Just about everyone I’ve talked to in the online ad business has seen a dramatic drop in direct ad campaigns since the first of the year. The reason is obvious, the holidays are over and advertisers aren’t pushing as many products. What we are also seeing, however, is a boost in internet traffic. Everyone is back from vacation, back to work, and spending a lot more time online. More internet traffic means more ad inventory (ad inventory means the number of square and rectangle ad zones multiplied by the number of website page views).
Big online publishers fill their ad inventory a couple different ways. First and foremost, they sell it directly to advertisers. Direct sales generally deliver the highest CPM rates, the highest margins, and the most relevant ad/content pairings. A good example of a direct sale would be Nike buying 10 Million ad impressions on ESPN.com through an ESPN.com sales rep for a $10 CPM rate (a $100,000 buy). Because ad inventory levels are unpredictable, however (because they fluctuate with traffic levels), most websites work with some type of ad yield optimizer to fill the rest of it not taken up by direct sales.
The job of a yield optimizer is to maximize the return from a website. And that means using sophisticated algorithms to retrieve and serve the highest paying, most relevant ads available each time a page loads. It’s easy to do this in the Nike/ESPN example. But when looking at the scale and value of remnant ad inventory on the internet, it isn’t economical to hand pick campaigns for specific sites. Ad optimizers and their emerging technologies (such as RTB and behavioral targeting) are required to do this job on a massive scale pairing hundreds of different advertisers with hundreds of thousands of different websites.
The economic situation that I described in the first paragraph (few direct sales + a lot of ad inventory) means that ad optimizers are seeing a lot more business this month. And in an industry with so many players, in a period of such hyper change and growth, this is the optimizers’ time to shine.
Who will step up to the plate and deliver the best performance? I have a couple ideas, and I will be interested to see who is still around next January. But in any case, in the online display advertising business, December is the month of the salespeople while January is the month of the technologists.