Yield management is a slippery topic to explain, and even more complicated in practice. Rather than explain how it works, it’s probably more helpful to explain what it does. Well… what it’s supposed to do, in theory.
First, the problem that yield management aims to solve for publishers: The total amount of inventory on a site is more or less consistent over time, but the demand for it fluctuates. Your goal is to sell out all your inventory all the time, at the highest prices possible. Yield management strategists have to figure out which buyers will have access to how much inventory, at which time, through which buying channels, at which CPMs.
Basically, in order to keep both fill rates and CPMs as high as possible, the same inventory is sold to different buyers at different prices.
Yield management is not even remotely confined to digital media.You come across examples of it as an everyday consumer without thinking twice about it. The “analog world” parallel everyone brings up (don’t credit us—this comparison has been around the block) is how the airline industry works.
Say you have a 747 flying from London to New York. The flight distance and the number of seats are both always the same. But demand for seats will probably be lower in January than in June. The airline knows this from past years, and can set seat prices based on the demand it expects to get. That’s how they can squeeze dollars out of travelers in peak season, and entice travelers to fly during the off-peak. In the end, they’re not just reacting passively to the marketplace—they’re trying to actively impact it via their pricing strategies.
Predicting demand and managing yield accordingly is a hair more complicated for a digital publisher. You have your direct sales channels and your programmatic channels, direct and indirect. To manage yield, you need to allocate impressions to wherever the demand is highest—which means inventory must be able to flow between these ordinarily siloed channels.
You can forecast in which channels you’ll find the best demand, so you can figure out how to strategize your inventory allocation over time. But you also really need to make sure your real-time sales don’t interfere with your previously booked direct sales. Got it?
Yield management is a highly technical process, and for many publishers, really good yield management is more of a dream than a practical reality. Allow unified access to inventory across all channels, and allocate inventory based on the demand you expect?—Yeah, sounds a little like sorcery, as we’ve suggested in the past. At the very least, it’s a very manual process that would call for considerable data processing and automation in order to make it actionable.
To talk to tech vendors about how they do holistic yield management, the process can sound downright ephemeral. It’s not necessarily their fault. It’s just that yield management seems to call for certain transaction channels to behave in a way that’s counterintuitive to how they were set up.
But publishers are dreaming of holistic yield management because they desire it. We’ve called HYM as an acronym, in the event it becomes acronym-worthy. We haven’t heard HYM catching on just yet.
AdMonsters Resources:
Hugging the Publisher Yield Curve: A Conversation With Lorne Brown of Operative (2016)
What’s In Your Header? Yield Optimization… Transformed! (2016)
Breaking Out of the Two-Class System: Talking Holistic Yield Management With LiveRail’s Vijay Balan (2015)
Other Resources:
Ad Ops Insider: Articles on Yield Management