Before diving into this topic, we will shortly define the term yield management. Yield management is a pricing strategy, which helps businesses to maximize their revenue by varying their prices, based on their consumers’ buying behavior. The consumers with the highest willingness to pay are served first, therefore it is essential to understand, anticipate and influence the customers' behavior. This is done by collecting and then analyzing any data about the customer that can be acquired, which is then used to sell a service or product to the right person, at the right time and for the right price. This means that efficient yield management is a system of demand management by the availability of resource and pricing.
The following criteria are essential for yield management to be applicable:
- Amount of resources available for sale is fixed
- Resources sold are perishable
- Customers are paying different prices for the same resource (price discrimination)
This criterion perfectly fits the business of publishers who are trying to monetize their content by displaying ads. The resource in this case is the ad space available on the publisher's website, where the amount of ad space on the website during a certain time period is fixed. The resource ad space is perishable and advertisers are willing to pay different prices for the same advertising space available, hence this is why yield management has become a very important topic amongst publishers who mainly generate revenue via ads. Advertisers and publishers can come together on Real-timing Bidding platforms that auction off advertising space as each ad is viewed, giving the ad space to the highest bidder and loading it for the person viewing the website.
Often misunderstood is the fact that yield management is not just the simple monetization of remaining inventory via ad exchanges and the providing of inventory for Real-time Bidding. In fact a professional and high-performance yield management strategy consists of a complete evaluation concerning shadow costs, shortage of inventory, booking habits, cannibalization, quality of the ads, as well as the willingness of the advertiser to pay depending on the campaign running.
This way an efficient yield management sets rules which exactly define which ads and through which advertising channel are shown to a certain customer and what price they are going to be demanded at.
Here is where RTB and further technological innovations come into play as lots of advantages can be gained through the use of technology. Almost every RTB service provider offers the RTB technology to enable a publisher to sell their inventory on a RTB marketplace, usually with an online performance tool available where you can view how much revenue is being generated and which formats are mainly used by advertisers. The following three advantages are the most significant:
- Direct campaigns (bulk, buying, CPC-campaigns) and ads generated by the RTB marketplace will run against each other, the ad generating the highest revenue is selected and displayed
- The sizeless format allows publishers to display many different formats at the same place on their website, depending on which format generates the most revenue at the given time
- The online performance-tool helps improve ad-format allocation, placement of different formats on the website and even improving content
Yield management is most effective, when multiple advertisement networks are connected to the publishers' website and all these networks are run against each other. This way an efficient Yield management can generate the most revenue, selling any desired item of inventory at any given moment for the highest price possible.
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