Usable Clicks

Product Strategies to Stem the Erosion of Ad Rates

During News Corp’s quarterly earnings call earlier this month, global media mogul Rupert Murdoch explained his long-term position on Internet advertising. He states that the almost infinite increase in ad inventory is putting a constant downward pressure in prices, making it difficult to monetize audiences, especially with ad spending on the decline.

A large chunk of my responsibilities at Yahoo! deal with this exact problem. In an environment where online advertising is becoming a commodity, how do you maximize the selling of premium inventory while using networks and exchanges to monetize the gaps? All while achieving the highest possible rates the market will bear. In an ideal world, exchanges and adservers would maximize network traffic to monetize each impression to its fullest. The truth is that the imbalance between supply and demand, as well as the relative immaturity of exchanges is causing a huge gap, and impressions are selling for bargain bin prices.

As Kevin pointed out a few weeks ago, maximizing monetization through direct buying is becoming increasingly harder to do. Ad dollars are tightening, and as publishers are looking for ways to maximize inventory worth, network/exchange traffic is becoming a staple of most sites, even premium frontpages like NYTimes.com.

I do think there are some basic principles that can help businesses defend themselves from this kind of erosion in premium inventory.

Know your audience, define your niche

• Don’t dilute your audience by expanding for the sake of expanding. Understand who your core audience is, and focus your energy there. If users are consuming your content, chances are good that there’s an advertiser looking to reach them.

Develop products and services that meet the needs of your users and your advertisers

• We all hate Venn diagrams, but if you’re in the business of making money (aren’t we all?), you need to consider both sets of ‘clients.’  The perfect product delivers a specific need for users, and also provides a single place for advertisers to reach them. Tech Ticker, for instance, provides active investors with highly relevant market information and analysis. Those same users are also a highly sought after audience, and Tech Ticker provides a framework that aggregates them in one neat and tidy place, hence the exclusive sponsorship.

Create demand through scarcity

• This is the principle that powers exchanges. If demand outpaces supply, advertisers will pay a higher premium to gain access to that content to exclude their competition. So how do you create scarcity without artificially limiting scale? Create individual marketplaces for differentiated products. If you’re a global finance publication, discretely break-out your audience into easily digestible segments, financial advisor, active investor, beginning investor, ETF trader, Currency trader, Options trader etc. You can still achieve massive scale within your niche, while segmenting out your audience in logical and discrete ways.

In general, online ad dollars are drying up, but those who put in the effort will fare much better than those who decide to simply ride it out.