4 Best Practices For Higher Margins & Profitable Growth
Across the media industry, board of directors meeting and executive teams are discussing how they’ll grow margins and revenue. Profitable growth isn’t a new concept, but one that grew in priority during the pandemic for media companies of all types and sizes.
With intense competition and a growing media efficiency crisis, media companies are facing strong headwinds in the pursuit of profitable growth. Active yield management is a critical component of healthy margins and maximizing monetization activities. Unfortunately, maximizing yield has only become more complex with a proliferation of new products and channels. In this blog, we’ll unpack the latest challenges to unlocking higher margins and more profitable growth through yield management.
What Are the Higher-Margin Opportunities?
1. Dedicated Pricing & Yield Management Team
Creating a dedicated PYM team with a charter to maximize yield is a best practice. One of the biggest hurdles is finding talent. There’s a lack of qualified people, so media companies would be wise to seek strong analytical talent from other industries. Their charter should include planning, price setting, pricing approvals, inventory ownership and forecasting, and ideally this function reports to the revenue operations leader. This is a strategic function that can find revenue growth opportunities in both strong and weak demand environments if done properly.
2. Inventory and Pricing Intelligence
PYM teams should have clear ownership and processes around continuous inventory forecasts. This should be actively managed through one or more full-time roles—depending on the size of the company—that constantly compare forecast vs. actual. A savvy analyst will incorporate internal and external signals into models that can maximize where in the pricing waterfall inventory gets sold.
REAL-TIME UNIFIED DEMAND VIEWS
PYM teams need to be able to see all points of demand against each tier of inventory. Even with direct-sold premium inventory, information about buyer interest and at what price should be available so that media companies can sell to the best partner. Then try to convert the extra demand into similar inventory or packages, which savvy PYM teams do today. For indirectly sold inventory, media companies need to get consolidated demand views by partner, category, end client, channel and product/ad unit. Ideally, alerts suggest optimization improvements to grow revenue. Oftentimes, a consolidated view of this information is difficult to obtain or people are too busy to determine what actions to take, missing opportunities to grow yield.
The direct IO channel continues to produce the highest CPMs, as seen in our 2022 Media Ad Sales Trend - Pricing & Yield report. On the programmatic channels, most category CPMs increased from 2020 to 2021, with some programmatic guaranteed (PG) categories getting close to IO CPMs. There’s still a big disparity between open exchange, PMP and PG prices. Old tactics such as identifying open exchange buyers who can be moved to higher-margin channels like a PMP or IO are still useful. Publishers should look for opportunities where they can add new demand partners, resellers or ad networks that may pay a premium for mid to lower-tier inventory.
In previous reports, we found that publishers who sold multiple products per deal had the highest overall revenue growth rates. They’ve mastered how to cross-sell and bundle their solutions. Too often, sellers only sell what they know, what they’re confident in or stay away from newer products that are perceived as riskier. Defining a cross-sell strategy is critical to deeper product adoption by advertisers. The savviest media companies will drive seller behavior to cross-sell with intelligent automation tools suggesting the right product mix and budgets. Scaled, consistent cross-sell may be the most effective lever to drive growth within existing accounts. To get best practices on how to design a cross-sell strategy, see our NARR Expansion eBook.
4. Audience Extension
Buying network supply is not a new concept and is broadly used by many media companies.Traditionally this has involved buying inventory via a DSP on the open exchange or social platforms. Executing and optimizing these buys has been a challenge. Savvy media companies are pursuing new ways to curate premium, higher-quality audience extensions. They’re building their own direct networks and using their first-party data to make it higher quality and control frequency. They’re also improving the monetization of the audience extension with new ad format such as shoppable ads, streaming video, rolling up podcast publishers and connecting with other first-party/identification platforms. Again, what’s old is excitingly new again with fresh changes.
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