Remnant inventory sometimes not worth selling?

By August 26, 2009Advertising, Yahoo!

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There has been a big wave of interest in remnant inventory on the web in recent years, most notably with the acquisition of Advertising.com by AOL for $475m (a deal we backed when I was at Reuters Venture Capital) and RightMedia by Yahoo in an $850m deal.

The thesis behind these companies and their exits is that there is almost limitless inventory on the web and finding a way to monetise even just some of it and at low rates could generate a lot of cash.  And generate a lot of cash it has.  I’m not privy to much information about RightMedia, but I do know that AOL have been very pleased with the Advertising.com acquisition.

However, just because a lot of money has been spent through these networks doesn’t mean that they are necessarily delivering good value for publishers, and this is what Jim Spanfeller was saying in his post on paidcontent earlier this week.  The simplified version of his argument is that selling remnant inventory doesn’t generate much extra revenue and drives down prices across the board.

And, if anyone should know, it’s Jim.  He is the outgoing president and CEO of Forbes.com, he is the treasurer of the Online Publishers Association and chairman emeritus of the Interactive Advertising Bureau.

His argument exactly matches our experiences at WAYN where we have recently cut the inventory we are putting through RightMedia to focus on driving premium ad sales.  Our logic was that despite being a reasonable percentage of the inventory the revenue we were getting from remnant was a low percentage of total ad sales and that removing them would enhance both the experience on the site and the money we can make from premium deals.  The greater potential for premium deals comes from removing the option for advertisers to get access to WAYN on the cheap and because the remnant ads often detracted from the premium feel of the site (e.g. despite our best efforts they occasionally served ads for debt reconsolidation services).

I’m not going to publish numbers from WAYN, but Jim cites data from an IAB and Bain Consulting survey of seven member sites which found that the 30% of their inventory they were selling via ad networks was only generating 2% of their ad revenue.

I like to try and keep my posts to around this length, so I’m going to stop here, but if this topic is of interest to you then you should read Jim’s post as his full argument is much richer and nuanced than the short version I have produced here.  It’s full title is Publishers are killing web advertising’s potential with misguided pricing.

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  • Spanfeller went a bit further. Far enough where he doesn't deserve any support.

    I'm all for pulling all ad nets from sites that can sell premiums well (as Dogster did a couple years ago). However, Spanfeller was promoting that measurement and accountability was in error and that Internet ads had to drop all that analytics crap and go back to being priced on faith.

  • Jim D

    Unfortunately, this is one of the very common downsides to many advertising campaigns. With our real estate license website I found that we were large amounts in advertising capital, but were seeing little return. We have since discontinued purchasing advertisements on other websites.

  • Jim D

    Unfortunately, this is one of the very common downsides to many advertising campaigns. With our real estate license website I found that we were large amounts in advertising capital, but were seeing little return. We have since discontinued purchasing advertisements on other websites.

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