It’s getting increasingly more difficult and complex to get to the answer of a basic account planning question: How much will that advertiser spend in the following year? Successful sellers have to navigate the complexities of multiple inventory types, sales channels, and increasingly, the trend toward programmatic buying. Winning in this dynamic market begins by having a good plan of attack, i.e., a good account plan. In this three part series we’ll explore the nuances of digital media account planning. What should publishers consider when creating a bottom-up account plan? How does inventory type impact planning factors like the number of deals, deal value and timing of ad buys throughout the year?
Series Overview: In Part 1: Understanding Inventory Types we address the initial questions for three of the most prevalent inventory types. We’ll cover the various sales channels (ad exchanges and real-time bidding networks) and the implications for account planning in Part 2: Buy/Sell Channels. The traditional purchasing process characterized by one intermediary—the agency—between the advertiser and publisher is no longer the norm. The landscape is much more crowded today. New technologies are disrupting the capabilities and value of traditional advertising platforms and driving the growth of new products and companies. In Part 3: Programmatic Ad Buying we’ll explore how this quickly-growing way of buying and selling inventory via the use of algorithms to make buy decisions promises greater ad relevance, reach and ultimately profitability.
To begin answering the “how much?” question, publishers must build up the advertising spend dollars by three basic inventory types: premium guaranteed, audience and remnant.
Premium guaranteed (50 – 85 percent of advertising spend): As implied in the name, a premium guaranteed inventory provides assurance to the advertiser that a specific ad will be placed in a specific location on a publisher’s property. From a technical standpoint, this type of ad can have the same ‘look and feel’ as any other type. The key differentiator, from the advertiser’s perspective, is control on timing and placement. As such, premium guaranteed inventory is the most costly of the three basic inventory types, yet still the preferred way to sell ads by both advertisers and publishers. For publishers, guarantees create predictability in terms of set monthly or quarterly spend throughout the year. The largest portion of a publisher’s revenue, typically more than 50 percent and up to 85 percent, will come from guaranteed inventory. This is the starting point in building-up the account plan for any specific advertiser. The negotiation and pricing of premium guaranteed inventory usually happens early in the year, often starting late in the previous year, and thus means more predictable account planning.
Audience (10 – 30 percent): Delivering targeted content to the targeted audience is often considered the holy grail of advertising. Advertisers looking to target a very specific audience turn to publishers to place their ads on digital properties where those audiences live. An audience can be very broad (ex: males between the ages of 18 and 34) or quite narrow (ex: males between the ages of 18 and 34, with a college degree in sports medicine, graduating top of their class). The more specific the audience, the greater the relevance of the message and therefore difficulty in finding that audience successfully time after time. Unlike guaranteed inventory, the advertiser pays only for a successful impression. From an account planning perspective, most advertisers will spend significantly less on targeted ads. With increasing ability to provide specific audiences, advertiser spend in this category is likely to increase in the future.
Remnant (10 – 15 percent): In simple terms, remnant inventory is the unsold space, or leftovers. In the digital advertising space, remnant inventory is equivalent to the empty billboard on the side of the highway. It’s cheap, plentiful and pooled with other unsold space and sold in real–time bidding. Impressions are not guaranteed and advertisers only pay for what they get. As such, the median price of remnant inventory typically hovers just above zero. Much of the technology innovations have focused on improving the distribution and pricing of remnant inventory. However, it’s still very difficult to plan for, and as such, is a small portion of a publisher’s revenue stream.
Piecing together total advertiser spend requires a breakdown across three key inventory types. Understanding the typical spend proportions across inventory types allows the sales executive to place appropriate sales effort against each throughout the year. The largest portion, premium guaranteed, is usually locked in early in the year. This means it’s easiest to plan for, but typically the most difficult to win because a lot of the work to win that sale is done at the tail end of the previous year. Targeted buys and spot buys of remnant inventory are harder to predict and build into the account plan but typically comprise a much smaller portion of an advertiser’s spend. As proportional spend on audience and remnant inventory increases, the account planning process will only get more complex. Keep these proportions in mind and ensure your sales executives are aware of where ad spend dollars are coming from and when they need to go after them throughout the year.
In Part 2 we’ll look at how the buying/selling landscape changed in the last 10 years and the various ways in which ads get bought/sold. Lastly, in Part 3 we’ll explore programmatic buying and the promise algorithmic purchasing holds for the future.
Learn more about digital media sales best practices.