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STAMFORD, Conn., November 19, 2008 View All Press Releases

Gartner Identifies Top 10 Priorities for Digital Advertising Transformation

Creating effective digital advertising operations is crucial for media companies regardless of the current adverse economic climate, according to Gartner Inc.

“While the Internet still accounts for a minority of overall advertising revenue at most diversified media companies and media agencies, the qualities that make digital advertising disruptively different are rapidly spreading to television and other devices and channels,” said Andrew Frank, research vice president at Gartner. “This makes it imperative that media companies master these qualities.”

Mr. Frank said the most important asset that media companies must protect is their relationships with advertisers, and the best way to protect them is to take the lead in offering new, more-strategic products in the form of cross-media bundles and “engagement packages” that come complete with data and real-time optimization capabilities.

“This is not something that can be accomplished overnight,” Mr. Frank said. “It requires careful prioritization of initiatives, long-term thinking, and, not the least, a change in mind-set that recognizes that digital advertizing is changing everything.”

Gartner has identified 10 priorities for digital advertising transformation, offering the following advice:

1.
Re-Evaluate Pricing, Packaging and Inventory Management Strategies: Media companies must recognize that solving the challenges of online advertising is not an isolated exercise, but a critical step in preparing for the day when digital advertising is the dominant source of revenue for the business, regardless of which device or channel it’s being delivered to. This should make acquiring the skills and tools to make informed pricing decisions across any form of addressable interactive media a top priority.

2.Make Data Available, Internally and Externally: Data is the lifeblood of any digital advertising operation; the key to effective pricing, inventory management, targeting and sales. Advertising data is often associated with consumers to support demographic segmentation, but at least as important is data about the performance of advertising. Also essential is real-time inventory status data that can supply a snapshot of forecast fill rates and revenue issues for management decisions.

3.Prioritize Strategic Relationships With Top Customers: One of the greatest threats to the media business is the commoditization of advertising as sales relationships become more transactional and less strategic. Media companies must look to their existing advertiser and agency relationships as a key competitive advantage. For Web intermediaries, a lack of long-standing relationships represents one of the strongest challenges to expanding market share with established advertisers and publishers.

4.Sell Audience, Not Just Placement — Sales training is an essential part of any product structure transformation. In the case of digital advertising, sales forces also need tools and data to generate proposals based on audience guarantees and options. The source of this data is a topic of major concern for media companies that do not necessarily have extensive CRM resources to draw from. This suggests a need to partner with alternate sources, specifically social and behavioral targeting networks or communication service providers, subject to privacy considerations.

5.Invest in Yield Management Tools and Dashboards: Yield management (YM) aims to maximize revenue for perishable inventory under dynamic conditions of supply and demand. In the digital advertising environment, YM is further complicated by the overlap problem, which results from the ability to price and sell a given spot based on any number of parameters — its contextual placement, the demographic or geography or behavioral history of the current visitor, or relationship considerations given to a particular advertiser or agency. Online publishers need to develop tools and expertise in acquiring and routing traffic to high-demand yield zones in response to spikes in order volume and pricing, and respond to low-demand periods with inventory reductions that may enhance consumer experience. Furthermore, they must understand the dynamics of price elasticity at each of their yield tiers to optimize pricing models in response to market conditions.

6.Reach Beyond Your Web Site: Many media companies have realized that they can extend their inventories through select third-party partnerships with smaller sites and blogs that lack their access to quality advertisers. This approach addresses a key challenge of the new media landscape for incumbent media companies, which is the fragmentation of the audience and its distribution along the long tail of sites and pages. This results in more-limited reach and frequency (at least within a given market) for media-owned Web sites and gives rise to the ad networks and exchanges that attempt to satisfy the need for scale by aggregating this fragmented audience and creating liquidity for advertisers and publishers.

7.Increase Video Inventory — While there may be a great deal of undersold display inventory on the Internet, the same can't be said for quality video inventory. Video has the advantage of being more measurable, more impactful and more likely to produce results without taking users off a site. Moreover, video advertising sets up a clear path to cross-media traffic, because the same or similar content can work on multiple devices.

8.Integrate Sales Teams and Track Across Platforms: Segregating sales teams (or buying teams on the agency side) is a significant impediment to achieving strategic cross-media relationships. Advertisers need a holistic view of the effectiveness of their media efforts, and only an integrated approach can deliver this. Cross platform sales can be optimized by tracking pricing and sales data across channels, and sellers can add value to their bundles by offering expertise on media mix optimization gained from such tracking experience.

9.Optimize the Use of Intermediaries: Online publishers of any scale should look to platforms to optimize ad network use. These platforms provide ad network optimization capabilities that can save money and resolve channel conflicts.

10. Create a Digital Advertising Road Map and Governance Structure — A governance structure is essential. In particular, forging and negotiating new relationships with portals and communications service providers will be crucial in reconfiguring the digital advertising chain.

Additional information is available in the Gartner report “Making Digital Advertising Work for Media Companies." The report is on Gartner’s Web site at http://www.gartner.com/DisplayDocument?ref=g_search&id=770012&subref=simplesearch#2_1<!--%20entry%20label%2011-->.

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