MittMedia has increased revenues from display by 23 per cent despite a reduced advertising inventory. This is how we did made it possible
During 2018 MittMedia increased its revenues from display advertising by 23 per cent. This was in spite of the company doing two things that are traditionally deemed to reduce revenues.
First, we have reduced our advertising inventory as we have pushed for a successful reader business with almost all content behind a paywall.
We have also chosen to work with ad quality and placement of the ads to generate a better reader experience. We have even removed (!) ad formats from our product range. This should have reduced our display business, but in fact the reverse has happened.
The numbers speak for themselves. A 23 per cent increase for display in 2018.
How on earth is this possible? We will reveal all in this blog post.
Transformation of the sales force — towards a role as a media advisor
An important and foundational aspect has been the digital transformation that our sales force is going through with the help of daily hard work and our learning platform “Reacher Learning”. In Reacher Learning, our sales people have a learning tool to help them get up-to-speed on the digital reality and transform their roles.
From selling a product to becoming an advisor for all digital marketing.
We are now taking another step so that we become an important part of our customers’ and our own value chain through substantial segmentation and customer journey work.
This work was set up and is now being run by our Learning and Development unit under Peter Backström, our Digital Business Development unit, and our B2B Analysis unit, including Mikael Strömmer and others.
New business model and higher prices using Reacher Marketing
Another contributor to the success is Reacher Marketing, MittMedia’s sales tool through which all sales people create effective marketing together with the customer. The tool has many advantages. In Reacher Marketing we no longer sell advertisements for placement or for single sites. Instead, we offer our advertising customers effective target groups based on geography and interests.
This gives us higher ad prices.
The first-hand data we receive from readers drives value in the advertisement business through Reacher.
Reacher also has a unique and in-built pricing logic that gives the advertiser more impact from each display campaign while MittMedia charges higher prices for the same campaign. Read more in that price logic in this blog post.
We have also removed any possibilities for discounts on digital marketing in Reacher.
All these elements mean that the Reacher tool “automatically” drives higher prices and when the sales force consistently uses Reacher in its daily work, the higher prices in combination with increased campaign volumes will substantially increase total revenues.
This is made possible through more effective campaigns and a higher quality of the ad servings sold.
The outcome for us has been an increase in repeat sales of the product.
Prerequisites for MittMedia’s inventory and price optimization
However, there is more to MittMedia’s success in the display business than the Reacher solutions. It’s also a matter of the fundamental view of our ad inventory and how it can drive value. And this is the perspective we have worked from.
Before getting into the details of how this was done, we would like to put our work with pricing and inventory optimization into context.
Of all the local media groups, MittMedia has been the most successful in the digital advertising business in 2018. We base our work with price/inventory optimization on local contexts and conditions. They are:
- MittMedia’s reach is generated from 21 digital news products that are geographically dispersed.
- Our sales people and our customers are located in 30 cities around Sweden.
- Some of these cities are well covered by one news product, some by two and some are in border areas and are therefore covered by even more news products.
- We have a sales force that has to sell digital whilst maintaining and developing print sales.
- Add to this that we have been focused on a digital reader business over recent years that, in the short term, risks driving our advertising inventory downward.
These are the conditions that have become MittMedia’s logical driving force for how we believe we must work with inventory and prices.
A new and complementary approach to ad inventory
The most common way of looking at ad inventory involves the size of the ad inventory that can be sold.
Simply put: How many servings do we have on a site?
The size of the ad inventory is obviously crucial and will remain so in the future, and must be emphasised, worked on and given focus. After all, the inventory is the foundation on which we stand.
However, in a world where media companies have to combine an advertising business with a successful digital reader business, we can solve the problem and drive value by complementing the usual way of looking at ad inventory with new approaches.
This makes us better at unlocking the true potential of the inventory and avoiding the risk of a conflict between the reader business’s and the advertising business’s need for success.
If we are going to invest in a reader business, other and new metrics have to be monitored, not simply how many ad servings are generated.
Important focus on driving up CPM levels
MittMedia has therefore chosen to focus on increasing the CPM pricing we can get from campaigns running on our sites. CPM can vary significantly. Below is a trend line showing average CPM levels for one period.
What we see is significant differences in CPM levels.
And a simple calculation example shows us that if CPM increases from 40 to 80, we can retain our revenues in spite of a halved inventory size.
If we look at the revenue and accept the fact that we can’t influence the inventory to any great extent, we quickly realise that we can increase total revenue considerably by increasing the CPM.
By maintaining inventory and increasing CPM from an average of 40 to an average of 80, we are actually able to double the revenues.
It is obviously incredibly difficult to double CPM. However, in combination with a reader business, it is considerably easier for us to influence CPM than influence inventory.
And the reader business also provides us the tools to drive up CPM.
Long-term business development lies ahead
This is a long-term effort that is not complete yet. It demands constant work in both development and follow-up, but we can share what we have done so far, broadly.
- Deliver locally sold campaigns programmatically to drive up CPM.
- Open up locally-sold campaigns to competition to let through campaigns that provide a higher CPM (but where Reacher allows us to control pricing so that we primarily sell servings on our own sites, which gives us maximum margins).
- A holistic solution allowing us to consistently choose the campaign that gives us the highest bid.
- Effective ad placement offering good viewability and good CTR as many programmatically sold campaigns are optimised using these metrics.
- Adding data to locally sold campaigns to increase the impact for the customer and thereby allow for a higher CPM.
- Augment demand by connecting more bidding parties to our inventory.
- Allow more sales companies to sell our inventory.
Important work: Maximise the matching between supply and demand
As price is a factor that in programmatic advertising is steered by supply and demand in the classical sense, it becomes less interesting to increase the inventory. If an increase in inventory leads to a lower price, then the price reduction will counter the increase in inventory and the total revenue remains the same. There are of course exceptions to this, above all during intensive periods when we see prices escalating (Black Friday, Christmas and such) making it interesting to increase the inventory. In contrast when we have low average CPM it is not relevant to increase inventory as the consequence will most likely be an increased number of servings at a low CPM and thereby reduce our average CPM.
How have we managed to succeed with all these points, then?
As mentioned, our advertising tool Reacher Marketing has provided many of the elements. It is through Reacher that we have been able to open up the local ads to competition and obtain a programmatic flow for them. Furthermore, Reacher’s target group logic has made it possible for us to take data from the reader business and use it in the advertisement business, as the very idea behind Reacher’s display solution is monitoring who sees the ad instead of where it is shown. Through Reacher we have provided our customers with much more effective campaigns resulting in a doubling of the CPM prices and an increase in revenue of 23%.
Header bidding — A crucial part of our work
Another important part of our revenue development is header bidding. By having header bidding on both the client side and server side we have obtained a holistic flow that allows many participants to bid on our servings. We clearly see that we can generate reasonable income from new participants without significantly affecting other participants. It is also through header bidding that we have managed to add more sales companies that can sell our inventory.
And since it is the highest bidder that wins the serving there must be a mechanism that counteracts the possibility of sales companies outbidding each other and driving down our prices. Once again, we rely on the idea that price is steered by supply and demand and that increased demand will drive prices up whilst increased supply will drive prices down.
Håkan Hamrin, Product Owner, Advertising
Henrik Mazzanti, Business Development Manager, Business market