• by Larry Dobrow , January 27, 2004

When one thinks about inventory management, the online ad marketplace isn't necessarily the first thing that comes to mind. Rather, the phrase tends to conjure up images of vast warehouses, with plumbing supplies or similarly anonymous widgets lining row after row of shelves.

Nonetheless, software supplier Tacoda Systems views inventory management as one of the more pressing issues facing online publishers, and devoted the latest in its series of "thought leadership" seminars to discussing it. The get-together, held Monday in New York City, encouraged a shift in thinking about inventory management, suggesting that publishers should concern themselves less with trying to engineer a one-size-fits-all management system and more with increasing efficiency throughout the transaction process.

Featured speaker Bowen Dwelle, chairman of the AdMonsters association of online publishing higher-ups, described the current state of inventory management among Web publishers as "the definition of a wasteful situation."

He noted that rate cards for online ad space are more often than not ignored, and that publishers lack the information they need in order to maximize the value of their ad inventory--for example, he claimed that many publishers don't know exactly how much it costs them to serve an ad. His overarching message, in a word: simplify.

"Things are done largely on an ad-hoc basis," he said, adding that the main goal for Web publishers should be minimizing inventory. "If there's inventory that isn't selling, you shouldn't have it."

Dwelle suggested that publishers adopt a practice that is accepted in just about every other industry, from automobiles to musical instruments: assigning a specific SKU to every online ad unit. Then, rather than attempting to negotiate a deal for "the upper-right-hand-corner spot on the front door" of a given company's site--a designation both unwieldy and imprecise-each party to a transaction would have a better idea of exactly what the other is referring to. "It would uniquely identify the specific position you're talking about," Dwelle explained. "I doubt you can find any other business that doesn't [do this]."

Along those lines, he believes that publishers should designate product managers to better coordinate the flow of online ad inventory. These individuals would be in charge of determining what ad products/positions should be offered, how to price them, and when new ones are needed or old ones should be "taken off the shelves," so to speak. "Salespeople are creating products out of thin air," he said, noting that many ad products are rarely used more than once or twice.

Dwelle, commissioned by Tacoda in mid-2003 to take a closer look at inventory management, based his conclusions on interviews he conducted with some of the Internet's preeminent brands, including MSN, USAToday.com, and Tribune Interactive. What he heard from them wasn't any great surprise: they were having difficulty predicting their audiences, found it near impossible to sell the less desirable space on their sites, and worried that their sales staffers were making unrealistic promises to clients. But in contrast to early efforts by Web publishers--which focused on devising systems to predict precisely how many ad impressions a publisher might be able to serve on a given day, then selling space accordingly--Dwelle believes that the ultimate solution will not be technology-based.

"Human analysis is a very valuable part of the sales process... we should enable [analysts], instead of trying to eliminate them," he emphasized. "Software will assist. It's just that we shouldn't be looking for the answer in one place."