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Returning to the subject of how platform-based buying can help publishers.  Last time I wrote that proper attribution and the elimination of user-duplication would benefit publishers despite being provided by buy-side platforms.  But it’s a little unsatisfying because both of these solutions are being built for the buy-side and buyers will dictate how they develop and evolve.  They only indirectly impact publishers.  Yet buying platforms are building tools that can be directly used by publishers to get smarter and monetize more effectively.

One of the biggest challenges facing publishers today is that direct sales forces still think they are selling the site.   Sorry, sales guy, the world has moved on.  If you’re a salesperson for a website you are selling (and your prospects want to buy) the various audiences that comes to that site, whether that audience segment is related to your site or not.  There are a number of ways to sell audiences that come to your site and probably the least creative and most challenged in the future is to just sell the site itself.

Unfortunately, most publishers have near zero visibility into the many audiences that visit their site.  Advertisers, on the other hand, appear to know everything about what they are buying (or at least think they do).   This instance of asymmetric information drives a lot of the tension in the advertiser-publisher dynamic.

But the same tools the advertisers are using to make these decisions can (and are) rather easily be made available to publishers.  These tools give publishers visibility into their audiences and allow them to better sell and monetize their inventory.

Let’s walk through an example.  Kozmo.com is a publisher and sells out 60% of its inventory at $5 CPM.  The other 40% goes for $1 via networks and exchanges.  That 40% is either selling uniformly at $1 or, more likely, advertisers are looking for specific audiences they like and paying more for them while letting the rest is going for under $1.

To oversimplify for the example, let’s assume there is only one audience segment that buyers want – Cat Lovers, of course – and buyers are willing to pay $10 cpm for it, regardless of the site the user is on.  We’ll also assume Kozmo.com has nothing to do with cats.

Bringing back Mr. Omniscient Marketer from the prior post, he can see that 20% of Kozmo.com visitors are in the Cat Lover segment.  However, because Kozmo.com is so focused on selling the site and doesn’t know which of its visitors are Cat Lovers, ¾ of that audience is already sold as part of the direct sales efforts for $5.  Can someone say “NIGHTMARE!”  This is tragic for everyone involved.  The buyer cannot get the audience it wants, the publisher is actually selling impressions at $5 when it could have gotten $10.  And the Cat Loving consumer cannot learn about the latest in self-cleaning litter boxes(!).

But there is a solution. Give the publisher the same visibility into the audiences on its site that buyers get.  This creates a whole new character – it’s Mr. Omniscient Publisher!  WooHoo!   Platforms (like my own MediaMath) can leverage extensive data partnerships and integrations to provide publishers with a view of who is on their site.  Publishers can then make decisions about what audiences to sell directly and what should be placed on exchanges or with networks.

Let’s rebuild the revenue line for Kozmo.  Obviously, $10 > $5 so Kozmo will want to sell the Cat Lover audience first.   Once that is sold, the original direct sales force inventory can be sold at $5.  Yes, there will probably be a little bit of loss due to frequency caps and buyers wanting first impressions, but $10 is two times $5 so there would have to be a lot of direct sales attrition to make this a worse deal.  Let’s assume that instead of selling 60% of total inventory, the direct sales force can now sell 55%.   The rest goes to networks and exchanges at $0.75 cpm (lower because cat lover buyers are now buying direct vs being blended into the remnant price).  Overall eCPM went from $3.40 (60%*$5 + 40%*$1) to $4.94 (20%*$10 + 55%*$5 + 25%*$0.75).  Big win!

Admittedly, this is an overly simplistic example. The % of visitors from an unrelated audience segment is exaggerated as I would imagine the % in any one segment rarely approaches double digit percentages.  It’s important to point out that even if the segments are not big enough to sell directly (and they likely are not) the publisher can still benefit from audience intelligence. This intelligence can either help it negotiate with networks or it can be used as an input when using a Supply Side Platform like Admeld, Pubmatic or Rubicon (the SSPs have tools themselves which serve this need).

The CPM’s are also a bit extreme to prove a point and make the math easy.  The point is that if publishers know more about the audiences on their site, they can make better decisions and monetize more effectively.  With greater intelligence, direct sales teams can be better informed when they approach advertisers, get off their heels, and serve their advertisers better. Data will stop being a scary word to publishers.  Relatedly, direct sales teams can take the offensive when they find advertisers buying their site via indirect channels (a subject well documented by Ryan Maynard of Pubhelix here )

So look at that, with just some simple insights we radically changed the publisher’s ad stack (at least philosophically – no more “direct always goes first”) and increased revenue by 45%.  The next step would be to allow platform-based buyers to optimize on performance and pick and choose individual impressions out of all of your inventory (not just what is deemed “remnant” and thrown on the exchanges).    With that, publishers may find even more incremental eCPM lift.  But since I was told my last post was a bit long, we’ll leave that for another day.