Inventory Matters

Originally Published 05/11/05

Before you pass this article by in favor of something you believe is more exciting, like streaming video ads, wireless multi-player games or interactive TV, think back to the last corporate fire drill that occurred towards the end of a fiscal quarter. This is where the CEO asks “how much are we selling, are we going to make our numbers, do we have the inventory to fulfill campaigns, what is our sell- through rate, why do we have unsold inventory and what are we going to do about it?”

If you have ever been caught in the eye of this storm, you either wish you had people who could supply this information on a moment’s notice, or you patted yourself on the back for having the foresight to staff up with an inventory analyst.

This article is about inventory, the importance of managing it and the people who can help you do that. Along the way, I’ll cite some hair-raising real life stories on inventory “mis-management” that unfortunately, you may be able to relate to.

First, let’s take a step back and put the issue into perspective.

For publishers who depend on media dollars for their livelihood, selling is just part of the equation. From there, insertion orders are routed to an ad operations group and are scheduled into any one of several ad serving applications available on the market today. Most of the brand name ad servers have a function that enables sales and/or operations to get information on available inventory. Sales and operations folks know this drill all too well. Most would also agree that inventory management systems are still a “black box” that can only tell part of the story and are at best inaccurate. They can’t take into account the day-to-day idiosyncrasies of selling in today’s market with today’s products.

Many publishers rely on their ad trafficking staff to give them insight on inventory. The problem is, most of them are so busy with the day-to-day tactical chores of receiving orders, sending them back for corrections, testing ad tags, responding to customer requests to change campaigns, that the last thing they have time for is thinking about inventory.

The job of thinking about inventory belongs to an “inventory analyst.” Unfortunately, for many publishers, this is a head count they don’t consider, or think they can’t afford. But as online media gets more complex, they will find they can’t afford NOT to have a staff position for this individual.

Now, before your eyes glaze over, I’ll relate some real life adventures in inventory terror that could have been prevented by having an individual devoted to understanding this part of the revenue equation:

• A publisher finally gets the Packaged Goods client they’ve been dreaming of. They are interested in promoting a candy bar and want to use a rich media floating ad, displayed during the afternoon hours of 1 pm to 5 pm, to reach a youth audience just when they need an energy boost. The ad trafficker takes the order and is so busy, he just takes the order. He fails to notice that 1) the rich media ad takes a total of three impressions to load 2) there is a frequency cap of one per user per day. The campaign starts to run, and you discover that the 10 Million home page impressions you thought you had has now turned into 1 Million. The client is furious about under delivery. The salesperson is at your desk wanting an explanation. The make-good you need to run to fix this has a ripple effect that impacts every other client on your website.
• It’s the beginning of Q1 and everyone is just getting back to work. An order comes in from a client who says, “I’ll buy every pop-under you can give me for a $5 CPM. My budget is $400,000. Just send me the IO.” The order somehow gets signed and noted as booked revenue. Unfortunately, based on the number of uniques on the site and the frequency cap and the fact that there are seven other rich media campaigns scheduled during the quarter, there’s only $200,000 worth of pop-under inventory to serve. As the quarter goes by, everyone is happy with the booked revenue. As the end of the quarter approaches, management wonders why $400K of booked revenue isn’t being delivered and comes down on the traffic department who scheduled the ads and asks them “why aren’t you monitoring our inventory?”

The solution to avoiding these problems is to have an inventory analyst on staff who, on a daily basis, monitors the site to determine how campaign delivery is matching up to booked revenue; an individual who knows how to calculate available inventory for complex campaigns that involve frequency caps, rich media, demographic, behavioral and geo targeting. The inventory analyst should also be able to create trend reports that give the business insight into how their inventory is being utilized, and recommend pricing and product strategies to increase yield.

The airlines have spent billions of dollars creating reservation systems that help them manage their inventory. Since your livelihood depends on making sure that booked equals delivered inventory, shouldn’t you consider spending slightly less to make sure your staff can give you the ability to monitor and manage your business?