media planning & buying

To run a business effectively, it is crucial to understand the core key performance indicators (KPIs); knowing the key metrics that drive your business will ensure that you are always making directionally correct decisions. Identifying the most sound and effective ways to develop real solutions for clients is always the goal, as opposed to simply shilling inventory.

However, in the ad business we've fallen into the habit of making everything complicated. This started back in the mid-'90s, when we were trying to differentiate what we affectionately called "new media" from traditional print and broadcast. We were selling a cure-all of targeting, accountability, and emotion, all within a 468x60 banner.

Unfortunately, we dramatically oversold what we could do and the entire industry suffered. The obvious point -- that businesses still need to practice sound fundamentals even when confronted with a rapidly growing new medium -- was lost on many, if not most, of the sellers involved.

Today, audiences are still shifting online with tremendous volume, and publishers and advertisers are still struggling to keep up. This overall lack of forward momentum is largely due to the fact that growth makes everyone lazy -- sellers, product people, and CEOs. Building a digital media business is certainly not easy, but during the mass migration to the internet many of us fell into the easiest (and laziest) logic: Cast as wide a net as possible to hopefully pull enough new consumers in to make a good profit, as opposed to stepping back and thinking carefully about the true value proposition of the core business to consumers, advertisers, and shareholders.

Marketers could see the audiences shifting to the internet, but could not yet justify spending a premium for the so-called accountability, targeting, and insights every publisher, ad network, and interactive agency was hocking.

The result of replacing fundamentals with a dizzying online free-for-all is a general lack of cohesion in our business models. Audiences and revenues continued to grow at such a fast clip that we swept all the sins under the rug. Many of the most experienced people in the industry look less attractive to start-ups today because they simply forgot or never learned the fundamentals needed to run a profitable business.

Those fundamentals are simple:

• Focus your offering on core advertisers (your top 20)
• Identify those products that are effective for the core
• Price them fairly but profitably
• Track the key drivers of the business diligently

In general, the key drivers for every publisher are sellout, campaign schedule-to-delivery ratio, pipeline next 90 days, inventory yield (value utilization), and margin. 

The internet's size and scope does not exclude it from the basics, and we are now seeing a renaissance in the fundamental concepts and tools many of us old-timers were focused on back in the early days. In the '90s we were rapidly innovating, trying to define what interactive advertising would be and well, here we are. Unfortunately, we too succumbed to the hype and hysteria around the growth of interactive and few of us stopped to build fundamental operations, tools, KPIs, and processes into our business.

The good news is that the recession, as painful as it is, has given us a huge opportunity to correct and fill in the gaps in our business processes. I am encouraged by the conversations I am having with media companies of all sizes that are taking this back-to-basics concept to the bank. The smartest companies are investing in their business by building or buying tools that will drive operational efficiency, help analyze the true value of their products, and identify and closely monitor the KPIs of their business.

Is your business taking the bold step to invest in our future?

Larry Allen is president of Yieldex.

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