Maximizing The Yield Curve

Oct 8, 2012

As a publisher, maximizing your revenue yield should be a constant theme. Every day I hear from publishers and members of my team, “how do I get higher CPMs?” High CPMs(revenue per 1000 impressions) is a concern for all online publishers large and small. I think it is the common denominator for conversations among all publishers and advertisers.

There is an ever present theme in our daily lives when we are ready to engage in exchange, “How much to I have to give in order to get.” In the case of online advertising, how much are advertisers(brands) willing to pay you(the publisher) to smack a banner ad across your content. As a publisher you want maximum dollars flowing to you for each impression you allow on your content. Advertisers want to spend only the minimum amount to see a return(product purchase, brand lift, etc). With a nearly unlimited market of supply(impressions requests by publishers) and a finite dollar amount(brand advertising budgets), the brands(demand) will follow the economic law of diminishing returns and spend less and less for each additional ad impression across your content. As a publisher you have a choice to continue to sell at a lower rate thus maintaing market efficiency or closing the market, ie making your content no longer available to advertisers.

Below is a sample of a publisher’s revenue yield curve. On the right side are highdollar CPMs(y-axis) but a low quantity of impressions served(x-axis). As you move along the curve, the CPMs fall and the quantity of ads served increases. This is not atypical for any publisher that maximizes the revenue across their content.

As a publisher there are several questions that remain in order to maximize revenue and push the belly of the curve up and to the right:

  • How do I slow the rate of diminishing returns?
  • When do I stop selling my advertising on my content?

I analyze these questions every day for the publishers in the Federated Mediaexchange. There are several techniques but the most significant driver to decreasing your revenue delta is a robust ad partner(demand) structure. The demand market is limited but there are solutions available to you. As an exampleI,your site receives 1,000,000 ad requests per month and one advertiser(scenario one) has offered to buy all of your impressions for the month. They agree to pay you $5CPM for the first 100,000 impression then $2.50 for the next 150,000, $1.00 for the next 250,000 and finally $0.50 for the remaining 500,000. Now imagine your savvy sales development skills landed a second advertiser for you the next month. They agree to pay you the same amount as advertiser one keeping in mind that your number of available impressions is constant at 1,000,000 for the month. Can you see what is happening here? You have have to advertisers buying your content for the same rates and the same quantities. Good stuff for sure. Now let’s look at the impact of your additional sale.

  • Revenue is up by 63%
  • Your lowest value ad inventory is now priced at $1.00, not $0.50

This brings me to the topic at hand, by using two partners you improved your revenue yield. Did you reach the maximum? Impossible to tell. You would need to add additional advertisers until you found a diminishing rate of return.

The above scenario is a bit simplified but my point is that as a publisher you should focus on increasing your revenue yield by maximizing the return from each ad partner. High CPMs, like winning streaks are great but eventually all begins to normalize. This leads to the second question of when do you stop selling your content. There is no easy answer for this as each publisher is different. The rule I like to follow is if you don’t receive an incremental or noticeable bump in your revenue then you have likely reached the point on your yield curve where selling more content space is not going to lead deliver noticeable returns.

I hope this helps provide you with a better understanding of the market dynamics that are at play. I will continue to write about this topic as it resonates daily with me. Post comments and I will do what I can to answer.

This article was originally published on www.drivingdelta.com. Matthew Barrowclough is the Director of our Publisher Management Group and currently oversees publisher revenue growth for our network. You will usually find him grinding away with spreadsheets and surfacing additional revenue yield for each publisher.

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