There is no shortage of pontification available about how to measure your online marketing campaigns: how to integrate social media measurement, landing page optimization, ensuring your site has the right feng shui to deliver optimal conversions, etc. But there is very little writing about the other side of the coin: if you’re the one selling the advertising, on your site, or blog, or whatever, how do you understand and then maximize the revenue that your site earns?
As I’ve covered previously in my Online Advertising 101 series, publishers have a number of tools and techniques available to manage the price that their online ad inventory is sold for. But the use of those tools is guided by data and metrics. And it’s the generation and analysis of this data that is the focus of this series of posts.
In this series, I’ll unpack the key data components that you will need to pull together to create a dashboard that will give you meaningful, actionable information about how your site is generating money – or monetizing, to use the jargon.
We’ll start by taking a high-level look at a framework for analyzing a site’s (or network’s) monetization performance. In subsequent posts, we’ll drill into the topics that we touch on briefly here.
Getting the measure of the business
Ultimately, for any business, revenue (or strictly speaking, income or profit) is king. If you’re not generating revenue, you can’t pay the bills (despite what trendy start-ups will tell you). But anyone running a business needs a bit more detail to make decisions that will drive increased revenue.
In the ad-supported publishing business, these decisions fall into a couple of broad buckets:
- How to create more (or more appealing) supply of sellable advertising inventory
- How to monetize the supply more effectively – either by selling more of it, or selling it for a better price, or both
Another way of thinking about these decisions is in a supply/demand framework that is common to almost all businesses: If your product is selling like hot cakes and you can’t mint enough to meet demand, you have a supply problem, and you need to focus on creating more supply. If, on the other hand, you have a lot of unsold stock sitting around in warehouses (real or virtual), you have a demand problem, and you need to think about how to make your products more compelling, or your sales force more effective, or both.
Online publishers usually suffer from both problems at the same time: Part of their inventory supply will be in high demand, and the business will be supply-constrained (it is not easy to mint new ad impressions the way a widget manufacturer can stamp out new widgets). Other parts of the inventory, on the other hand, will be hard to shift, and the business will be demand-constrained – and unlike widgets, unsold ad inventory goes poof! when the clock strikes midnight.
So analysis of an online ad business needs to be based on the following key measures:
- How much inventory was available to sell (the Supply)
- How much inventory was actually sold (the Volume Sold)
- How much the inventory was actually sold for (the Rate)
It’s ultimately these measures (and a few others that can be derived from them) that will tell you whether you’re succeeding or failing in your efforts to monetize your site. But like any reasonably complex business (and online advertising is, at the very least, unreasonably complex), it’s really how you segment the analysis that counts in terms of making decisions.
What did we sell, and how did we sell it?
Most businesses would be doing a pretty poor job of analysis if they couldn’t look at business performance broken out by the products they sell. A grocery chain that didn’t know if it was selling more grapes or grape-nuts would not last very long. Online advertising is no exception – in fact, quite the opposite. Because online ad inventory can be packaged so flexibly, it’s essential to answer the question “What did we sell?” in a variety of ways, such as:
- What site areas (or sub-areas) were sold
- What audience/targeting segments were sold
- What day-parts were sold
- What ad unit sizes were sold
- What rich media types were sold
The online ad sales business also has the unusual property that the same supply can (and is) sold through multiple channels at different price points. So it is very important to segment the business based on how the supply was sold, such as:
- Direct vs indirect (e.g. via a network or exchange)
- Reserved vs remnant/discretionary
Depending on the kind of site or network you’re analyzing, different aspects of these what and how dimensions will be more important. For example, if you’re running a site with lots of high-quality editorial content, analyzing sales by content area/topic will be very important; on the other hand, if the site is a community site with lots of undifferentiated content but a loyal user base, audience segments will be more relevant.
Bringing it together – the framework
I don’t know about you, but since I am a visual person to start with, and have spent most of the last ten years looking at spreadsheets or data tables of one sort or another, when I think of combining the components that I’ve described above, I think of a table that looks a bit like the following:
This table is really just a visual way of remembering the differences between the measures that we’re interested in (volume, rate etc) and the dimensions that we want to break things out by (the “what” and “how” detail). If you don’t spend as much of your time talking to people about data cubes as I do, these terms may be a little unfamiliar to you, which is why I’m formally introducing them here. (As an aside, I have found that if you authoritatively bandy about terms like “dimensionality” when talking about data, you come across as very wise-sounding.)
In the next posts in this series, I shall dig into t
hese measures and dimensions (and others) in more detail, to allow us to populate the framework above with real numbers. We’ll also be looking at how you can tune the scope of your analysis to ensure that
For now, here’s an example of the kinds of questions that you would be able to answer if you looked at premium vs non-premium ad units as the “what” dimension, and direct vs indirect as the “how” dimension:
As this series progresses, I’d love to know what you think of it, as well as topics that you would like me to focus on. So please make use of the comments box below.