The Risks of Accepting Remnant Ads

By: Neil Greer

Publishers who own their own online sales- should carefully consider whether to accept ads for remnant inventory from ad networks. The practice of selling remnant online ad inventory toad networks may be destroying more long-term value than the short-term revenue is worth.

One of my publisher clients put it best: “Our premium rich media sponsorships sell for $20 to $40 CPM. In most cases, we only get around $1 for remnant. I have an infinite amount of time to hear ideason how we can get more of the former and less of the latter.”

According to data published by Cox-owned software firm Adify, online ad CPMs average around $12. So, with yields for directly placed online ads ranging from 800 to 4,000 percent higher than remnant ads placed by ad networks, why would publishers choose to accept remnant ads in the first place?

In conversations I have had with publishers, many times the answer is simply, “Those placements are only for our unsold inventory, and it is immediate revenue.” 

While that statement may be true, there are several risks to accepting remnant ads. These risks, if left unchecked, can destroy long-term value and cause instability in markets.

Risk 1: Remnant Ads Encourage Distribution Channel Conflict 
As an example, let’s presume the online sales manager for Site A is responsible for selling 10 million monthly page impressions. 

The manager bundles the premium impression inventory so that the site succeeds in obtaining 100 percent of the available stated budget from Advertiser A. Advertiser A’s stated budget is $5,000 per month, and the ad position is sold for $20 CPM; a good price point and a good account for an online publication — one worth retaining for the long term. For its placement, Advertiser A will receive 250,000 premium monthly impressions from Site A.

After all sales efforts are concluded for that month, 6 million page impressions have been sold in the marketplace, and 4 million impressions remain unsold. Rather than goinback to the advertiser anddelivering more page impressions (read: value) on top of the package price, the manager runs 1 million impressions from Ad Network A at $1 CPM for a total of $1,000. 
Often, the result of the above situation is that Advertiser A comes away from the interaction feeling it did not receive as much value as it otherwise could have for the price paid.
Since Ad Network A is also in the same market as Site A, the salesman for Ad Network A also calls on Advertiser A, heralding that Site A is “in its network of sites” and that thenetwork can offer a 
better price point. 

Risk 2: Lost Opportunity to Retain Key Advertisers 
Advertisers care about how many customers yoursite brings them. Smart advertisers also care about how much branding they receive on your site. Alas, even the best vice presidents or marketing directors have to report ROI in terms of sales generated. Certainly, their bosses don’t want to hear about measures of engagement as a primary success metric.

Therefore, if an advertiser pays too much and does not generate enough sales to make the campaign a win, it will seek another place to spend ad dollars. It is understandable to want to justify the high CPM, but client retention has to come first. 

Rather than taking $1,000 in remnant revenue, a better move might be to budget the remaining page impressions as rewards for advertisers that continue their ad campaigns or that are in long-term contracts.

Risk 3: Remnant Ads Detract from the Reader’s Experience 
While there are exceptions, ads accepted through remnant channels are typically much more generic than directly placed ads and leave readers with a lack of context in their market. We have all seen the “Win a Free Vacation” adon the Web and probably are not interested in seeing it again while we try to stay informed in our marketplace.

The ad looks like a $1 CPM ad and, correspondingly, your brand in the eyes of the reader suffers 
a hit.

For some, accepting remnant ads can make sense when alternatives do  not exist. Publishers, however, should take a hard look at creating alternatives to the low-hanging fruit of remnant ads, as the short- and long-term risks, many times, outweigh the immediate rewards. 

Neil Greer is CEO andco-founder of ImpactEngine.com, a provider of rich media solutions to more than 450 publishers in the United States across newspapers, television, and radio. Neil has been in the media industry since 1994. His column, Go Digital, focuses on sharing experiences that aid in solving key strategic and operational issues facing publishers as they grow their digital operations.

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