The Challenge of Remnant Inventory

August 25, 2009 | By Marc Porcelli | No Comments »

Remnant inventory has been getting a lot of attention of late with the explosion of ad networks. Today, PaidContent ran a great piece by outgoing president and CEO of Forbes.com Jim Spanfeller titled, Publishers Are Killing Web Advertising’s Potential With Misguided Pricing. Mr. Spanfeller argues that publishers and undercutting themselves, and that they have “vastly reduced their pricing power” largely through misguided efforts.

I agree with Mr. Spanfeller, I also believe it is the technology coupled with the challenges of merely being a web publisher that have accelerated this, “misguided pricing.” Web publishing is very difficult and exceptionally competitive. You really have to have a highly knowledgeable group of employees that are metric driven.  I wrote an article early in January that touches on remnant inventory and the effects that technology has had:

So why did sites turn to exchanges, and why didn’t publishers see this coming? You figure about two or three years or so ago that a site could sell say 70% of its inventory and 30% went through an ad-exchange. This 30% that was remnant and being, “bonused” or sold at a very minimum price was not very profitable. Along comes 2006 and particularly 2007 and a huge implosion of exchanges, largely legitimized by Google’s purchase of DoubleClick followed a few weeks later by Yahoo’s acquisition of the Right Media Exchange and publishers are monetizing this remnant inventory like never before, all by simply placing some code. Networks are making huge margins, some as high as 40%+ (Right Media Exchange was reported to take about 7%) and everyone is making all kinds of money and for the most part all through automation, no need for large staffs with salaries.

The marketplace is going through a cycle. A cycle where many players are being educated at an exceptionally rapid pace. Also not to be discounted is the tremendous pressure that has come from the recession and decreased ad-spend.

Another way to look at all of this, is that it is not a problem, but an opportunity. It has been a significant oppertunity for advertisers in the performance space and largely for those that are highly metric driven!

Related: If you have some time, Ben Barokas who is the Co-Founder and CRO of AdMeld has a great presentation on. “Solving The Remnant Inventory Problem.”

View more documents from AdMeld.
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Category: Ad Networks, Media Buying, Monitization

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