Rethinking the Role of Programmatic in Your Ad Revenue Strategy
Programmatic advertising continues to expand, exposing publishers to more opportunities to utilize the technology to advance their advertising sales strategy. But some publishers see programmatic technology as cannibalizing their direct channels. Others see it as a remnant solution -- a marketplace to sell unsold inventory.
These narrow views of the technology's use have stunted its potential impact on revenue streams. Programmatic is much more than a residual solution, and can be a tactical means to significantly increasing revenue from ad sales. And while the technology can benefit different publishers in very different ways, it deserves a seat at the table as a valuable contender for selling inventory.
Learning how to use the technology and integrate it into an overall strategy does not have to be an arduous task. It can be simplified by following a clear, straightforward process that allows publishers to develop and ultimately execute a yield optimization strategy that best positions them for success.
Programmatic technology can have a major impact on a publisher's revenue stream, but only when utilized in a way that supports the business' overall ad sales goals. To understand how programmatic can benefit a particular business, it's vital to first define yield.
A publisher's overall yield can be calculated by multiplying its sell through rate by the estimated cost per mille (eCPM). In other words, yield is the amount of inventory a publisher sells out of its available pool times the average cost of an impression. This number, or yield, is the total revenue accumulated from ad sales.
To maximize yield, publishers must implement a yield management strategy that addresses all parts of the equation. This is where programmatic technology plays an important role. Yield management is defined by the Interactive Advertising Bureau as "the process of understanding, anticipating and influencing advertiser and consumer behavior in order to maximize profits through better selling, pricing, packaging and inventory management." Once yield, and then ultimately yield management, is defined, identifying where programmatic adds the most value becomes a much more fluid exercise.
Understand the Programmatic Landscape
Programmatic is often misused as a synonym with the open exchange, or real-time bidding. Despite this misconception, programmatic actually encompasses a wide range of solutions for both advertisers and publishers. Today's most popular channel is the open exchange and private marketplace. The other is programmatic direct, a growing channel that offer buyers and sellers automation with guaranteed and non-guaranteed deals.
Understanding all of these options will better position a publisher to properly utilize the technology to their advantage. Oftentimes, the buyers engaging with one source or partner are not the same buyers engaging with another. Integrating programmatic into a sales strategy can expand the landscape of potential buyers for available inventory. Understanding each channel and the buyers it attracts gives publishers a better comprehension of the options available and how each can provide the most impact on yield.
Decide What Inventory Goes Where
Many publishers incorrectly view programmatic, particularly the open exchange, as a source for remnant inventory -- the channel that is used to sell the left-over inventory that wouldn't have been sold otherwise. But seeing programmatic through this narrow lens obstructs the view of its full capabilities.
To best optimize yield, programmatic should be looked at as a separate channel in the mix of an overall sales strategy. Paired with traditional channels like direct sales, selling inventory programmatically can have a huge impact on yield. But only if a publisher is correctly allocating inventory to these different channels. Despite longstanding practices, maximizing yield doesn't necessarily mean a publisher must give their entire inventory to one source. Having one source managing everything can become tricky. It's important to diversify. Programmatic, with its various channels, offers an important alternative to the one-source strategy.
To allocate strategically, publishers should be savvy and ask questions. Don't just look to the private marketplace, for example, and think it's the best fit. There is always more to the story, and these details are important factors to consider. What may work for one set of impressions may be grossly inadequate for another. When shopping for options, be sure to take into consideration current deals in the pipeline, experience, and success rate.
With programmatic technology, publishers have a variety of tools with which they can optimize overall yield. Integrating the new technology into legacy practices can be challenging, but incredibly effective when leveraged strategically. To find success with programmatic, publishers must define business goals, understand their options, and position inventory accordingly. Only then can programmatic become a strategic means to an end, and play an important role in executing a yield optimization strategy.
Cheryl Ng is vice president, publisher development at Gamut, a media services company owned by Cox Media Group that serves agencies and publishers, programmatically and direct.