overnight Internet success that lures entrepreneurs and major content brands to the quest for maximizing uniques there is an inevitable saturation point—and it is fast approaching.

A ‘Unique’ Bubble

According to recent comScore research, the average American Internet user spends 8-10 hours per day engaged on-line. Roughly 80 percent of this time is spent locked into captive platforms such as Facebook, Twitter, search and mail services.

Content providers are left scrambling to compete for the remaining two hours per day of leisure surfing. Imagine, thousands of publishers pouring millions of dollars into the fight for two hours of your time per day.

And the average American Internet user visits about 15 pages during this two-hour leisure period. The math from this consumer-centric point of view is quite simple even if the result is not intuitive:  15 pages visited per Internet user per day at 2.3 ads/page * an average CPM of $1.80 = six cents in revenue contribution to the Internet economy per consumer per day during this two-hour leisure period. That’s right, the average Internet user today generates six cents per day for all the news, opinion, fashion, celebrity, retail and other websites competing for his or her time every day. Clearly, this result is an unsustainable business model.

And yet the quest for unique visitors remains stronger than ever, as illustrated by deals like the recent $315 million Huffington Post acquisition.

More disturbingly, the race to add uniques is distracting media companies from the real challenges: How to fight the commoditization of advertising and avoid the reliance on advertising revenue that plagues virtually all media platforms. Economically, an advertising-reliant business model simply does not work in the long-run—across all mediums—particularly as capacity increases while consumption stands still.

The Commoditization of Advertising

The growth of ad networks (for display, video and audio) has shifted advertising value away from the media companies who own the space to those who deal in the arbitrage of information. Exponential growth of content creates almost unlimited inventory of digital ad space, but the demand for online advertising is ultimately limited. This is the mark of extreme commoditization. And what does this mean for media companies and for advertisers?  In the end, it becomes a Paradox of the Average: How do media companies take advantage of scale (both in terms of technology and uniques) made possible by such growth without following the descending revenue curve to unsustainable levels?

Unlike other media such as television, out-of-home and print where advertisers are paying for the “chance” to be seen—through non-descript GRPs or rate base—digital media is granular. Digital advertising reach can be compared and arbitraged with a precision much greater than with traditional media. This has led to a more transparent market and hence a lowering of the price curve for digital advertising. While specific economics will vary by publisher, the universal truth remains: Ad inventory is increasing at a rate faster than the ability of consumers to view it.

This commoditization of the current advertising model in fact ignites an opportunity to create entirely new value propositions—for media companies that understand this new reality rather than fear it.

Seizing the Opportunity

While every marketer understands the need for and is actively adopting digital marketing strategies to engage their customers, there remains much debate on what the right marketing mix should be, how it should be evaluated and when it should be planned. Multiplatform media companies are in the prime position to solve these problems. Here, we offer a few guiding principles to survive and even thrive during this industry revolution.

Build Your Media Brand

To overcome clutter in a sustainable way, media companies must approach their value proposition through the lens of brand building.

While maximizing reach will always be a powerful asset, maximizing impact will always surpass it. And while not always mutually exclusive, activities that dilute brand standards in favor of more cheap eyeballs should be pursued with caution lest they risk diluting long-term brand status.

Extend Your Brand Experience

Once a media company’s core brand equity has been built, the foundation has been laid to extend into valuable adjacencies. Multichannel media companies further have the advantage of their scale and name recognition to do this.

Reset Expectations

The standard mechanisms to track and measure digital consumption fail to recognize the multi-faceted attributes of digital media. Further, ROI on many digital marketing investments makes it even harder for companies to develop campaign strategies within traditional planning cycles.

Traditional consumer marketers still have a tendency to think of the online world as simply an extension of the offline one. They are used to measuring effectiveness in terms of reach and frequency, neither of which offers a corollary in digital. The resulting chaos has opened a door for media companies to re-educate marketers. For example, ESPN has begun to frame metrics in terms of “share”—similar to traditional television terminology. In other words, it isn’t a matter of how many eyeballs their sites capture as much as it is their share of sports media consumption across all platforms.

Beyond the traditional chase to lock in competitive CPM and GRP costs, marketers are more than ever searching for partners to help them decode an unclear advertising reality. As the “owners” of that landscape, media companies are uniquely positioned to play that role.

To be successful, media companies need to identify which capabilities offer them the most benefit and then lock them in. This may include upgraded consumer databases, response models, cross-platform programs or even character licensing. One thing is for sure: Only adding more uniques is not the path to success.

Kosha Gada and Greg Portell are senior manager and partner, respectively, with A.T. Kearney, a global management consulting firm.

Native Advertising: Delivering for Partners While Retaining Your Brand Voice
Check out this related session at The Folio: Show, November 1-2 in NYC!

Editors have become a key part of the native-advertising conversation, as many successful media brands generate custom content for their…