The recipe for a healthy business usually involves meeting demand with steady supply. But sometimes, high demand outgrows a limited supply, creating a premium. This is something that certain parties in the media world have thrived on, and it’s how you end up charging US$4.4 million for a 30-second television spot during the Super Bowl.
But newspapers have never really followed this practice. Selling more ads results in printing more pages. If there are orders for additional full- or quarter- page ads, the newspaper will take the advertisers’ money and produce articles to go around those ads. Ads are sold by sizes, and costs are largely fixed.
In 2015, the days of extra pages from high-ad sales occurs less often than they did in the past. Newspapers rely on digital publishing and the associated ad revenue more than ever, and that reliance necessitates a change in ad sales and pricing philosophy.
All local media is going digital, and newspapers now compete directly with TV networks, radio stations, and even cable providers for an online audience. And with digital advertising becoming greatly commoditised, newspaper publishers have to be strategic to bring in optimal ad revenue.
What advertisers are demanding now is audience. They want to access the consumers most likely to respond to their offerings. This provides two big opportunities to online publishers: They can help their advertisers access larger audiences across the Web by leveraging technology, and they can sell their remnant inventory via an exchange, profiting off of the same strategy.
In a previous age, publishers sold directly to advertisers, and the amount of revenue they could earn in a month was restricted by the amount of traffic they received on a Web site. Things were less predictable than radio or TV, but local publishers would usually average consistent traffic. If they failed to meet a promise, they often gave the advertiser a make-good the following month.
Today, advancements in advertising technology make it so that publishers with smaller traffic bases can still meet their advertiser partners’ demands for a larger audience. By utilising third-party data and programmatic buying platforms, these publishers can extend their audience to other Web sites, helping their advertising partners reach the precise audience they’re chasing, but at an increased scale.
At the same time, they can place unsold inventory on an exchange, and earn money on the revenue in similar fashion. Previously, a publisher might sell through 80% of their monthly inventory, and then run house ads for the remaining 20%.
Now that 20% can go into an exchange, where the publisher can earn revenue from advertisers trying to reach a desired audience. The publisher may not get back the full 20% it would have received by selling directly, but some percentage of it will be recouped.
Now, the goal remains to sell as much of your internal inventory as you can. Unlike in print, every day you go with unsold impressions is lost revenue opportunity. You cannot create more pageviews to make up for lost ones like you can in print. So it is critically important to have a dynamic pricing structure.
Yes, you can send the unsold inventory to a third party and have it monetised at US$1/M. Or you can create a local remnant programme with a pricing floor of US$4/M and then offer those available impressions to local advertisers as opposed to remnant advertisers.
As an example, you sell a local retail shop 100,000 impressions locally for US$10/M. You can then bundle in another 100,000 impressions for US$5/M, bringing the net CPM to US$7.50/M. That is a much better model than collecting pennies for inventory. And by selling it this way, you are providing a dynamic pricing structure that can move based on supply.
I encourage you always to be thinking of the best way to monetise your entire inventory. Sure, the best selling strategy is to sell by audience and use internal and external inventory. That does not preclude you from having a 100% sell-through monetisation strategy.
Ads may be commoditised, but audiences are not. And certain segments are worth more to one advertiser than to another. Audience is in demand, and publishers can now employ the tools to meet demand.