Publishers Look to Ad Networks for Revenue

My colleague, Brian White, is SVP of publisher solutions with Vibrant. He is charged with building our network of 6,000 premium publishers, and helping them find new incremental revenue for their sites. He recently wrote on strategies for online pulbishers to outsource more of their ad sales operations. The following article appeared in similar form on top digital marketing site Digiday.com:

The maturation of a site into a media business has typically hit an important milestone: the point where it hires a sales team. This might not be the case going forward, and many sites should consider doing the opposite and getting out of the direct ad-sales business altogether.

With ad spend shrinking and sales talent scarce, more publishers are choosing the no-sales option. After all, the agency folks can only take so many calls – and they’re not taking calls from small and midsize publishers. At the same time, agency trading desks and exchanges are taking over big chunks of direct-response spend that once flowed through sales reps.

Picture this: You’re a publisher with a well-regarded non-finance site that appeals to high-net-worth individuals. Your brand is solid, traffic is reliable (with around 5 million page views per month), and CPMs are modest but steady. When you add up revenue from display-ad inventory, newsletters, and sponsorships, you net about $100,000 a month.

Let’s do the maths. It costs roughly $350,000 — when you count salary, benefits, equipment, and training — to employ a top-tier sales person. That doesn’t include the cost involved in trafficking, receivables, ad serving, marketing, wining and dining media buyers, etc. You also need to account for the opportunity cost of diverting your attention from your core business, which for most sites is creating and curating content. Publishers should be in the publishing business, not the managing ad sales business.

There are other options for publishers with automation and outsourcing. When they work with an ad network or participate in an exchange, CPMs and monthly earnings are generally lower, but net operating profit can be unaffected or even increase.

Let’s assume that with partnerships you can make 40 per cent of the amount you previously earned with a sales team: $480,000 per year versus $1.2 million. That leaves you with a $720,000 gap – ugh, right? But plug in the additional hard and soft costs outlined above, and the gap quickly diminishes. Remember, too, that small and midsize sites are dependent on a small group of sellers. When just one person leaves, you can lose an entire quarter training a new team member.

So third-party ad networks present an attractive alternative.

For one, they’re more efficient than they’ve ever been. The same economic pressures that face publishers have made networks more focused. Their teams are shrinking too, but that just brings better value for publishers. As they hone their expertise, vertical- and demographic-specific networks like Martini, Halogen, Investing Channel, Complex, and Gorilla Nation are gaining more traction in the marketplace and with agencies. After all, in our post-portal world, the long tail rules.

At the same time, the technology powering ad exchanges has mitigated some of the issues publishers may have had with them in the past. Brand safety is easier to assure than it was a few years ago, which enables publishers and advertisers – even those with particular brand attributes – to relinquish a bit of the control they’ve held so fast. Punch-the-monkey ads are not the threat they once were.

Supply-side platforms have become more sophisticated. They’re often better able to monetise inventory than publishers themselves, thanks to access to millions of advertisers who buy in exchanges and prioritise them using yield-optimization tools.

So if I were the head of sales at a small or midsize publisher debating whether to grow my sales operation, what would I do? I’d work with multiple ad networks to optimise revenue, plug Google AdSense into the mix if it made sense, consider leveraging non-banner real estate (like toolbars and in-text), and maybe use an SSP. If I weren’t getting high CPMs based on my brand value, I’d want to be wringing every last bit of revenue out of my inventory, so I’d take a hard look at my value in the organisation and, if it were viable, look to aggregate and package my audience with other like-minded sites to build scale.

This is an uncomfortable argument for many because they may take it to mean that people aren’t needed. That’s not true; they are. But the realities of the digital media business mean that publishers need to look very hard at what’s a necessity and what’s a luxury. After a dispassionate analysis, many will find that their sales staff is a luxury.

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