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Too Much Unmonetized Ad Inventory

Posted on Tuesday, Nov 29th 2011

If you are a content producer or a freemium app or game developer, you would know, instantly, what I am talking about: there is WAY too much ad inventory out there. Too many eyeballs that are not getting adequately monetized. Major publishers sitting on top of huge masses of unmonetized impressions. Game developers monetizing, barely, 1-2% of their traffic. App developers, similarly, struggling to convert free users to premium.

If you are an entrepreneur, looking for an open problem to solve, look no further. This is your opportunity. In 2012, one of the greatest unaddressed pain points for the Mobile and Online industries is this over abundance of eyeballs that publishers, software, app and game developers are struggling to find monetization models for.

There are many Ad Networks that offer very low monetization rates and take a large sales commission. If you decide that the way you want to address all this is by becoming, yourself, an ad network, that is certainly one way of addressing the pain-point. However, you would need to know how to sell $25-50 CPMs, because at $4-5 CPMs, there is no money for anybody. Not for the network, and not for the publisher. It’s just not worth it. Some vertical ad networks have gone after this opportunity, Glam Media being one of the most successful of the lot.

But, by and large, the problem remains unsolved from the publishers perspective.

Now, if you are an entrepreneur looking for cheap advertising, this actually plays in your favor. However, most ad networks don’t have the kind of self-service mechanisms of buying ad impressions that Google AdSense has, for example. This is a limitation on the side of Ad Networks, who would actually monetize a lot better if they were to open their inventory up to the small-medium businesses.

Now, if you are an Ad Network with the ability to service a large pool of SME advertisers, I would like to hear from you.

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Apps are a different beast compared to advertising on websites! Apps by their very nature are becoming super-virtualized. You look at medical aps – there are drug information apps, medical education apps, pill reminder apps, on and on… When youy have a freemium app in any of these categories what makes sense is super-verticalized ad networks and they are not there! For example, if I am creating a diabetes freemium app, weighwatchers makes sense, test strips make sense, Godiva choclates do not! That's the problem now, lots of opportunity but all we have are tired old (1o years or so) networks that do not serve this market well! Problem and an huge opportunity!

Nari Kannan Tuesday, November 29, 2011 at 12:10 PM PT

Yes, and Games are also a different beast. If you are a Gaming company sitting on large amounts of unmonetized inventory, you want a way to sell in-game ad inventory to other gaming companies, perhaps. There is no solution for this problem either.

Sramana Mitra Tuesday, November 29, 2011 at 1:13 PM PT

As an online publisher, I can only speak about the dynamics in our industry, and based on our experience, it is getting increasingly difficult for publishers to realize the true potential and value of their online audience. The vertical ad networks were a great step in the publishers favor but with the growth of RTB platforms and the commoditization of inventory, even vertical ad networks are going to feel the pressure. With respect to ad networks, which is what most publishers use to meet their monetization needs, publishers are seeing:

1. Drop in CPMs: This is by far the biggest complaint. With the growth of RTBs, it is going to get even worse.

2. Ad Networks imposing more stringent requirements: This includes steep traffic requirements, placement restrictions, and Comscore traffic assignment.

3. Poor Fill Rate: No matter what your traffic is, most ad networks (specially Vertical Ad Networks) can fill only a fraction of your inventory.

4. Poor customer service: This is more true for smaller publishers than big ones. I've had a few friends tell me that they have never ever spoken with a real person at any of the networks that they currently work with.

5. No differentiation: Networks bundle sites in specific categories and sell. They wont sell specific sites and, thus, theres no way for a site in the portfolio to differentiate itself.

6. Standard-units only: Ad Networks care about serving products that can scale. This has so far been, and will likely continue to be, banner units. For niche publishers who want to and can deliver custom campaigns, the networks wont help.

Often times new companies are started not to revolutionize an industry but make it better by improving on just one dimension, such as make search-results more accurate or provide great customer service while still selling shoes online.

With online advertising, there's many dimensions to improve upon and many new-business opportunities. I just hope theres an entrepreneur listening.

Vikrant Mathur Thursday, December 1, 2011 at 3:30 PM PT

Agreed. Given the ad sales models today, there is no premium because of the audience quality unless you do direct sales, which few can afford.

Sramana Mitra Thursday, December 1, 2011 at 7:51 PM PT

Theres almost an opportunity to create a business that would rep medium size sites (in a niche) and do direct sales on their behalf.

Vikrant Mathur Friday, December 2, 2011 at 11:58 AM PT

There is a solution that I so often write about ….Yes …For many Publishers ……The Times Are indeed, a Changin'… http://seekingalpha.com/instablog/36191-lookingco

Ross Bradley Monday, December 5, 2011 at 2:04 AM PT

How about using existing facilitators like TEXT-LINK-ADS.com ? Small publishers can sign-up any time and start earning. I already earn a steady stream every month from two blogs. They turn down many other viable ones which confuse me.

Ramon Thomas Monday, December 19, 2011 at 3:41 AM PT

One solution could be moving from 'content monetization' to 'content for monetization'. If we typically take any online purchase. I search for a product/service -> read reviews -> feel satisfied -> buy the product or service. I don't have the data , but it is common sense to believe that the probability of a person who does the search will buy the product/service is higher than ad conversion rates.

From the consumer perspective , I will buy only when I feel like buying. Why will I buy something because you showed me something while I was doing something else. 1-2% conversion rate are probably from people who already had a need.

If we slightly invert the logic , can content create the need for purchase? For example , an article about Aakash tablet (Benefits , Price , Comparison) followed by an online purchase link is bound to see more conversion than an Aakash ad getting displayed on a section of a page which I will more or less avoid looking at. Another example Snapdeals , the content displaying a discount percentage is a good enough motivation for people to next stage in the process

Movies could have ads on games made on same movie , In-product placements for online content could also be an idea. Just thinking aloud , but there could be potential 'content for monetization' ideas floating around.

Sriram Monday, December 19, 2011 at 5:52 AM PT

There are plenty of options for monetization, but not many good ones depending on the niche. In some, including some bizarre ones, AdSense does admirable well, in others direct sales. In general though CPM is going down regardless of whether you are monetizing on a CPC, CPM or other model. Interestingly, text link ads (which is literally selling links, against Google and others TOS) seems to be growing based on the requests received and what I see on other sites.

Ted Monday, December 19, 2011 at 6:28 AM PT

I certainly agree to what Sriram has mentioned. Click through rate is very much dependent on :
1. The kind of audience product or service is displayed.
2. The context in which product is displayed.
3. Information about the product.

For instance the chance of people clicking on an advertisement for "Variable annuities" is more 1. if its advertised in an investment education newsletter that is read by folks who like to be in charge of there Finances.

2. Versus it being advertised in a general web site like Yahoo.com where the audience is very diverse.

Dayanand Monday, February 13, 2012 at 5:54 AM PT
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