Online Ad Revenue Optimization: Strategies To Increase Web Ads Performance

These are challenging economic times for newspapers. While print advertising is feeling the majority of the brunt, a news organization's online component has the potential to increase its ad revenue significantly.

Quality content and desirable audiences give news organizations a big advantage over other online publishers; the key to success is implementing smart strategies to improve efficiency and increase the value of your online ad space.

Photo credit: Ariel Berger

Up to 80% of online ad space goes unsold from direct sales, so publishers generally turn to ad networks to help sell the inventory. While this helps to some extent, publishers still need new levels of efficiency, control, and transparency to ensure they truly maximize their revenue.

The Online Publisher's Guide to Ad Revenue Optimization provides detailed information on strategies that publishers can implement immediately, and without the help any third party companies, to improve their revenue.

Intro by Rajeev Goel

The Online Publisher's Guide to Ad Revenue Optimization

by Rajeev Goel

Leveraging Indirect Ad Sales Channels Is Key

Direct advertising sales account for the majority of ad revenue that is earned by most large online publishers, but due to a challenging economy and an abundance of ad inventory, that majority is shifting. While direct advertising generally yields higher ad pricing than indirect sales, as much as 70% of advertising inventory from large online publishers is sold through ad networks.

With advertising budgets being cut across the board, advertisers are moving away from buying big direct campaigns in favor of more performance-based advertising. The result is a growing dependency on indirect sales through ad networks to fill the revenue gap.

It may be true that as the economy improves, direct ad sales will pick up, but there are many reasons to believe that even when big advertising budgets come back, the dependency on indirect sales for a major portion of overall ad revenue will continue. Those reasons include:

• Advertisers that are moving towards performance-based marketing for the first time are likely to continue to demand the kind of accountability only performance-based advertising offers.
• Loads of data leveraged by ad networks is improving targeting, and therefore improving campaign performance and user experience.
• There is a growing trend of targeting the user no matter what website they are on, rather than targeting by contextual relevancy, which in itself is competition to direct sales.

Direct sales will continue to be a critical source of revenue for large online publishers, but direct sales will also continue to face challenges such as ever-growing competition and an abundance of ad inventory.

Savvy publishers that create a solid strategy around monetizing indirect sales channels will be in a much better position for significant revenue growth.

In many cases, an indirect sales channel is essentially selling the same product as direct sales, but in a different way. It can be likened to Apple's successful indirect sales strategy: an iPod sold through Apple.com may be preferred by Apple as that yields the biggest margin for them, but iPods that are sold by other vendors make up a very significant portion of total iPod sales. Online advertising is no different, and the publishers that realize that early on, will stand to gain the most.

This guide will help you get on your way.

Optimization Strategies

1. Diversify of Your Ad Networks

What:

All ad networks are not equal. In fact, most ad networks differ in seemingly subtle ways that are actually quite varied:

• targeting approaches,
• geographic focus,
• vertical focus,
• mix of advertisers,
• and ad campaign targets (branding, clicks, conversion) are just a few examples.

The result is that different ad networks will determine relevance of ads relative to a publisher's web page differently. Take CNN as an example. CNN maintains several subsections within one site.

1. One ad network might conduct page-level contextual analysis and determine that a page mentioning news in Hawaii is a page is about travel, and therefore, show a travel ad.
2. Another ad network might conduct site-level demographic or behavioral targeting and determine that the site appeals to moderate to high-income business executives, and show a life insurance ad.
3. A third ad network might be looking at the users that view the site, rather than the site itself, and identify a given user as an in-market auto buyer and show that user a Lexus ad.

Benefits:

By diversifying your mix of ad networks, you as the publisher, can determine what the most valuable aspect of your audience and content is, and therefore, determine the best mix of ad networks that can monetize your audience.

What to Do Next:

Look at the mix of ad networks you are using, and classify them along the lines of

• behavioral,
• contextual,
• and demographic targeting capabilities.

Depending on the size of your site, look to get one to three ad networks in each area and identify which targeting mechanism works the best for your site.

 

2. Implement a Segmentation Strategy

What:

Smaller websites that are more targeted in content and are niche-oriented tend to have a higher eCPM than large, broad websites. The reason for this is that these smaller websites generally have a more targeted audience, and therefore, they typically perform better for advertisers than broad websites, and so advertisers are willing to pay a higher rate.

So what can you do if you are the owner of a large, broad website like WashingtonPost.com? You can carve your large website into a collection of smaller websites. By making your large website appear like a bunch of small websites, you can get the benefit of large website scale along with higher advertising rates.

Doing this is easier than it might seem. For example, if you have a website that covers a variety of subjects, you may have a navigation bar that includes News, Politics, Opinions, Local, Sports, Arts & Living, and a City Guide.

Instead of creating one 728 X 90 ad tag to go across the top of every page on the site, create six of them - one for each navigation area on the website. Once that has been done ad networks can better target your website's ad inventory. Callaway can show ads only in the Sports section of the website while American Express can show ads only in the Arts & Living section of the website.

You can extend this strategy even further by carving up each of the six areas into smaller areas (Men's sports vs. Women's sports, for example).

Benefits:

Smaller websites enjoy ad rates that are up to three times as high as large websites.

You can significantly raise your monetization rates if you can present a more targeted advertising opportunity to the advertiser. And you can do this by limiting the scope of a single ad tag to the most relevant areas possible.

What to Do Next:

• Check out the navigational areas of your website, and use that as the basis for carving up your large, broad site into a collection of smaller sites.
• Create one set of ad tags for each smaller area of your site, and use those ad tags with each of your ad networks to get more targeted advertising.

 

3. Better Monetize International Traffic

What:

For a typical U.S. website, 30-40% of the website's traffic comes from outside of the U.S. We all know the Internet is global, but on top of that, English is often times the language of the Internet in foreign countries.

For example, the vast majority of Internet users in India are visiting English language websites, which means your content and services on your U.S. based website may be readily consumed by an Internet user in India. The same is true in many parts of Southeast Asia, Africa, and parts of Europe.

On top of this strong foreign contingent on many U.S. websites, the weak U.S. economy and dollar can lead to higher monetization rates outside of the U.S.

The slowdown in the U.S. economy has lead to a drop in ad rates in the U.S. and the weakness of the U.S. dollar makes it relatively cheaper for foreign advertisers to buy U.S. ad inventory.

Benefits:

As a result of the significant foreign readership of a typical U.S. website, the drop in U.S. ad rates, and the weak US dollar, monetization rates for the 30-40% of foreign traffic on a U.S. website can be higher than that of U.S. traffic, resulting in up to half of a website's revenues based on foreign visitors.

This foreign traffic is often overlooked as a source of revenue for U.S. websites. If you're not making a significant stream of revenue from your foreign visitors, it is time to re-evaluate your monetization strategy.

What to Do Next:

• Check your server logs or Google Analytics reports to identify your top 5-7 geographies outside of the U.S. You will likely be surprised by the amount of foreign traffic.
• Then determine if your current ad networks can monetize inventory in these geographies. You need an ad network that can reach advertisers in these foreign countries. A U.S. ad network will often default (show blank or empty ads) to visitors from foreign countries, and you typically have no way to know this because you're sitting in the U.S. and won't see the default ads!
• Check if your ad networks have a sales office in the foreign country. If not, do a bit of research to find an appropriate ad network in that country and start working with them right away.

 

4. Monetize Every Impression

What:

Nothing frustrates a publisher more than a default (empty or blank) ad. Defaults occur when an ad network does not have an ad to show to a user on your site. Website publishers leave an estimated $1 billion on the table annually as a result of default ads. There are two main problems that cause this:

• Problem 1: Not having an ad to show. A network runs out of ads for your site, they have reached a frequency cap, or they don't have ads for the geography of the user. This means you get a $0.00 eCPM.
• Problem 2: When an ad network does default. That means they are not reselling that impression to the highest paying ad network. This problem is just as bad; publishers often setup static daisy chains of ad networks based on historical pricing data in case one ad network in the chain defaults. With a static chain, there is no way to ensure that the highest paying ad network will fill the impression.

How big of a problem is this? In a study conducted by PubMatic, it has been found that on average ad networks default 56% of the time, and can default as much as 87% of the time. That's over half of a publisher's ad inventory! This is an important one to get right.

The solution is a dynamic marketplace in which default ad impressions are collected and then routed to the highest paying ad network.

Benefits:

A solution that both eliminates defaults and ensures that the impression is sold to the highest possible ad buyer can add 30-50% to a publisher's revenue base.

The key to the solution is detecting when a default happens, then re-selling that ad impression to ensure that the sale is dynamic, and not through a pre-determined or static daisy chain of ad networks.

What to Do Next:

See how often your ad networks are defaulting. If it is more than 10% of the time, consider a dynamic default optimization solution.

 

5. Monetize User Information

What:

Advertisers are constantly looking to improve how they target their users.

A growing trend in online advertising right now is targeting the user wherever they go online, regardless of contextual relevancy. This is often referred to as behavioral targeting because it is based on the behavior of a user, and for years there have been a number of ad networks that specialize in this type of targeting by collecting user data from various sources.

User data is critical for understanding user intent, and getting access to it is an invaluable part of behavioral targeting; as a result, in the past year there has been a new crop of companies that have emerged for the sole purpose of trading data like any commodity is traded - they are referred to as data exchanges.

The customers of data exchanges include ad networks, marketers, and even other publishers. This data that is sold is anonymously and is in compliance with regulatory oversight.

Benefits:

Because user data is such a hot commodity, publishers that excel in collecting user data can have a consistent, secondary source of revenue from selling this data. Selling this data is beneficial because it has no direct affect on your available ad space or its value.

Additionally, because the data you are selling results in better targeted campaigns, users generally have a better user experience.

What to Do Next:

• The first step is that you are regularly collecting consistent data that will be valuable data buyers. They generally take data from you publishers and segment it in accordance with how they resell it, but some data might be more valuable to them than others.
• You should look into contacting a data exchange and find out what data you possess is the most valuable and if there is anything you can do to improve the quality of your data for the purpose of selling it.

Moving Forward

Never before have website publishers like you had such an accessible opportunity to improve the performance of your advertising; ad serving costs are down and the explosion of ad networks has created an opportunity to get highest possible price for your inventory.

Yet, even though there are some things that your company can do easily, such as implementing the strategies listed above, some of these new opportunities that can increase ad revenue can also create a lot of extra, and sometimes complex, work for your company.

Originally written by Rajeev Goel for PubMatic and first published on March 9th 2009 as "The Online Publisher's Guide to Ad Revenue Optimization".

About the author

Rajeev Goel is Co-Founder and CEO of PubMatic. His previous titles include Co-Founder and VP of Technology of Chipshot.com, Principal at Diamond Management and Technology Consultants, and Sr. Director of Product Marketing at SAP. He holds a Bachelor's degree from The Johns Hopkins University in Economics, Political Science, and Spanish. He received his Master's degree from the University of Pennsylvania in Computer Science.

Photo credits:
Leveraging Indirect Ad Sales Channels Is Key - tiero
Diversify of Your Ad Networks - kmitu
Implement a Segmentation Strategy - Mateusz Koc
Better Monetize International Traffic - gattopazzo
Monetize Every Impression - Andrea Danti
Monetize User Information - H Berends
Moving Forward -Andres Rodriguez