The online advertising industry is changing faster than the rap sheets of Hollywood celebrities. While the spotlight moves constantly from AJAX to iPhone, from Second Life to "platform integration," some of the basics of online advertising, such as inventory optimization, can fall into the shadows. If inventory optimization does, it can be a costly oversight for both content providers (think: inventory maximizers) and social networks (think: inventory capitalizers).
Content providers include brand titles like "Sports Illustrated," publishers like Meredith and broadcasters like Comcast. Unlike social networks, content providers produce or own professional content, which leads to loyalty and repeat visits by users. Their social network counterparts are hotbeds of users that drive in and out of the coolest and newest at the speed of the "Fast and Furious." Each has a diametrically opposed inventory challenge: content providers need to maximize scarce inventory, while social networks need to monetize excessive inventory.
For now, let's explore how big media brands can make bigger bucks with less inventory:
Inventory management and forecasting
As ad space on the most valuable and popular sections of media sites is often sold out and what used to be "undersold" inventory is sold in greater proportions, brand sites need to make the most of their scarcest asset -- inventory -- by maximizing the accuracy of inventory management and forecasting. Every percentage of over-or-under forecasted inventory leads to a percentage of make goods or lost revenues. For example, if you under-forecasted your insertion order by 10 percent, then you just lost 10 percent of revenue.
The standard ad server designed in the early to mid '90s did not have any concept of the importance of inventory management. Recall the prevailing thought of those times was that online inventory was infinite. Now we know that brand advertisers are only going to go just so far down the black hole of inventory before they pull back and insist on quantifiable, quality audiences. In response, brand publishers are increasingly turning to more accurate and advanced solutions to fill in the void of inadequate ad server predictions.
Today's advanced targeting methods can actually increase ad space availability. For instance, we now have the ability to target free space on a page based on the user's screen resolution and browser size in real-time. Such a method can increase site inventory by 60 to 70 percent overnight (increasing revenues at that percent) on a sold-out brand page.
Super targeted impressions (down to a single individual some days) currently compose just a small percent of media buys and might work well for very targeted campaigns. But, most advertisers and agencies want a mass-medium vehicle for a broader message and reach most of the time. Scion may very well want to target youth who recently visited an auto section of a site and even researched a competitor's car, for example, but Starbucks likely does not want to limit its message to pages related to coffee. Does anyone actually go to Starbucks for its coffee?
Rich media formats
Rich media means different things to different people, but I'm referring to advanced ad products that support any type of creative (images, Flash animations or streaming video) to drive greater branding and direct response campaigns at higher CPMs. This growing part of the advertising mix is expected to exceed display advertising in the next five years (according to the latest eMarketer study).
There's a major twist in the current circumstances, though; it's no longer a buyer's market. As inventory at top brands has tightened, the tables have turned and rich media toolsets are being adopted by publishers so that the sellers are now offering advertisers customized rich media advertising opportunities. Why? Because publishers are able to make more money from less ad space using rich media. A page that used to have four ad spots can have less clutter and higher returns with just two or three units that stream video, expand real estate or perhaps introduce a message before or in between pages.
While social networks will make less from more in online advertising, online brands stand to make more from less using advanced inventory management and forecasting, rich media formats and targeting. In a world of tech-driven media, content providers will be able to seek high-tech solutions to better monetize their advertising opportunities. The biggest challenge for publishers will be to assure themselves that the ad management and ad serving solutions they choose can be counted on to continue to evolve their offerings for the general market and not just for their new owners.
Dana Ghavami is CEO of CheckM8 Inc. Read full bio.