99%. That is the share of incremental digital revenue that went into the pockets of Facebook and Google in Q3 2016. This stat says quite a bit about Facebook and Google’s ability to attract additional digital ad spend to their platforms. But on what odds do local publishers have to compete against the giants? Quite good odds I would say, and right now many publishers are taking the necessary strategic steps to do exactly that.
The key ingredient of Facebook and Google’s recipe for success lies in the data. Data allows a much more efficient ad delivery and higher value for the advertisers’ investments. But despite the fact that local publishers’ impressions are generated by unknown users, they can apply algorithms and machine learning to enrich those users with equally high (or higher) levels of precision. Local publishers can copy the traits of the behemoths of the digital ad industry by gearing up to monetize audiences – not impressions – and set clear strategic goals for doing so.
The programmatic promise to publishers has been that as long as they could drive ad impressions at scale, the money would come. But that promise remains to be fulfilled. The reality many publishers face today is, that they have been caught in a catch 22, seeking to grow their audiences, while delivering more ad impressions and increase pricing for their inventory. Seeking buyers’ promises of value for pure volume has proved to be the direct route to demise. To some extent many local publishers have been reduced to be suppliers of bulk impressions, leaving the data enrichment of impressions to be a task for the agencies.
Facebook took a different approach
At Facebook you buy audiences – not impressions. If you book a campaign at Facebook and compare that to booking a campaign at local publishers, you see an obvious difference in the booking process itself, but more importantly you see a difference in the approach to what you buy. You can’t set your campaign live on Facebook without having defined your target audience. And it works.
Having measured audiences on over 20.000 online campaigns, we see that on average less than 40% of all impressions do not reach the intended target groups. But that is not the case for e.g. Facebook, where the hit rate in target group is much higher.
A key reason for Facebook and Google’s success in driving incremental digital revenue is their efficiency in building targeted reach. Not only do they have the eyeballs on their platforms – they also have the data infrastructure to be able to deliver the right ads to the right users. They simply produce less waste.
Local publishers are obviously in complete awareness of what is to be achieved if they get it right, and now most publishers are gearing up in terms of product and people to be able to monetize audiences – not impressions.
10 steps to sell audiences instead of impressions
1. Invest in the right data management technology using algorithms and machine learning to build valuable audience segments to filter ad impressions against.
2. Understand how own first party data can be activated and leveraged using machine learning.
3. Understand what data you don’t have, and where you need to fill the gaps.
4. Build up data volume by collaborating with other publishers through strategic alliances and/or joined ecosystems that will lead to data quality, consistency and scale.
5. Ensure to educate sales staff in the methodology, benefits and limitations of audience based selling. Concepts like affinity, precision, first party vs third party etc. are basic but essential to master in order to succeed.
6. Incentivise sales staff to sell audiences as it demands higher CPMs and allows your inventory to stretch further (less wasted impressions).
7. Set goals for converting sales of impressions into sales of audiences. Without a managerial focus, most likely it will not materialize in sales.
8. Configure audience extension set-ups to be able to monetize your audience on third party sites.
9. Limit buyers from accessing your unprofiled inventory through exchanges. Ad impressions is a commodity – your audience is your gold, so consider to what extent you will allow buy side to harvest the value in turning impressions into audiences.
10. Always measure if your campaign reached the intended target group and document increased performance back to agencies and advertisers.
Executed with the consistent diligence these steps holds potential to create a positive spiral of driving higher ROI for advertisers, higher CPM prices for publishers and in the end of the day additional digital ad spend going to local publishers.