Online Ad Pricing Trends: How Publishers Can Increase Ad Revenue

Would you get excited if I told you that how to diagnose which actions will help ad pricing to leave the economic downturn in the rear view mirror? Are you interested in analyzing the latest online advertising trends by looking at last year data and see where the market will be going next?

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As a matter of fact, professional web publishers can hope for some tangible relief in the months ahead:

While industry forecasts tend to vary significantly, nearly all analyst firms have forecasted dramatic growth for non-guaranteed display advertising over the next few years - some see the category doubling by 2013.

But what are exactly the causes of this spreading optimism among analysts?

In this 2009 Ad Pricing Report from PubMatic you will find data coming from some of the largest US publishers and specific advice from them on how online advertising is changing and where it is exactly going next.

Here the three main points emerging from it:

1. Revenue optimization: Publishers want to have a stronger focus on how to increase their ad revenues in the long-term, as compared to any other aspect of managing their non-guaranteed ad inventory.
2. Understanding eCPM drivers: Publishers need to have an holistic understanding of what drives eCPM lift to develop better strategies to maximize their revenue flow. More generally, education in online advertising seems to be a must-do for those publishers that want to leverage extra opportunities to further monetize their ad inventory.
3. Trustworthiness: Publishers are skeptical towards those companies or solutions that promise flawless strategies to increase ad revenues. What seems a priority for publishers, is to manage expectations so that solution providers do not over-promise and under-deliver.

While it must be said that the data contained in this report are collected specifically from PubMatic publishers, these ad pricing drivers can indeed help you better understand the specific online advertising strategies you should implement in the short term to optimize your online ad revenues in 2010 and beyond.

Here the full report:

Ad Revenue Report

by PubMatic

Non-Guaranteed Display Advertising Forecasts (Global)

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While industry forecasts tend to vary significantly, nearly all analyst firms have forecasted dramatic growth for non-guaranteed display advertising over the next few years - some see the category doubling by 2013.

There will be several contributors to the growth of the 2nd Channel:

• Ad abundance: A continued abundance of available ad inventory that can be much better monetized than in previous years.
• Data management: Premium publisher ability to better utilize their audience data and manage data across multiple data providers, which will allow them to sell pre-packed media + data.
• Pinpoint targeting: Better audience targeting and segmenting, including a much more sophisticated method of reaching users by "intent."
• A shift in media buying: As media agencies improve their technology and continue to see better performing campaigns through the 2nd Channel, they will proceed to use ad networks and ad exchanges more frequently than in previous years.
• Brand protection: Significant gains in brand protection capabilities from intermediaries will allow premium publishers to consider the use of 3rd parties selling their inventory less risky.
• Better ad units: New ad units will be created and standardized that perform better than the banner ads that currently dominate the 2nd Channel.
• Premium branding campaigns: As all of the above points evolve, more premium priced branding campaigns will be sold via the 2nd Channel.

Premium Publisher Ad Pricing Q3 2008 - Q3 2009

Premium publisher ad pricing has seen a steady recovery in 2009.

While 2008 ad prices had precipitous drops due to the slow economy, the first three consecutive quarters in 2009 have shown a strong turnaround for ad pricing.

Q3 2009 ad prices for premium publishers are 32% higher than they were one year ago, Q3 2008.

About The Ad Price Data Methodology

The PubMatic ad price data used in this report is comprised of pricing data from premium publishers.

The data is analyzed by Albert Madansky, Ph.D., H.G.B. Alexander Professor Emeritus of Business Administration at the University of Chicago Graduate School of Business and recipient of the 2005 American Statistical Association Founders Award, and Michele Madansky, Ph.D., a media and market research consultant and former VP of Global Market Research for Yahoo!

The pricing data reflects net publisher monetization via ad networks and excludes ad networks' share of ad spend as well as inventory sold directly by publishers to ad agencies or advertisers.

The pricing data is not representative of the performance of any particular ad network.

The PubMatic Premium Publisher Interviews

PubMatic recently commissioned Greg Stuart, Digital Media Consultant and Former CEO of the IAB, to conduct in-depth, face-to-face interviews with premium publisher executives in order to find out their key challenges in monetizing and managing non-guaranteed inventory.

The goal of the interviews was to find out directly from some of the largest publishers in the US what these challenges are in order to allow PubMatic to continue to develop industry leading solutions.

Methodology

All of the data was gathered during one hour sit-down interviews conducted over the course of four months (April 2009 - July 2009).

The target publisher list included select members of the US comScore 250 list of publishers.

Over 30 interviews were conducted with senior executives in the sales or ad operations function. Anonymity of the interviewees was guaranteed in order to receive open and candid input.

 

Key Findings Revealed

PubMatic is revealing three key findings from the interview series.

PubMatic believes these three findings are of most interest to publishers as they consider their own strategies and operational models for managing non-guaranteed inventory.

 

1. Revenue Matters Most

Premium publishers overwhelmingly care more about increased revenue as compared to any other aspect of managing their non-guaranteed inventory.

The fact that the interviewees held several different executive roles ranging from ad operations to sales, had a wide range of personalities, and dealt with different daily challenges, did not change the fact nearly everyone was significantly more concerned with revenue than anything else.

However, as most people working in this industry already understand, there are clear differences of importance of issues between sales executives and ad operations executives as outlined in the graph below.

Conclusion

While maximizing revenue is the number one stated objective for sales and ad operations executives, a holistic solution that takes into account all of the key benefit drivers is the most likely to generate a long term successful partnership.

Several of the secondary benefit drivers, such as accurate reporting and creative control, are necessary components of a holistic solution.

 

2. Drivers For Increased eCPM Not Clearly Understood

Very few premium publishers can explain in detail what drives eCPM for non-guaranteed inventory.

We asked the following question to the premium publisher executives: "What drives eCPM higher for non-guaranteed inventory?"

Many of the answers did acknowledge certain factors that contribute to increased eCPM, but many were focused on one or two specific reasons and did not have a holistic understanding.

Alternatively, a publisher might have identified several eCPM drivers but not clearly understood how to make those drivers actionable in order to generate more revenue.

Select premium publisher answers on what drives eCPM for non-guaranteed inventory:

• Inventory quality.
• Frequency caps - managing what you give the ad networks.
• How the inventory was sold. CPM, CPA, etc. Networks are like stocks, they move up and down. Then creative - it should not be done by humans.
• Negotiating better deals.
• Category relevance and the algorithms; it's all about real-time.
• Just do not know.
• Active management of networks facilitated by technology; then, understand the buy side and optimize for the highest bid; moving to be real-time.
• Clicks, behavioral targeting,technology, algorithms.
• Ad network deals, efficiency of ad calls, frequency capping, defaults.
• Right ad to the right consumer, context, geography.
• Relevancy, reporting, optimization / learn, CTRs.
• Market conditions; networks vary a lot, good relationships with my network representatives.
• Minimums; tech should drive it.
• Low defaults; site needs to have good performance, lots of people to manage the ad networks.

Conclusion

Premium publisher executives have the right hypotheses about what drives eCPM lift.

However, few publishers had a cohesive, data-driven understanding of the key drivers of lift, the priority of focus on those key drivers, and actionable strategies around driving higher revenue. This is not a surprise given the rapid innovation and fragmentation happening within the online display advertising space over the past few years.

As a result, publishers should seek to partner with solution providers that can create a long term partnership in which education is a key component.

 

3. Lack of Transparency and Trust

There is a consistent sense of frustration and lack of trust from premium publisher executives when working with outside companies to increase non-guaranteed inventory revenue.

Marketing from advertising companies is a problem for the executives at premium publishers because they believe that most companies exaggerate their capabilities. This has only gotten worse in the past two years as the ecosystem around non-guaranteed inventory has exploded along with the dollars and revenue flowing through this sub-category of online display advertising.

Select premium publisher answers on what they believe solution providers exaggerate about (sorted in priority order):

• Creative management capabilities.
• Who the company's allegiance is with (premium publisher or advertiser).
• Technological capabilities.
• Ability to monetize consistently.
• Reporting accuracy.
• Everything.

Conclusion

As premium publishers are pitched various solutions frequently, it comes as no surprise that many have heard outlandish claims from solution providers. They are therefore rightly skeptical of companies that present their solution as having no flaws.

Many of the premium publisher executives chose not work with companies in the past because they just did not believe their claims.

It is important to manage expectations so that solution providers do not over-promise and under-deliver.

Similarly for publishers, it is important that solution providers come to them with a manageable test plan to prove out the viability of a solution before launching it at full scale.

Originally written by PubMatic, and first published on October 8th, 2009 as "Ad Revenue Report".

About PubMatic

PubMatic is a global ad revenue optimization company that provides online publishers with a service solution to manage and monetize non-Guaranteed ad inventory. PubMatic's real-time ad price prediction technology ensures that online publishers get the most money from their advertising space by deciding in real-time which ad network or exchange can best monetize each impression. There are currently over 6,000 large and medium publishers working with PubMatic. PubMatic is venture backed by Draper Fisher Jurvetson, Nexus India Capital, and Helion Ventures.

Photo credits:
About The Ad Price Data Methodology - Dmitriy Shironosov
Methodology - Andrea Danti
Key Findings Revealed - Ryan Pike