Publishers should stop selling their remnant inventory — unsold ad spots that are often sold by third parties at incredibly low rates — but it is likely too late to get rid of the trade altogether. And in many ways, publishers themselves — who are now hurting from the practice — are to blame.
In a recent article, outgoing Forbes.com CEO Jim Spanfeller argues that online publishers are hurting the potential of their ad inventory by selling remnant ads at firesale prices — and that they should stop doing it. Why? Because publishers end up selling anywhere from 10% to 40% of their inventory for only about 2% of their total revenue. Instead, he argues, they should be steering advertisers towards inventory that actually makes them money.
The problem is that we’re having this conversation a few years too late.
Now, publishers must inevitably grapple with the challenge of selling ad inventory at traditional media rates — anywhere from $5 to $15 per 1,000 impressions in most cases — while there is an endless supply of super-cheap inventory out there for advertisers to choose from.
But those same established publishers are to blame for this problem in the first place. By selling remnant inventory in the past, they helped support and grow two flourishing business models:
- Ad networks that sell remnant inventory
- Publishers that gather dirt cheap content — or free in many cases — that they then build profitable businesses on top of.
It seems a new ad network pops up every day, and in turn a new site that aggregates content from other sites or from contributors willing to work for free, supported by revenue from ad networks. This might not have happened if publishers didn’t sell so much inventory at firesale prices in the first place.
Meanwhile, most traditional online publishers continue to pay staffs of people to contribute to their sites, putting more pressure on profit margins and making it necessary to sell ad inventory at higher rates in order to create a profitable business.
Why can’t we turn back the clock?
Now that the industry of ad networks and scrappy content sites has been created — arguably on the backs of traditional publishers — the inventory and money is out there, whether more established online publishers were to stop selling remnant inventory or not. As a result, there will still be pressure on all publishers’ inventory and rates — regardless of where the low-rent spots are being sold.
What should publishers do now? Instead of now trying to fight a wholesale battle that has for the most part been lost, they should focus on better ways to differentiate their inventory in sales pitches — focusing on engagement metrics, or demographics, for example — while at the same time seeking better ways to develop quality content at lower costs.
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