Finding the Best Home for Ad Operations 2.0

This article, penned over 10 years ago, tried to provide some guidance on where ad operations should live in an organization. As part of a series of retrospectives in the “Past, Present and Future” collection, it probably holds up better over time than any of the other pieces. In 2020, we frequently call this business unit “Revenue Operations”, since it encompasses all of the media and technology that has a role in delivering revenue to a company. In reading the original article (below) through again, I think most of what I said holds true, but you be the judge!

Finding the Best Home for Ad Operations (Originally Published for iMedia Connection 10/08/09)

In the past, when the subject of “who wants to manage ad operations” came up in executive meetings, the only response was the sound of chirping crickets. Ad operations was frequently relegated to the farthest reaches of a corporate floor plan. Fortunately, that time has come and gone. The consideration of where ad operations lives has significant ramifications on the ability of a company to run efficiently and attain revenue goals. The human dynamics between functional divisions are as important, if not more so, than the technology used to support them.

Ad operations is much more than just a back-office function. In fact, it is the lifeblood of any publisher who relies on online media as a significant contribution to its revenue stream. Without ad operations, sales can never make the leap from insertion order to fulfillment of contract. Without ad operations, guidelines for pricing and packaging become a moving target. Without ad operations, the balancing act between creative ad units and credible, reliable content goes off kilter.

Given this critical function, where should ad operations live in an organization? In sales? In technology? In finance? Or, does it live on its own as a standalone division? Having worked with more than 40 publishers as clients, I’ve seen it all. Even within a single company, organizational structure can change with each new management regime. Depending on the choices that are made, the results can lead to operational efficiency, or downright dysfunction.

Care and feeding of ad operations

In considering the organizational structure that ad operations lives in, the following functions need to be preserved and nurtured:

Gatekeeping: Any publisher revenue forecast worth its salt is built from the ground up, based on metrics that ad operations works with every day. What is the monthly traffic of a site, and the resulting volume of ad impressions? What is the distribution of ad impression by size, by content type? What is the typical sell-through percentage for the site? What is the rate card, and what variances are allowed in day-to-day selling? Ad operations is the last stop before an ad campaign is launched and the last chance to help the publisher manage the pricing and packaging so at the end of a fiscal year, they actually stand a chance of achieving the budget. Ad operations can help by working cooperatively with sales and finance, acting as a gatekeeper to flag contracts that don’t meet agreed-upon guidelines.

Technology: Ad operations needs to be in a position to ask for and receive the budget needed to improve the technology that runs its business. If it doesn’t have the management clout within an organization to vet out new inventory reports, or new order management and billing solutions, or sophisticated targeting methodologies, it will always be hamstrung with workarounds that are inefficient and lead to errors.

A seat at the table: Here’s what I mean by “seat at the table.” Too often, new ad product initiatives, editorial calendars that include special site sections, and management changes in ad packaging are planned in a vacuum as far as ad operations is concerned. Leaving ad operations out of the loop leaves out an important piece of the success equation, and generally results in last-minute fire drills because the maxim “the devil is in the details” was not considered.

What’s the best neighborhood?

What is the best corporate neighborhood for ad operations to live in? Let’s take a look at the variations and consequences at play in creating an org structure that includes ad operations.

Reporting to IT (technology)

The technology department is a crucial ally of ad operations. Changes to site ad tags and the implementation of targeting options ranging from behavioral to cross-platform (overlying external cookie databases on your own base of users) is impossible without help from web developers and programmers.

However, when ad operations is rolled into IT as a functional division, the results can be less than stellar. In this scenario it’s been my observation that ad operations consumes only a small percentage of IT’s attention. Ad traffickers can be isolated from sales and viewed as another form of sysops, instead of a more strategic partner in the achievement of revenue.

Summary: IT is a crucial component in managing the technology associated with ad operations. But its focus and prioritization of other functions and its distance from the sales process makes this a less-than-ideal home for ad operations in a company’s organizational structure.

Reporting into sales

In an ideal world, this model results in a cooperative collaboration between sales and ad ops. Ad ops becomes an “FOS” (friend of sales). Sales looks to ad ops for guidance, making sure it is armed with accurate information certifying that what it sells can actually be delivered. At the end of the day, its success is our success, and there is acknowledgement of that all around. I’ve seen this work at publishers, provided there is agreement and buy-in on pre-established guidelines for pricing, packaging, and inventory usage.

However, there is a flip side to this state of nirvana. The most disruptive variation of this model occurs when unchecked selling occurs regardless of forecasts on available inventory, and there are a lack of checks and balances covering proper pricing and packaging. At this point, ad operations becomes a simply an order taker, inventory is oversold and under-delivered, and the resulting fire drills end up taxing the entire company.

Summary: Reporting into sales can work, provided there is agreement all around on checks and balances associated with pricing, packaging, and inventory usage. Absent this dynamic, the effectiveness of ad operations can falter as it descends into the role of an order taker, instead of a strategic partner in the attainment of revenue goals.

Ad operations as a stand-alone division

For a mature and established publisher, setting up ad operations as a peer group to sales, and having both divisions report up to a common executive is one of the more effective options. In this scenario, executive management has agreed-on guidelines for the selling and operational procedures needed to attain a budget goal. Ad operations has the ability to act as a gatekeeper in support of sales and the rest of the company. It has enough seniority and visibility to lobby for and request new technology that will make it more efficient. And, it is more likely to have a “seat at the table” on a cross-departmental basis, so it is engaged in the preliminary planning stages of any initiatives having to do with ad-supported products.

Is there a potential downside? Yes. If this scenario creates an “us versus them” scenario (ad ops versus sales), it will be counterproductive for the entire company. This model depends on collaborative cooperation between two groups with common goals — sell and deliver the revenue necessary to meet annual budgets.

Summary: This is perhaps the most efficient way of ensuring that what sales sells can actually be delivered according to pre-established corporate guidelines — provided, however, that this is accomplished in the spirit of collaborative cooperation, and not combativeness.

Hybrids

As organizations become larger, there is more room for variation in their structure. Some companies split the functions of ad operations among various divisions. Pricing, packaging, and inventory control are managed by a division of finance, since their focus is on making sure that budgeting, forecasting, and attainment of revenue are tracking according to plan. The development of ad products and the ownership applications related to ad operations become a part of an IT division, where they understand the interdependencies between an ad server, a content management system, and control of video assets. And finally, ad traffickers may make up what is formally called the ad operations division, with a focus on tactical support of sales.

Summary: Relatively uncommon, but potentially effective, hybrid organizational structures can work within large organizations.

If you are a startup with minimal staff, count yourself as lucky. You’re small enough that everyone reports to everyone. The consideration of organizational structure is far on the horizon and a problem that you will be happy to have when the time comes. However, there will come a time in your growth where it needs to be considered carefully.

For established companies, organizational structure has an increasingly important impact on efficient operations. If the status quo is working just fine, I’m the first to say, “If it ain’t broke, don’t fix it.” But if the signs of inefficiency are clear, consider the impact of ad operations and its current place in your company. Sometimes moving from one neighborhood to another can work wonder

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