Lou's Commentary
August 2011
Monetizing Data: Don’t Be Scared by Scarcity
Wednesday, August 10th, 2011
By Lou Ann Sabatier, as posted to PubExec.com
"....about 80% of metrics have no value."
An Interview with Matt Shanahan, Senior VP of Strategy, Scout Analytics
Data science is being adopted everywhere. Advertising Age recently reported that some companies are hiring data visualization experts to help translate data to products and services for consumers. Data has always had a seat at the corporate table, but now there is more of it, often tracked in real time. When it comes to online marketing, publishers can track where site visitors came from, the device they are using, what they are doing on your site, for how long and where they go when they leave. Even more is gleaned by tracking the links and ads they click, the emails they open, the apps they purchase, the content they share. How do we bridge information into market intelligence?
Emedia Vitals refers to Matt Shanahan as the "go to guy" for commentary on publisher revenue models. Here are his thoughts on using data regarding audience loyalty, engagement and monetizing online.
Q. How is information about our customers driving online and digital business decisions?
I read a great book titled How to Measure Anything written by Douglas Hubbard of Hubbard Decision Research in which Hubbard stated that about 80% of metrics have no value. The value of any metric is the amount of uncertainty it removes about decisions with economic consequences. So the 80/20 rule is referring to the fact that most metrics are not used in decisions that affect expense or revenue.
For publishers of online content, this translates to digital metrics that directly measure business model performance to track progress, make decisions and deploy resources. The most basic digital metric is total addressable market, yet few digital publishers are willing to report the maximum size of their online audience and their target for average revenue per user.
Business 101 went out the window when publishers went online. Very rarely do I see a publisher measure their business model performance to the degree they can and should. Instead the focus of analytics is on operational performance: user experience, system performance and click-through rates. Often publishers place more emphasis on operational performance (i.e., efficiency) versus business performance (i.e., effectiveness). The goal should be a unified set of business performance metrics that allows a publisher to make effective decisions for maximizing audience size and monetization.
Q. Can you explain what you mean by a unified set of business performance metrics?
Important data about a publisher's business model is often scattered in silos across the organization. A unified set of business performance metrics includes the integration and correlation of Web analytics, entitlement data [what your customer is entitled to view and read], CRM data and billing data. Each of these systems helps to meet operational objectives of a particular functional group, but because they are siloed, there is not opportunity to optimize business performance overall. The business optimization challenge in digital is connecting the data sets and measuring it day by day.
Q. What is the one metric that is most powerful and least understood?
Engagement. In digital, engagement is the true measure of market share which I like to think of as attention share. What share of an audience member's time per day does that publisher own? I call this attention economics. Many publishers do not realize that about 20% of their visitors account for 80% of their page views. I believe when monthly uniques are separated from page views, a distorted view of audience size and engagement is created that hurts advertisers and publishers.
Q. You recently wrote that the digital media survivors will be those that learn how to create scarce engagement of niche audiences rather than commodity page views in exchanges. How do you create scarcity?
Many publishers focus on acquiring traffic because their advertising rate is perceived to have a ceiling. The reality is that advertising sell out is often not low enough and the impression quality is not high enough to raise rates, no matter how sophisticated or unsophisticated the ad serving might be. To create quality impressions and scarcity with your target buyer you must segment your online audience by engagement. Our research studies consistently show that a minority percentage of the audience creates a majority percentage of the impressions.
Let me give you an example. I worked with a B2B publisher who had an advertising sell-through rate of 60% on their site. After reviewing their data for 45 days, the data showed that half of their traffic was not their core target audience, 22% were scrapers (i.e., automated data aggregation bots) and 27% fly-bys (i.e., one and done visitors). The publisher made changes on pricing and packaging of the audience impressions (i.e., delivered page views) with the core audience (fans) for a higher yield which delivered higher quality to his advertisers. Because the scrapers and fly-bys were removed, there was more competition for the advertising inventory which had also increased in quality. Within 45 days, the site went from 60% sell-through to sold out and the rise in CPMs went up more than covered the slight drop in advertising inventory.
Segmentation by engagement is also relevant to monetizing paid content by identifying opportunities for paywalls and license optimization. For publishers with syndicated content, the engagement segmentation can identify whether the syndication costs yield a break-even result or not. The reality is that engagement segmentation enables targeting of audience development, advertising, and paid content strategies to increase revenue and profits of the business model.
Q. Who has responsibility for this within a company?
Whoever owns the P & L. In a small company most likely the owner and in the bigger companies it is divisional. The challenge for the P&L owner is sourcing the know-how and embedding the best practices in the organization. A publisher can acquire this knowledge by hiring employees with experience in this area, from a services firm or a consultant but rarely does the knowledge exist inside—otherwise it would already be in use.
Q. What keeps you up at night?
Thinking about customer online revenue streams.
Take-away:
Are you tracking metrics that matter to optimize your business model performance online or are they used for management show and tell meetings?
Bio:
Matt Shanahan, senior vice president of strategy at Scout Analytics, is relatively new to the information and media world. Shanahan is, by training, an electrical engineer from the University of Washington, and he spent much of his career consulting for big businesses in the fields of aerospace and finance. In 1994, he jumped from the management consulting firm of Andersen Consulting to a document management software start-up called Documentum. While at Documentum, he specialized in new market development and specifically in how organizations adopt new technology and new business practices. In 2008, he joined a Seattle-area firm called Scout Analytics and was soon struck by an anomaly of online media: the yawning maw that separates the size of audiences from the level of engagement those readers and viewers demonstrate. Ever since, Matt has been working with publishers to better model and monetize their online audience.