What's the Problem With Online Ad Inventory?

With an explosive growth of online advertising budgets, many advertisers are bemoaning the lack of inventory that works. Given the growth in advertising options, there ought to be sufficient inventory to meet existing and new demand. The issue, however, is advertisers often only want placement on premium, branded media sites in highly desirable locations or formats during prime usage periods or dayparts.

This is due more to a lack of imagination and proper pricing than of a simultaneous surplus and shortage of inventory.

Here are some ways advertisers can get more from their online media buys and for publishers to get more money for the inventory they sell.

The Advertiser’s Perspective

Factors advertisers and media buyers must assess include:

• Media brand quality. Established brands command higher premiums.
• Content. Since online advertising is contextual by nature, the subject and quality of the information adjacent to or surrounding an ad can have an impact on the target audience. Section, subject, author, style, point of view, and geographic reach are elements to consider.
• User demographics/psychographics. More targeted audiences appeal to certain marketers since they translate into more efficient media buys. Publishers may gather this information directly from readers or use market research. Also important is the ability to apply behavioral targeting.
• Traffic quality. Based on the type of site and reader usage paths, ads fatigue quickly if impressions aren’t capped. Often, this occurs on sites that provide daily information. From an ad sales perspective, this translates into a need for a larger number of smaller advertisers and more work for the sales team.
• Cost. In a market where advertisers must show a positive return on every advertising investment, price is critical.
• Timing. This applies to day of week as well as time of day.
• Past performance. This is particularly important for below-the-line marketing that drives response. This is where advertisers can directly measure revenues and customer acquisition.
• Account servicing. In a market where agencies, marketers, and media companies are thinly staffed, providing post-sale service can be a distinguishing factor.
• Formats. Availability of special formats, such as video, mobile, podcast, and RSS (define) feeds, can be a deciding factor for some brands or markets.
• Tailored opportunities. The ability to create special offerings that provide advertisers with a targeted, uncluttered environment can provide value to advertisers and incremental revenues for publishers.
• Hidden costs. Additional costs can encompass many factors, including developing totally different creative and targeting behavior.

The Publisher’s Perspective

For publishers, the art of optimally pricing advertising real estate to maximize revenues requires research and testing.

Some basic steps:

• Set business goals. Depending on your offering or corporate constraints, you may want to attract a specific mix of clients or brands that best fit your site. To do so, you must be willing to offer attractive pricing, at least in the beginning.
• Assess the site from an advertiser’s perspective across the factors outlined above. It’s often helpful to bring in an outsider who hasn’t lived through your site’s evolution to see it as readers do.
• Evaluate competitive sites and offerings for the same attributes. Consider both near competitors and broader options available to your clients. As part of this phase, examine performance, advertising options, fill rates or utilization, and media kits to get an idea of how your site’s features and advertising rates compare. Continue monitoring the environment to ensure you’re maximizing return.
• Determine new strategies to maximize advertising revenues. Many publishers aren’t as sophisticated in pricing inventory as their advertisers are in maximizing return from their placements. As the online publishing market continues to mature, Scott Howe of Drive Performance Media believes, “there’ll be more transparency in the market that will help both advertisers and salespeople.”

In the short term, publisher options include:

• For excess inventory, consider using advertising networks. To evaluate a network, ValueClick’s Dave Yovanno recommends assessing fill rate, sales mix, advertisers/brands on your site, and account management.
• For excess demand (i.e., more clients than real estate), increase prices or create special opportunities.

Longer-term solutions to improve advertising inventory pricing:

• Reposition your media brand (which can take time in the more mature segments of the market).
• Reorient content in terms of editorial direction, topics, or format.
• Change your sales team to support your offering better.

Inventory Metrics

Indicators to monitor:

• Revenues. From a publisher’s perspective, this is the metric. Try to diversify your revenue streams and number of clients to reduce risk as much as possible. Related sales metrics consist of:
  • Yield rates. In its simplest form, this is assessing revenue per page or section. Additionally, you may want to consider changing the number of ad units per page and monitoring how readers react to different configurations.
  • Fill ratio. The percentage of ad inventory sold relative to the total amount available. Examine fill rate in detail by section and format type.
  • Effective CPM (define). When supplying additional campaign support, incorporate these costs into your analysis. If one advertiser uses a variety of different offerings, calculate a blended rate.

• Costs. Include all relevant costs by advertising type. This includes specialized technology and content producers, as well as salespeople.

In a competitive market, the online advertising sellers maximize revenue by creating true value for advertisers. As the online advertising market continues to mature, publishers will maximize revenues from their entire inventory of advertising across formats and sections by delivering an optimal experience for readers and results for advertisers. This ultimately requires coordination across marketing, editorial, and sales to create content and page layouts that engage readers and minimizes annoyance factors.