Breaking Down the Barriers of Tiering Inventory

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Publishers and advertisers are often dissatisfied with their existing media buying relationship. Advertisers fear they're not reaching their intended audience due to the uncertainty of where their ads run on exchanges. Publishers don't receive fair market value for their inventory. In between the two is a growing pool of intermediaries whose existence is creating increased separation between advertisers and publishers. A new way of approaching yield management may be what it takes to break down the barrier between buyers and sellers and relieve the pervasive angst between both parties. Let's consider the advantages of an ecosystem without tiered inventory:

1. Publishers (and advertisers) could abandon the practice of predetermining inventory value as tiered buckets of "premium" or "less valuable" or "remnant." With advancements in leveraging data, targeting, and audience buying, all inventory, even that currently regarded as "remnant," reaches the advertisers' audiences and generates real revenue for publishers, and is not completely different than any tier one inventory. With this in mind, it could be beneficial for publishers to yield manage their entire set of inventory instead of optimizing "premium" and "remnant" inventory separately, which prevents full monetization of each impression.
   
   Publishers with true high quality content could consider their entire website as premium inventory. This approach would empower publishers to implement an effective yield management strategy, which allows them to control the inventory supply available to select advertisers. When only high-quality advertisers and publishers are involved, a closed ecosystem emerges with 100 percent transparency that guarantees effective audience targeting and the safety of content for both sides. Advertisers can have certainty about where their ads are running and publishers can have confidence in the quality of both the creative and the advertiser.
2. Another reason publishers are struggling to maintain value of their inventory is that advertisers drive hard for lower prices, especially when purchasing the nontransparent "remnant" inventory that has traditionally been sold via ad exchanges. Advertisers would be better served not to have the sole goal to buy at the lowest rate, but to buy quality audiences and quality inventory. However, the oversupply of this less-valuable tiered inventory prevents value-driven supply and demand. If all inventory is in one consideration set and transparent, then publishers can yield manage simply by setting a market-value floor price. The right ad management and yield optimization technology could automate or provide a publisher with the knowledge to make decisions that will increase revenue.
   
   For example, if a publisher sets a floor price at $7.50 CPM, but is able to see that there are several requests for proposals (RFPs) being overlooked requesting a $7.00 CPM, then the publisher can make the decision to lower their CPM rate and take advantage of what would have been missed opportunities. Similarly, when an advertiser RFPs a site, the publisher should be able to view the specific RFP goals and budgets provided by the advertisers in order to make recommendations true to the campaign goals, and based on this, accept or reject the RFP.

To date, the majority of intermediaries that have joined the digital ecosystem lack this sort of automation and have only increased the complexity of the sales process, creating layers of confusion and disintermediation as well as more phone calls, involving more people and communications. This is compounded with the fact that in today's market, online publishers are struggling with dropping margins, pricing pressures, and content dilution, finding it increasingly difficult to continue to create quality content through advertising revenue. Each one of these hurdles can be attributed at some level to the increasing separation of publishers from advertisers and agencies. Over time, industry intermediaries are increasingly encroaching on the once direct relationship between advertisers and publishers. Rarely has an intermediary simplified the buying/selling process. Eliminating inventory tiers and implementing an automated sales process can recreate the more direct relationship that has been lost between advertisers and publishers.

Publishers need technology that can maximize revenue from all of their ad inventory; forecast what and to whom to sell to; enable the buy and sell sides to work together to ensure greater transparency in inventory and pricing data; and most importantly, remove intermediaries so that publishers can maintain a direct relationship with advertisers and agencies. Moving away from a tiered inventory structure through leveraging advanced technology will help address many of these problems.