Selling Out: Web Publishers' Newest Problem

After being knocked around for years by agencies and advertisers demanding lower and lower rates for ad inventory, many online publishers have found their footing. Online media buys are growing in size, and many sites are experiencing sold-out inventory in hot content areas, such as travel, finance or consumer technology content. But increasingly, shortages are hitting other content areas, as well.

“It’s certainly something we’re experiencing,” said Howard Manus, VP of operations for BusinessWeek Online.

Tacoda CEO Dave Morgan, who counts a wide variety of publishers among his behavioral targeting company’s clients, sees the issue surfacing regularly. “Almost every major branded vertical content site I know of has serious regular sellout problems,” he said.

This is great news, but sold out inventory brings with it a new problem for content owners. Call it a crisis of upward mobility. A publisher that has sold most, or even all, of its available product is not doing as well as it could be.

“You can sell out at $1 CPM, but that’s not the end game,” is how Manus puts it.

It’s a high-class problem, but a problem nonetheless. Once a publisher has sold every banner, roll-over and floating ad in a given section for a given period, how can it increase the money it makes on those sales?

Any experienced ad seller who’s been working in the online space can quickly rattle off several ways to address the conundrum, methods ranging from better forecasting to behavioral targeting to premium ad products. What’s actually working and for whom are questions with somewhat cloudier answers.

Better Forecasting

Enhanced forecasting is the first and most obvious place for publishers to start boosting revenue in a sold-out or near-sold-out situation. An age-old and rather straightforward business practice in most industries, online forecasting is anything but.

“No one got as good at it as they hoped, as quickly as they thought they would,” said Bowen Dwelle, chairman of AdMonsters, a professional association of online ad operations execs.

Dwelle believes publishers’ success at predicting inventory, and pricing accordingly, has gotten steadily better.

Publishers say this is thanks in part to real time forecasting tools like those offered by Solbright Systems. Solbright enables publishers to determine up to a year in advance what inventory will remain available in abundance and what will soon become scarce. Site owners can then price their inventory accordingly.

Said Tom Pace, Solbright’s CEO, “Overbooked publishers can use our ad inventory manager to determine what inventory is available and decide which inventory to sell at what price. They can then reserve it until the order has been placed.”

“If [a publisher launches] a temporary section, we can tell them when it’s going to be overbooked and for how long. It’s a very accurate system that gets more accurate over time.”

Customers such as Weather.com have used Solbright’s inventory manager to good effect. BusinessWeek Online is looking at implementing it.

“It doesn’t handle the sold out problem; it’s a question of how we maximize what we have,” said BusinessWeek’s Manus. “In the future, hopefully we’ll have a much better handle on our internal systems and be able to turn down a $20 CPM with relative certainty that a $40 or $50 CPM will come in the next week.”

Closely tied to forecasting are new approaches to yield management that allow publishers to make on-the-fly decisions about what ad to serve in a given placement to optimize incremental revenue.

CheckM8’s recently launched AdVantage ad serving platform offers tools that perform this sort of yield prioritization. If two ads served by AdVantage are competing for the same position, the platform will automatically serve the higher-CPM unit. Each time AdVantage performs such a function, the publisher may have made a dollar more than it would have had without the prioritization function. For publishers, the money ads up.

Software can’t completely solve the problem, contrary to the earlier predictions of many in the online ad space; human analysts remain a key part of the equation.

“You certainly need someone to do the analysis. There are systems out there that may be able to take us further down the line,” said BusinessWeek Online’s Manus.

“There are some folks who think in an ideal world, there’s going to be no human interaction at all,” said Dwelle. “At the other end of the spectrum, you have rates set on a quarterly basis, with a whole bunch of humans involved in the analysis. Those are two very different models, and I don’t think either one applies across the board.”

Behavioral Targeting

“Advertisers want to reach specific consumers. When they buy media, they have to buy pages, which are proxies of people,” said Tacoda’s Morgan, voicing a central conundrum of the ad business — one he hopes will ultimately disappear if behavioral targeting firms find success.

Tacoda and its rival, Revenue Science, have rapidly been winning converts to their respective solutions, which let publishers serve ads to valuable audience segments while they’re surfing content pages that might not be the most sought-after by advertisers. Sure, a publisher’s entire inventory of ad placements on travel-related content may be sold, but that doesn’t mean an airline or other travel industry advertiser can’t reach the people who are reading that content while they’re on other pages.

Morgan began developing an early behavioral targeting prototype for the New York Times in 1996, when he was running Real Media.

“It was very much inspired by a vision Martin Nisenholtz [CEO of New York Times Digital] had at the time: that media companies couldn’t focus only on selling pages; they had to focus on selling people,” said Morgan.

He believes behavioral targeting might have had its day in the sun back then, if it hadn’t been for the Internet bubble, which gave advertisers eyes only for reach.

“All anybody cared about was who could deliver a quantity of pages,” said Morgan. “When the market corrected itself in 2001, it made the inventory problem a really serious one that had to be addressed.” That was the year Morgan launched Tacoda, and the trend of selling audiences rather than pages began to gather momentum once more.

(Morgan also believes behavioral targeting may have implications for search engine marketing. “This is a really big area for search,” he said. “We typically think of inventory problems as a concern for content publishers. But search engines are having the same problem. Their major search terms are all sold out.” And in the hypercharged search category, that trend’s only likely to increase.)

But publishers who start down the road of behavioral targeting should expect complications along the way.

“When you start selling campaigns on the basis of audience, those campaigns have the potential to conflict with every other fixed position campaign you have running,” said Morgan.

“Solving the problem with behavioral targeting isn’t just about serving the right ads to the right people,” he said. “It’s about how the campaigns are going to coexist with all the other campaigns a publisher has sold. [Most] publishers are only serving a couple behaviorally targeted campaigns. It’s solving some problems, but creating more.”

Finally, any discussion of behavioral targeting must point out the strategy’s not for everyone.

“I think it’s a mistake to look for silver bullets that apply in all cases,” said Dwelle. “There are vertical sites that are going to remain almost entirely content driven. For these, content targeting is sufficient.”

Premium Products

Once the behavioral targeting card has been played (or not, as the case may be), publishers may wish to examine whether they’ve maximized the range of products available to advertisers.

Developing premium products that can be sold at higher rates is neither new nor unique, but doing it on the Web can be extremely confusing.

“What’s tricky online is there are so many different formats, technical infrastructures and companies involved,” said Dwelle. “Increasingly rich ad models are clearly more valuable for everyone, but the number of players involved in producing a rich media campaign still represents a significant amount of friction in the business.”

Many options are available to publishers wishing to boost revenue through richer ad products: units from Eyeblaster, Unicast, PointRoll, and Flash ads developed through DoubleClick’s Motif ad serving platform.

They can also be bundled together to varying effect, something New York Times Digital has tried with its “surround sessions” offering. CheckM8’s AdVantage platform lets publishers track such product combinations.

In Agencies’ Hands

The factor that ultimately does the most to raise publishers’ CPMs may be completely beyond their control. It may even be beyond the control of the media buyers and advertisers on which they rely for revenue. It may be in the hands of creative firms.

Bowen Dwelle is an empirically-motivated ad operations type, but he nonetheless believes creative innovation will lead the way to fatter revenue streams for publishers.

“I’m not a creative guy, but I think it’s very much about creative,” he said. “There’s a feedback loop related to the amount of dollars going online. As a bigger portion goes online, better producers — and better creative — come into play and effectiveness goes up. It’s still an underappreciated factor.”

But that trend is essentially out of the hands of publishers. What can they do in the meantime? Dave Morgan urges his publisher clients to give more money and control to their people in ad operations.

“I’ve spent a lot of time with ad operations people in the last nine years,” he said. “They tend to be some of the smartest people in publishing operations. They have a lot of good ideas; unfortunately, their voice isn’t always heard in organizations.”