New players entering the CTV and streaming TV advertising game start their journey when they begin opening advertising opportunities for the demand side. However, this route is paved with specific roadblocks that reflect the nature of the modern AdTech market:
Low inventory prices. New streaming video publishers often face this challenge at the beginning of their journey. As the viewer base grows and content quality improves, the value of ad inventory increases, but this requires strategic planning and patience.
Small viewership base. A small viewership base limits the ad impressions available for monetization. Gradually expanding the audience while optimizing ad strategies to make the most of existing traffic is crucial.
Limited partnerships. Building a robust reputation in the industry is a gradual process that requires time and consistent delivery of high-quality content to attract partners.
Lack of direct deals with advertisers. Establishing direct relationships with advertisers is crucial for securing premium ad deals. However, new players may need a proven track record and an extensive audience base to negotiate and close these deals.
Media buying market intricacies. New publishers may face challenges navigating this complex sphere, making investing in research and talent acquisition essential to stay competitive.
Wrong people at the steering wheel. Identifying and recruiting individuals with a deep understanding of the digital advertising niche is challenging but crucial for maximizing revenue potential. While ad sales and delivery occur through programmatic pipes, automation needs the capabilities for intelligent decision-making. Competent individuals remain essential to implement technology, analyze insights, and enhance overall results.
Lack of proper organizational structure. Without a well-defined organizational hierarchy, roles and responsibilities may be unclear, leading to inefficiencies and missed opportunities. A clear hierarchy and workflows are vital for streamlined and efficient ad revenue operations.
You can take small leaps towards revenue generation by leveraging open market programmatic demand. This way, you can access a specific pool of buyers but have to comply with their rates. They can be relatively small and need to meet your expectations in terms of revenue. It can take a long time before your expenses pay off and you enter the growth stage.
Luckily, there are specific ways to get over the stagnation and start scaling your revenue faster. At Geomotiv, we possess valuable insights into this process, drawing from over 14 years of expertise in delivering custom AdTech development services tailored specifically for OTT TV/CTV publishers.
Leveraging our knowledge and practical expertise, we suggest the following approach to creating and operationalizing an ad monetization strategy.
Creating Your Ad Monetization Strategy
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Setting metrics
Crafting an ad monetization strategy begins with locating the metrics tailored to your objectives. Say you are training for a marathon. It's like having a stopwatch for comparing performance to previous benchmarks. And setting proper metrics is akin to following a training plan, ensuring you stay focused on essential things.
In CTV/FAST advertising, you will focus on the revenue generated from your ad pod. An ad pod is a commercial break of any length, ranging between 60, 90, and 120 sec. You can have 15-, 30-, and 60-second advertising slots within this range. Say you want to activate the ad pod. You will request an ad server to deliver back a combination of 15-, 30-, and 60-second creatives that meet your bid floors.
The duration of the ad slot plays a crucial role in this process. A limited amount of seconds for an advertising piece ties your hands regarding revenue. Say your minimum bid is $10 for each ad. Within that setting, you can access $30, $15, or $12 CPMs for each advertisement in the ad pod. Further, you can specify the target length: only 15 seconds or anything no longer than 60 seconds. And the ad server will need to construct an ad response. For example, it can be a combination of two 15-sec, two 30-sec, etc.
So, you need to factor in the duration of the video ad slot and calculate how much you can earn from it. The most optimal way to do so is to calculate RPS (Revenue per Second).
RPS is a metric that defines revenue per 1000 ad impressions:
The publisher will look at the exact response from the ad server, calculate the total CPM, and divide it by the duration of the ads. Let’s say you have ads that are 15, 30, and 60 seconds long that you pay $15 for:
RPS 1= 15/15=1
RPS 2=15/30=0,5
RPS 3 15/60=0,25
The above calculations say that paying $15 per 15 seconds is much more profitable than paying $15 per 30, 60, or 90 seconds. With this approach, you achieve an RPS equivalent to $1. To attain an equal RPS value of $1 for a 30-second ad, you would need to request $30 CPM.
In some cases, premium video publishers planning to launch a new offering will often have a limited viewership or install base. Facing the need to expand their user base, establish credibility with advertisers, and simultaneously boost revenue, they focus on closely monitoring their earnings from each active user.
While RPS will suggest the most optimal way to structure ad slots, it won't factor in customer acquisition costs and accompanying expenses. Therefore, premium publishers should focus on tracking Average Revenue per User (ARPU).
ARPU is calculated by dividing the total revenue by the total number of impressions per specific period per each device:
Say a new video publisher sells its inventory at $4 CPM and has 7,500 monthly impression opportunities per device. The ARPU will be calculated as follows:
7500*4/1000=$30
The monthly ARPU reaches $30, assuming there’s 100% fill. This figure tells us that each active user contributed $30 in revenue.
The goal is to tally exclusively the users classified as "active." So, you'll need to define what an active user is in your particular case. If you offer a streaming service like Netflix, you may designate a user as someone with an active monthly subscription. However, in scenarios where there are multiple seats per account and pricing is tied to the number of users, the definition of a user could shift to represent a seat or an account.
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Demand stack build-up
Early on, as a TV publisher, you will likely sell your inventory through open-market programmatic pipelines. That is, transact with advertisers through AdTech platforms and pay fees. These fees affect the final CPM for the publisher, as SSPs take their portion of the ad spend.
New publishers traveling this route deal with unsold ad impressions due to a lack of interest in ad space or other reasons. On the one hand, gradually building up the demand stack for consecutive transactions is possible. But we at Geomotiv suggest a more efficient and faster approach - generate more chances to sell ad slots instead of losing impression opportunities.
In this context, one may consider implementing a backfill strategy, which helps monetize impression opportunities with no placed bids in the programmatic flow.
Say no interested buyers are ready to pay for an ad opportunity. Instead of losing it altogether, you can turn to CPA (cost per action) buyers - direct response (DR) agencies and affiliate networks. CPA deals can also be sourced from experimental CPA-based retailer marketing campaigns, search feed arbitrage, etc. These parties pay per conversion, such as website visits, purchases from a TV shopping channel, or filling out a registration form.
Your primary objective involves establishing an exclusive pool of strategic partners within the CPA domain. This process entails building and curating a network of DR agencies and affiliate networks that align with our objectives. The subsequent step involves integrating these partners into your AdTech stack, transforming each user interaction into a monetizable opportunity, and minimizing revenue loss.
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Increasing revenue
Monitoring your metrics will show how to build ads for the ad break with the best yield.
Monitoring and optimizing RPS
When focusing on RPS, you can filter out underperforming ads by this metric and phase out undesired demand. Some video publishers would stick only to 15-second ads and improve yield.
Eventually, you may have much demand and ultimately not have a chance to influence how much the advertiser is willing to pay. In that case, the better scenario is when multiple buyers bid on your ad slot. The more people bid on a placement, the better, i.e., twenty advertisers is better than two, four, etc.
So, the most significant driver of improving the RPS is increasing the number of buyers interested in purchasing the ad space - the term known as bid density. In other words, publishers need to increase competition among advertisers contending for the available inventory.
Higher bid density not only strengthens the revenue potential for publishers but also increases the perceived value of the inventory in the eyes of buyers. With an understanding of bid density nuances, publishers can optimize their inventory to attract more bids and elevate RPS.
How to increase the bid density?
You should encourage media buyers to secure ad slots and submit more attractive bids than competitors. Cultivating relationships and communicating the value proposition of your ad slots can lead to mutually beneficial agreements that contribute to increased RPS.
Supply partners will usually have a specially allocated sales team on their side. They play a crucial role in facilitating transactions between the parties, ensuring optimal ad placements and favorable terms. You, in turn, will need a sales team of experienced specialists capable of bringing aboard different advertisers. They will negotiate and convince 10, 20, and more demand partners to bid on your inventory.
-Monitoring and optimizing ARPU
Optimizing CAC and verifying that the LTV (lifetime value derived from ARPU) surpasses CAC and associated viewer expenses is best for publishers tracking ARPU. LTV acts as a rough ROI on CAC investment over some time, but you need to factor in churn as well.
So you’ve minimized your revenue loss - time to level up your strategy:
-Through demand facilitation.
A move towards improved revenue generation is adopting demand facilitation to enhance bid density and improve sales outcomes. For that, third-party SSPs, such as Xandr, Pubmatic, and Magnite, aggregate multiple publishers' inventory through packaging similar offerings. This involves bundling diverse content, such as sports programs, comedies, movies, etc., to create enticing sales packages for DSPs.
Ad agencies or other demand-side players plug into DSPs, which connect to the above SSPs. This connection aggregates inventory from numerous publishers, which provides the required scale and reach. The DSPs then run ad campaigns on this aggregated inventory, and the traffic is subsequently directed to publishers, creating a comprehensive chain to ensure the display of video ads.
Notably, demand facilitation teams primarily operate on the SSP side. Their role is to package the inventory of multiple publishers and align it to meet the demands of DSPs. This collaborative approach streamlines the media selling process, enabling publishers to reach their target audiences and optimize revenue through a well-orchestrated ecosystem.
-Through invite-only programmatic demand.
This approach involves elevating the status of your inventory to premium and selectively granting access only to specific advertisers. To execute this strategy, you will rely on a combination of SSP demand facilitation and direct DSP integrations.
This model emphasizes exclusivity, ensuring that only a curated group of advertisers with aligned goals and premium offerings gain entry. The invitation-only system demands a proper selection process, allowing you to maintain the quality and relevance of ads displayed on your CTV/FAST media.
-Through direct deals.
Direct deals involve your negotiations with SSPs. They enhance revenue through strategic partnerships and serve as a ground for educating the market. Engaging in direct deals with high-profile advertisers creates valuable PR opportunities, establishing credibility and increasing awareness in the market.
…or use an alternative revenue stream - Audience Extension
Two options emerge when an advertiser seeks more impressions than you currently possess. You can either decline the offer or accept the advertising contract and procure extra inventory from other suppliers or partners within the ecosystem.
Opting for the second approach - Audience Extension - facilitates revenue growth, enabling the publisher to surpass the limitations of its existing user base. This strategy allows for revenue expansion on supplementary inventory while growing the viewership base.
In some instances, publishers leverage Audience Extension (AudEx) to potentially exaggerate the extent of their inventory available in the market. This creates an illusion of a substantial inventory presence.
However, it is crucial to recognize that this isn't necessarily a vicious game publishers play. Instead, it serves as a response to market dynamics. Media buyers may be less inclined to engage with limited inventory, which makes publishers enhance the perceived scale.
Operationalizing the Strategy
Many of the above tactics stress the role of people in your company. The right pool of specialists will make OTT advertising work to generate and accelerate revenue.
For example, publisher-buyer matchmaking goes beyond setting automatic pipelines. This process involves negotiations, dealmaking, and partnership nurturing. Similarly, having an allocated team proficient in campaign management and ad monetization metrics is essential.
Create an Ad revenue department
Eventually, the road to efficient ad monetization begins with creating the proper organizational hierarchy within the Ad Revenue department.
A specific structure ensures optimal coordination and collaboration among different teams. It allows for maximizing the potential of each direction of ad-supported video business and provides balanced operations for the department.
Roles Included in the Revenue Department
VP of Ad Revenue
The VP of Ad Revenue is critical in executing the revenue strategy. Reporting directly to the Chief Revenue Officer (CRO) or Chief Executive Officer (CEO), the VP of Ad Revenue is entrusted with overseeing and optimizing the revenue-generating aspects of the business. A successful candidate for this role must demonstrate high proficiency in ad-supported revenue management.
In this role, the specialist organizes and monitors the work of two critical departments: Monetization & Analytics and Business Development. Let’s overview their inner workings and organizational structure.
Monetization and Analytics Operations
The Monetization and Analytics Department is dedicated to maximizing revenue potential through yield optimization from available revenue sources. This involves extracting the highest possible value from diverse streams of revenue.
The Head of Monetization is in charge of the department. Their core task is to maximize earnings from the set of partnerships and deals generated by the Business development team. In this role, a specialist manages the following aspects:
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Data Science and Data Analytics determine yield optimization tactics continuously.
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Data science specialists collect the indicators related to advertising campaigns to manipulate prices, bids, and metrics.
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Data analytics specialists analyze RPS, LTV, ARPU, user cohorts, etc.
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Data Science Lead is responsible for orchestrating the most efficient yield optimization tactics.
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Ad Operations (AdOps) perform the onboarding and ongoing maintenance of campaigns and programmatic partners and yield optimization tasks.
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AdOps specialists work with ad campaign interface, adjusting campaign settings to maximize yield from programmatic partners.
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AdOps Lead oversees the responsibilities carried out by the AdOps team and takes charge of the efficient execution of advertising operations.
Business Development Operations
At the heart of Business Development Operations is the Head of Business Development, tasked with sealing deals with diverse revenue sources. This leadership position requires proficiency in navigating partnerships and nurturing an extensive network within the market. In this role, the Head of Business Development oversees the following aspects:
The proposed structure for the Ad Revenue department ensures optimal coordination between Monetization & Analytics and Business Development. Each role maximizes revenue potential, from the VP of Ad Revenue to the Heads of Monetization and Business Development.
Summary: Scale Your Revenue Organization Using A Comprehensive Approach
This article explored various ad monetization strategies, focusing on metrics, demand stack build-up, and alternative revenue streams. Each tactic offers a unique approach to optimizing revenue and expanding viewership. When used collectively and comprehensively, this approach can help build and scale your revenue ahead of the competition.
Success relies on strategic planning, data-driven decision-making, and a dedicated team of specialists within the proper organizational structure. By aligning these elements, new video publishers can overcome initial challenges and establish a solid foundation for future growth.
