Does the 80/20 Rule Still Apply to Web Advertising?

  |  March 27, 2012   |  Comments

Why taking a holistic approach to inventory optimization will pay back big dividends.

Everyday when speaking with publishers, partners, and vendors, I'm asked, "How can we create more value for marketers?" My typical answer is "It depends. What are their goals and objectives?" Inevitably, there is a long pause and a blank stare. This exchange is not surprising. The answer to creating more value is a complex one. But if publishers focus a little more on optimization, they will find it easier to satisfy marketers, drive renewals, and improve value.

Optimization is a very simple solution that will drive value for marketers. Normally, we only consider optimization for performance-based campaigns where the marketer wants to achieve some downstream metric like a click or an action. However, agencies and clients are constantly evaluating campaigns and optimizing on a wide array of attributes from click to conversion, placement to audience, delivery to frequency. If a publisher takes these into consideration with the campaigns they run and chooses not just to focus on clicks or actions with direct response-oriented campaigns, they could see tremendous results.

When looking at optimization, most publishers think specifically about optimizing remnant or tier-two inventory to drive incremental lift in CPM from ad networks, exchanges, and performance clients. In the past, the easy answer to managing the tier-two inventory was to outsource optimization to a third-party, sell-side solution. These companies would take on the unsold inventory, work with multiple networks, and work to get the publisher the best value for the inventory.

Unfortunately, this model breaks down on many levels. First, inventory must be allocated wholesale to these companies and the setup does not allow for threaded optimization within the guaranteed and direct sold campaigns. Second, this model introduces yet another player in the mix who will be taking a management fee. Finally, using third-party optimization companies is limited generally to standard banners in web and mobile.

For most publishers, their tier-two inventory represents less than 20 percent of their revenue, but they end up spending a disproportionate amount of energy and time managing it. Selecting a few partners to work with and directly optimizing them within the ad server is potentially a better solution, enabling more control and allowing for optimization across the entire inventory stack.

So what are publishers doing with the other 80 percent of their revenue? Historically, they were primarily focused on achieving delivery for their direct sold clients and would pay attention to CTR for clients who specifically called out clicks as a required performance metric. Operations folks must look at 100 percent of their revenue and inventory and work to maximize the value holistically. To do this, they must start using new automation tools available in the market, like Maxifier. These tools offer critical insight into campaign optimization, helping to drive better decisions and deliver optimal value for both the client and publisher.

Given the vast number of attributes that can be used to optimize campaigns from delivery to click, conversion to engagement, and the sheer volume of campaigns running at any given moment, it makes it virtually impossible for a single person or even a team of people to effectively and efficiently optimize the inventory. Leveraging a tool within the ad server that uses machine learning and takes all possible delivery (e.g., targeting) scenarios into consideration for all campaigns simultaneously will make the best recommendation to drive value and success for clients. When using this approach across guaranteed and non-guaranteed campaigns, publishers can expect to see an immediate impact in campaign performance (e.g., delivery, clicks, and conversions) and increases in renewals from existing clients. When marketers are evaluating which publishers to work with, they will likely choose partners that consistently deliver smart programs, quality audiences, and performance. So even though you may consider many of your publisher direct-buys to be brand-oriented, I urge you to review the click and engagement metrics so that the ops teams can start optimizing every campaign automatically to deliver the best performance possible. Taking a holistic approach to inventory optimization will pay back huge dividends in increased revenue and renewals, improved inventory utilization, and higher levels of client satisfaction.

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Larry  Allen

Larry Allen is SVP, Global Platform Sales for Xaxis. He has responsibility for overseeing solutions for publishers including Xaxis for Publishers, Xaxis Exchange, and Xaxis Marketplace globally.

Larry has extensive experience in digital media, marketing, and business strategy unmatched by most standards. Prior to joining 24/7 Media (which merged with Xaxis in 2014), he held senior management positions at cutting-edge digital media companies such as AOL, Viewpoint, Unicast, Yieldex, Real Media, and TACODA.

Larry also ran his own consulting business where he advised many major media companies such as The New York Times, Meredith, 33Across, and Business Insider. He is a frequent contributor to a number of trade publications, blogs, and industry conferences.

A graduate of Clarion University of Pennsylvania with a degree in Business Management, Larry is based in Xaxis' headquarters in New York City.

Follow him on Twitter at @lawrenceallen2.

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