Advertisers and their agencies have a variety of different methods for dealing with cuts to the media budget.
One method involves renegotiating ad contracts. If the ad budget is reduced by 20 percent, media buyers will often have to revisit ongoing ad deals and roll back their costs by 20 percent across the board. In offline media, where one page in a magazine isn't much different from another page in a magazine, renegotiation won't generally affect the end-quality of the ad product. (Yes, I know that advertisers might lose a premium position or added value when negotiating this way, but they'll still get a page in the end.) In digital, the negotiated price, relative to what others pay, has a pronounced effect on the end product.
If I buy ads at a $5 CPM on a content site, and then need to renegotiate the price to $3.50 CPM in subsequent ad flights, I might end up running in completely different areas of the site. I might also end up running behind the pace required to fulfill an impression guarantee. Or I might not run at all. Why? Dynamic revenue optimization.
The decisions concerning which ads to serve happen in near-real-time, taking into account a wide variety of variables, including whether or not a user profile matches a pre-defined set of criteria, how many ads from a given advertiser the user has already seen, and perhaps most importantly for the purposes of this discussion -- what price the advertiser is paying.
Publisher-side ad management systems are designed to maximize revenue for the publisher. Unless you're running a sponsorship or some other sort of dedicated placement, the fact that your agency negotiated favorable pricing might actually work against you.
Buys are sourced from a variety of places. A content site might have an in-house sales team that books several dozen ad deals on the site over the course of a typical month. Anywhere from zero to a dozen networks might also be selling inventory to advertisers as well. There also might be ad inventory slotted for house ads or set aside to be sold on ad exchanges.
It is the ad management system's job to make the decision about which ad to serve, given all the parameters of the buys currently in the system, and to do so in a way that maximizes revenue for the site publisher. These decisions are based on sets of logic rules. Almost invariably, the decision-making supports deriving the greatest possible revenue from whatever resides in the system at that particular point in time. In addition to the variables I mentioned before, an ad management system might also have to juggle the following:
- Whether to run a campaign that pays $5 CPM or a campaign that pays $0.25 cost-per-click, based on historical CPC numbers.
- Whether to run a campaign that was booked by an ad network, for which revenue needs to be split between the publisher and the network, or to run a campaign booked by the content site's sales staff, for which it doesn't.
- Whether or not to serve a redirect to an ad network's ad queue based on a variety of factors, including whether or not the ad network knows more about that particular user than the content site does.
With all these decisions happening behind the scenes, it sometimes becomes difficult for campaigns priced below market value to actually run (or "clear," in media buyer language). Yes, your sales rep may force the ad ops team to give you a boost of impressions if your campaign is lagging behind its projected pace, but the sales rep does that only by temporarily altering the rules of the ad management system, and at a cost to the publisher. Generally, this will be done as quietly as possible, as no sales rep wants to be accused of working to deprive the publisher of revenue.
Thus, in digital media buying, it becomes more important than it does in other media to have two things:
- Great relationships
- Innate knowledge of what other advertisers are paying for similar inventory, lest you price yourself too low and end up failing to meet impression guarantees for a media flight.
Something to think about the next time budgets get slashed…
Tom Hespos is the president of Underscore Marketing and blogs at Hespos.com.
On Twitter? Follow iMedia Connection at @iMediaTweet.
