Yahoo, iVillage Grapple With Pricing Models
A dynamically priced rate card that lets online publishers adjust prices to demand is how Peter R. Naylor operates as senior vice president of sales at iVillage, New York. He said yield management is the best way to deal with an online medium that's "white hot."
"[But] managing your rate card is not just about raising your rates and how much you can get," Naylor said. "Certainly you can raise rates where the demand is high and supply is low."
Yahoo, meanwhile, uses both auctions and the rate card to sell ad inventory on its network of sites. The company already sells advertising against segmented audiences, and efforts are focused on engaging at an individual user level.
"We're looking to blend both models, where appropriate," said Todd Teresi, vice president of sales operations at Yahoo.
The company uses San Francisco-based Rapt Inc.'s pricing software to understand elasticity across its various brands. For example, what effect will a rate increase on Yahoo's sports subsite have on Yahoo Finance since both sites have the male audiences that advertisers seek? Will advertisers move their dollars to the finance area from sports? Those are issues that Yahoo considers while pricing.
Yahoo looks at its prices every two weeks, but the formal change cycle occurs quarterly even though the company has the ability to lower or raise rates by the hour.
Like many publishers, Yahoo offers competitive rates in August, when most people go on vacation and inventory is not that tight. Rates rise in November and December during the holiday season when inventory online is at a premium.
When made, Yahoo's rate changes result from management decisions coupled with technology and incentives to sales staff, Teresi said. Incentives are critical, or sales executives won't sell inventory at the best possible price, he said.
IVillage, on the other hand, examines its ad rates every 30 days. Changes are released quarterly to its sales team, with target rates and floors instead of the freewheeling, by-the-gut attitude that previously prevailed.
"Those who bought the previous quarter get the same price," Naylor said about deals with rates locked ahead of time. With auctions, he said, "it's a bet -- you can either win or lose."
More and more publishers will have to grapple with the ad models best suited for them, as advertisers like General Motors Corp., Procter & Gamble Co. and entertainment industry giants allot more for online marketing. Advertisers then will have to fight harder for finite inventory.
"As more advertisers come online seeking the audiences, the audiences aren't growing as fast as the advertising dollars," Teresi said.
Mickey Alam Khan covers Internet marketing campaigns and e-commerce, agency news as well as circulation for DM News and DMNews.com. To keep up with the latest developments in these areas, subscribe to our daily and weekly e-mail newsletters by visiting www.dmnews.com/newsletters