Revenue optimization – sure, it sounds good but what exactly do we mean when we talk about trying to achieve it, particularly through the lens of digital advertising?
We define revenue optimization as a “a function of holistic yield management, [involving] a series of practices used to generate the most revenue from every channel and placement.” Writing in AdExchanger, our own Jay Wright explains how publishers can improve revenue in a comprehensive way:
The fact that truly holistic revenue optimization requires addressing formidable challenges helps explain why few publishers are doing it. Better metric definition, improved product design, clearer waterfall priorities and stronger strategic alignment across the entire organization are the steps that can make a real long-term difference.”
When we say “revenue optimization,” we are essentially talking about:
- Maximizing revenue by focusing on the right objectives
- Defining the right performance metrics
- Aligning the organization around those objectives
- Finally, designing the processes and deploying technology to achieve your objectives
It’s certainly not just about using programmatic to capture a few extra dollars from relatively low-value ads.
Infographic: Optimizing the Ad Publishing Revenue Tree
Consider a fruit-bearing tree as an analogy for how revenue processes and yield management should work. Grabbing the low-hanging fruit is an important first step, but the larger opportunity and more substantive value comes from climbing the ladder and getting to those harder-to-reach (and much juicier) fruits at the top of the tree, as our infographic:
You need a sturdy ladder composed of clear KPIs, cohesive strategy and organizational alignment to access the highest value objectives at the top of the tree.
Why Truly & Holistically Optimizing Advertising Revenue Starts with Strategy
As the infographic above shows, picking off programmatic is easy; that’s why many companies start with that, and enjoy marginal revenue gains of 1-2%. But publishers miss the opportunity to drive much more significant revenue increases of 20-30%, because it takes the harder work of:
- Rationalizing the product catalog to focus on higher-margin and easier-to-sell products
- Restructuring rate cards based on supply-demand dynamics – selling fewer ads may lead to higher revenue in some cases
- Rethinking sales incentives so teams know what the priorities are, rather than just always seeking to sell more ads
- Tailoring user experiences in balance with revenue optimization goals – so that loading up pages with too many ads doesn’t lead to reductions in page views
Because these tasks involve coordinating the efforts and building consensus among multiple stakeholder groups, many digital ad groups never undertake them. They seem too hard. This is foundational strategic work.
For example, setting 10% YOY revenue increases is not a strategy, but rather a goal. The way you achieve that goal – the levers you adjust to reach higher-yielding sales, for instance – is the strategy. The key performance indicators and sales incentives should be closely aligned to that strategy, with all other decisions viewed through that lens.
So in our view, true revenue optimization and holistic yield management absolutely require a clear strategy. That’s the best way to yield the fruits of your labors (pun intended).
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