As any retailer worth his salt knows - its not how much you sell that counts, its what you sell it for. The rebounding online advertising economy has obscured a critical fact. Many online publishers have no idea when it comes to managing inventory and yields, and instead embrace a value destructive approach to sales which neither serves their shareholders nor advertisers.
Say what you like about the newspaper business, but there is one thing that the Sultans of Print understand. Yield management is all important. Media executives use yield to work out whether on a page or a centimetre basis, their sales teams are actually growing revenue for the company, or instead dropping their pants on prices to increase volume. Holding the line tight on rates takes company wide discipline, but is essential especially when the opportunity cost of what should be premium inventory is high. Such rigor rarely applies online.
Of course, the problem with websites is that the amount of inventory is potentially infinite. With the temerity of a despot in a Central American basket case economy – web publishers often succumb to the temptation of making more money by literally winding up the printing presses. Typically the first parts of a website to sell out are the homepage or specialist content sections such as finance or technology. To maximise revenue, a publisher will have two choices - put up rates or increase the number of ad units per page.
The problem with online rate rises, is the complex dynamic that currently exists between media agencies and publishers. At the risk of being unfair, most online media agencies exist for the sole purpose of driving down CPM rates and demanding compensation for any detected deviation from booking agreements. Under pressure to keep agencies happy, a rate rise on premium inventory will often be counterbalanced by a sales rep with bonus junk impressions (referred to in polite circles as ‘run of network’) to reduce the average CPM. On paper, it looks like the client has got a great deal. In reality, the vast majority of their ad campaign will probably languish in murky depths that never see the light of interaction.
Unfortunately, the other approach favored by publishers - increasing the number of ad units per page - is an even worse idea. After all, more ads per page only devalues the impact of your other advertisers. However there is a smart way of achieving the same impact. Web analytics software makes it possible to track the behavior of your online audience so that you can tell that a person who was looking at your banking & finance section is now looking at the gardening tips section of your website. So, when your banking inventory sells out, you can use the technology to serve relevant ads in unrelated sections of your network and thus create more premium inventory.
Achieving greater relevance in online display advertising is an area worthy of greater innovation. The genius of Google Adwords is that they have managed to commercialise what should be uncommercial inventory (e.g obscure web searches), by directly linking search terms with campaigns (e.g obscure web ads). Where display differs from search, is that ‘clicks’ are not a great measure of the effectiveness of a brand campaign.
If a search engine user fails to click on an ad, you can be reasonably confident your site was not what they were looking for. On the other hand, if someone doesn’t interact with your banner ad it may be due to a range of factors – they noticed your brand but didn’t click, they watched the animation and came back to your site later, they read the content of your special offer and acted upon it the next day. Post click analysis answers some of these issues, but the bottom line is the publishers need to sell smarter and clients need to buy better.
Sure, you say. But look at how quickly the online advertising industry is growing – something must be right? Too true. Advertisers are waking up to the value of the web medium and allocating a greater share of their budgets to figuring out how to make it work. Sooner or later that means that selling on reach and frequency will just not wash. Without implementing a rational yield structure in online advertising which reflects the true worth of web inventory, everyone is leaving themselves short changed.
