Inventory Monetization Strategies

Now more than ever it is crucial that publishers maximize ad revenue from their content assets. To achieve this goal, it's crucial to minimize the friction in the sales process, making sure distribution channels are as open as possible and information can flow freely between buyers and sellers.

A lot has been written lately about the effect that networks can have on publisher ad sales (for better or worse). In the end, it is a publisher's decision whether or not to use ad networks, so I will leave that issue alone for now.

However, I would like to begin a discussion on ways that publishers can increase total direct sales and reduce their reliance on third-party sales.

One way to look at this problem is to divide ad inventory into two categories: 1) Highly demanded (e.g. sold out or nearly sold out); 2) leftover (AKA remnant, network or house).

Highly demanded inventory is the easiest inventory to sell and often commands a high price. Examples include home pages and targeted sections. Since this category of inventory is the easiest to sell, a potentially lucrative strategy is to over sell and then use traffic acquisition strategies to help fulfill campaigns. This strategy can have a large impact on total revenues given the higher CPMs these products can attain.

Leftover inventory is the hardest to sell, but this doesn't mean it is not valuable.

Leftover inventory can be classified as either unsold inventory that was forecasted as available and not sold, or un-forecasted inventory resulting from spikes in traffic or other increases in inventory capacity that were not planned for and thus never sold. The latter case is the perfect place for publishers to use spot market ad networks to backfill sales.

Besides the overall slump in today's advertising dollars, there are several other possible reasons for leftover inventory that was forecasted and never sold. These reasons, which have not been discussed much, include a self-fulfilling sales prophecy, lack of buyer direct access to inventory and a dearth of timely and actionable information about inventory.

Self-fulfilling sales prophecy. Over the years, I have noticed that the sales process itself can often be a self-fulfilling prophecy. Sales reps usually sell the same inventory they sold before, and unsold products, which are not top-of-mind, are not easily or normally included in RFP responses.

Publishers can clearly benefit from using their data to help to provide new and different options to advertisers. By making these products more prominent in the sales process, you will be surprised at how you can increase sales and reduce the leftovers.

Lack of buyer's direct access. The online ad sales process is still very complicated and manual. Publishers that find ways to automate the buying process can further assist in the sale of leftovers by making it possible to efficiently service smaller buys of unsold products and facilitate testing of new, "never tried" products to help advertisers find a "diamond in the rough."

Dearth of timely information. It is often hard for publishers to determine which products in inventory are getting ready to "perish" (i.e. go unsold), let alone come up with a pricing strategy for them. Thus, there is little chance that a sales team can sell these products before they go to networks or house campaigns.

Publishers need to be able to easily view which products should be actively promoted, which is a hard problem to solve because it changes daily! And when exactly do publishers consider it "too late to sell" their leftovers? One week in advance? Two weeks? One month? (Please post your opinions, as we would like to learn the consensus view on this important issue).

We will be drilling into each of the above issues in future posts. Stay tuned.

6 comments about "Inventory Monetization Strategies".
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  1. David Scacco from david scacco, July 17, 2009 at 4:49 p.m.

    Good post. What tools/solutions are you seeing most effectively help publishers address the 3 problems you've high-lighted?

  2. Steve Pell from FatTail, July 20, 2009 at 8:26 a.m.

    David, thanks for the note.

    I will be providing more details about these problems in future posts. As for specific tools, I will send you an email with more info. Thanks

  3. W. Michael Draper, July 20, 2009 at 1:25 p.m.

    All good points. I would add that not only is it a common occurrence for reps to sell the same inventory they sold before, but they are also selling it to the same clients. A lot of publishers are struggling with the 80/20 rule. 80% of their revenue is coming from 20% of their clients. It is a high touch, sell environment.

    Publishers need to think about implementing a self service portal that would allow marketers to easily view and purchase inventory. Not all inventory need be placed in the portal and pricing could be adjusted to address market demands.

  4. Jonas Halpren from Federated Media, July 20, 2009 at 4:42 p.m.

    good post. many truths here. can't wait to read more

  5. Britta Meyer from Loomia, July 20, 2009 at 8:26 p.m.

    Steve, very helpful post, thank you. Completely agree with your suggestion to divide inventory into highly demanded and leftover (AKA remnant, network or house). When working with a new publisher, we always start out with this simple division to understand which monetization strategy the publisher follows, and where they may find additional traffic and pageviews most valuable to them (which is the service Loomia provides).

    Interestingly, a lot of times, the publisher is not used to applying this division of highly demanded/high value vs. leftover/low value areas of their site, and any experience or ideas you have with this i would love to learn more about.

    I also agree with Michael in that publishers could use more self-service/automation around marketing and selling their inventory, to make it easier for media buyers to engage. Advertising search engines, like Leadtail, could become key distribution channels, especially for smaller buys.

    Looking forward to more details on the reasons for leftover inventory you introduced.

  6. Richard Zeroth from CondeNast Digital, July 24, 2009 at 2:08 p.m.

    Nice post Steve - looking forward to hearing more. We're hoping that behavioral targeting proves to be a slick way to bundle the high demand inventory (people that went to section X) with historically unsold inventory (and that same person then looked at our site map!).

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