As a publisher, maximizing revenue yield is paramount. Every day I hear from publishers, “How do I get higher CPMs?” High CPMs (revenue per 1000 impressions) are a concern for all online publishers large and small.
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 spend less and less for each additional ad impression across your content. This is the economic law of diminishing returns. As a publisher, you have a choice to continue to sell at a lower rate thus maintaining market efficiency or closing the market, i.e., making your content no longer available to advertisers.
As a publisher, there are several questions that remain in order to maximize revenue:
- How do I slow the rate of diminishing returns?
- When do I stop selling my advertising on my content?
How Demand (Advertising Partners) Effects Your Revenue
The demand market is limited but there are solutions available to you. For example, 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 $5 CPM 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 deliver noticeable returns.