Waterfalling is an ad inventory mechanism that publishers use to unload the remaining inventory they could not sell at a premium price. Thus, with waterfalling, publishers sell the remaining inventory at subsequent lower price tiers to maximize profitability.
In short, this is a technique that publishers use to maximize their profits on an otherwise unsold inventory of impressions they have on a web property.
Publishing business models primarily make money by selling impressions or clicks to advertisers. However, medium to large publishers handle millions of impressions each month. Optimizing the processes of those “inventories” is critical to maximizing profitability.
Waterfalling, therefore, is a process where publishers manage to sell the remaining inventory, which could not be sold at a premium slot. Indeed, only a fraction of the overall inventory can be sold at a premium slot, and if the publisher didn’t manage to sell the remaining inventory, this would account for lost money.
How do publishers use waterfalling?
Waterfalling consists of a process where ad inventories are divided in tiers based on the bidding of advertisers:
When Publisher A could not sell the whole inventory through the primary ad network, the unsold impressions will go through a second partner ad network to sell that inventory at a lower price to consume the remaining part of the unsold impressions. If not all impressions are consumed at that tier, the waterfall moves to the next partner ad network until the consumption of the inventory.
Simple, isn’t it?
Waterfalling is a complex optimization process
While this process might sound simple in theory, that is complex in practice. At this stage, publishers are trying to maximize their income by looking to sell at the highest rate possible per CPM and to make sure most of the potential ad inventory gets sold.
Therefore, publishers use this method to squeeze as much money as possible from several ad networks. Usually, as a small percentage of an ad impression is sold at a premium price, publishers look for alternative ad networks where they can sell the remaining chunk of the inventory at a lower floor price.
Case Studies
1. Online News Publisher:
An online news publisher has a substantial amount of ad inventory on its website. To maximize revenue, it employs waterfalling. If premium ad slots are filled, the unsold impressions cascade down to secondary ad networks, ensuring that even the remaining inventory generates revenue.
2. E-commerce Website:
A popular e-commerce platform experiences fluctuating demand for ad space. Waterfalling allows it to efficiently manage its ad inventory. If certain ad spaces remain unsold, the platform progressively offers them to different ad networks, optimizing revenue generation.
3. Gaming App with Ads:
A mobile gaming app incorporates ads to monetize its user base. When premium ad placements are occupied, the app employs waterfalling to make use of unsold impressions. These impressions flow down to alternative ad networks, preventing potential revenue loss.
4. Niche Blog:
A niche blog focuses on specific topics and attracts a dedicated audience. Waterfalling helps the blog maximize earnings from its ad inventory. If premium ad slots are saturated, the remaining ad space is offered to various ad networks, ensuring monetization of all available impressions.
5. Video Streaming Platform:
A video streaming service relies on ad revenue to support its free tier. To optimize income, the platform employs waterfalling. When premium ad slots are occupied, the unsold impressions are directed to different ad partners, helping the platform generate revenue from its entire ad inventory.
6. Social Networking Site:
A social networking site has various ad slots throughout its platform. Waterfalling assists the site in efficiently managing its ad inventory. If certain ad spaces go unsold at premium rates, the platform redirects them to secondary ad networks, ensuring continuous revenue generation.
7. Mobile App Developer:
A mobile app developer integrates ads into its free apps. Waterfalling is used to make the most of ad inventory. If premium placements are unavailable, the app developer routes unsold impressions to alternative ad networks, preventing potential revenue loss.
8. Travel Booking Website:
A travel booking website relies on ad revenue to supplement its income. Waterfalling is employed to manage ad inventory effectively. When premium ad slots are occupied, the remaining impressions are directed to different ad networks, maximizing revenue potential.
Key Highlights
Waterfalling in Ad Inventory Management: Waterfalling is an ad inventory management mechanism used by publishers to optimize the sale of their remaining unsold ad impressions. It involves selling these impressions in subsequent lower price tiers to maximize profitability.
Maximizing Profitability: Publishers implement waterfalling to ensure that even the unsold inventory can contribute to their revenue. By selling impressions at progressively lower prices through different ad networks, publishers aim to extract as much value as possible from their ad inventory.
Publisher’s Business Model: Publishers generate revenue by selling ad impressions or clicks to advertisers. However, due to the large volume of impressions they handle, efficient inventory management becomes crucial for maximizing profits.
Unsold Inventory Challenge: Only a fraction of the ad inventory can be sold at premium prices. Waterfalling addresses the challenge of what to do with the remaining impressions that couldn’t be sold at a premium slot, preventing potential revenue loss.
Tiers of Ad Networks: Waterfalling involves dividing the ad inventory into tiers based on advertiser bids. If the primary ad network doesn’t sell all the inventory, the unsold impressions move to a secondary partner ad network, where they are sold at a lower price. The process continues through different tiers until the entire inventory is consumed.
Complex Optimization: While the concept might seem straightforward, implementing waterfalling is complex. Publishers aim to maximize income by finding the highest possible rate per cost per mille (CPM) and selling most of their potential ad inventory. This involves strategically selecting different ad networks and floor prices.
Alternative Revenue Streams: As only a small percentage of ad impressions are sold at premium prices, publishers seek additional ad networks to sell the remaining inventory at lower floor prices. This diversification allows them to capture value that would otherwise go unsold.
Related Frameworks, Models, or Concepts
Description
When to Apply
Waterfall Model
– The Waterfall Model is a linear and sequential approach to software development, consisting of distinct phases such as requirements analysis, design, implementation, testing, deployment, and maintenance. – Each phase must be completed before moving on to the next, with little to no overlap between stages. – The Waterfall Model is characterized by its rigid structure and emphasis on extensive upfront planning and documentation.
– When publishers adopt a structured and sequential process for publishing content, such as books, magazines, or academic journals. – The Waterfall Model provides a systematic framework for managing the various stages of content creation, editing, production, and distribution, ensuring that each step is thoroughly executed before proceeding to the next. – It is applicable in publishing projects with well-defined requirements and timelines, where a linear and predictable workflow is preferred for managing resources and minimizing risks.
Traditional Publishing Workflow
– Traditional publishing workflow follows a sequential process, starting from manuscript submission and peer review to editing, typesetting, printing, and distribution. – Each stage in the workflow has specific roles and responsibilities, involving authors, editors, designers, proofreaders, printers, and distributors. – Traditional publishing workflow emphasizes quality control, editorial standards, and adherence to publishing conventions and industry practices.
– When publishers follow a conventional approach to producing and disseminating printed or digital content, such as books, journals, newspapers, or magazines. – The traditional publishing workflow ensures consistency, accuracy, and professionalism in content production and publication, meeting the expectations of authors, readers, and stakeholders. – It is applicable in publishing projects with established editorial policies, production guidelines, and distribution channels, where reliability and reputation are paramount for success.
Editorial Calendar
– An editorial calendar is a strategic planning tool used by publishers to organize and schedule content creation, publication, and promotion activities over a specified period, such as a month, quarter, or year. – It outlines the publishing schedule, content themes, deadlines, milestones, and responsible parties for each editorial task or project. – Editorial calendars help publishers maintain consistency, relevance, and alignment with editorial goals, audience interests, and market trends.
– When publishers need to plan and coordinate content production and publication across multiple platforms, channels, or publications. – Editorial calendars provide a visual roadmap for managing editorial workflows, ensuring timely delivery of content and coordinated efforts among editorial teams, authors, contributors, and stakeholders. – They are applicable in publishing environments with diverse content formats, distribution channels, and audience segments, where strategic planning and content coordination are essential for maximizing audience engagement and editorial effectiveness.
Content Management Systems (CMS)
– Content Management Systems (CMS) are software platforms that enable publishers to create, manage, and publish digital content across websites, blogs, mobile apps, and other digital channels. – CMS features include content authoring, editing, version control, workflow management, content reuse, and publishing automation. – CMS streamline content production workflows, facilitate collaboration among content creators, and provide centralized control over content assets and publishing processes.
– When publishers need a scalable and flexible platform for managing digital content creation, publication, and distribution. – Content Management Systems (CMS) offer a centralized and user-friendly interface for organizing, editing, and publishing content, reducing manual effort and streamlining editorial workflows. – They are applicable in publishing environments with dynamic content requirements, frequent updates, and multiple contributors, where efficiency, consistency, and scalability are critical for maintaining editorial standards and audience engagement.
Project Management Tools
– Project management tools are software applications that help publishers plan, organize, track, and collaborate on publishing projects and tasks. – They provide features such as task lists, timelines, milestones, calendars, file sharing, communication tools, and project analytics. – Project management tools streamline project planning, execution, and monitoring, enabling publishers to allocate resources efficiently, meet deadlines, and deliver high-quality content.
– When publishers undertake complex publishing projects with multiple stakeholders, dependencies, and deliverables. – Project management tools offer a structured approach to managing publishing projects, ensuring transparency, accountability, and communication among team members and stakeholders. – They are applicable in publishing environments with tight deadlines, diverse content types, and distributed teams, where effective project coordination and collaboration are essential for project success.
Quality Assurance Processes
– Quality assurance processes involve systematic activities and procedures for evaluating and ensuring the quality, accuracy, and consistency of published content. – They include proofreading, copyediting, fact-checking, peer review, compliance checks, and editorial standards enforcement. – Quality assurance processes aim to identify and rectify errors, inconsistencies, or deficiencies in content before publication, maintaining editorial integrity and reader trust.
– When publishers prioritize content quality, accuracy, and adherence to editorial standards and publishing guidelines. – Quality assurance processes provide checks and balances throughout the publishing workflow, reducing the risk of errors, omissions, or inaccuracies in published content. – They are applicable in publishing environments where editorial quality, credibility, and professionalism are critical for maintaining reader satisfaction and loyalty.
Distribution Channels Management
– Distribution channels management involves planning, coordinating, and optimizing the distribution of published content through various channels and formats, such as print, digital, online, offline, direct, and indirect channels. – It includes activities such as inventory management, warehousing, logistics, fulfillment, retail partnerships, and digital distribution agreements. – Distribution channels management aims to ensure efficient and cost-effective delivery of content to target audiences, maximizing reach, accessibility, and sales opportunities.
– When publishers need to reach diverse audiences through multiple distribution channels and formats, catering to different preferences and consumption habits. – Distribution channels management enables publishers to expand their market reach, increase sales, and capitalize on emerging distribution opportunities in both traditional and digital publishing ecosystems. – It is applicable in publishing environments where content distribution strategies play a crucial role in driving revenue growth, market penetration, and audience engagement.
Market Research and Audience Analysis
– Market research and audience analysis involve gathering, analyzing, and interpreting data and insights about target markets, audience demographics, preferences, behaviors, trends, and competitive landscapes. – They provide valuable intelligence for publishers to understand market dynamics, identify audience needs and interests, and tailor content strategies and offerings accordingly. – Market research and audience analysis inform content development, marketing strategies, product positioning, pricing decisions, and distribution channel selection.
– When publishers seek to create and deliver content that resonates with target audiences, drives engagement, and meets market demand. – Market research and audience analysis help publishers identify market opportunities, competitive threats, and audience segments with the highest growth potential or profitability. – They are applicable in publishing environments where data-driven decision-making and audience-centric approaches are essential for sustaining competitive advantage and achieving business objectives.
Content Monetization Strategies
– Content monetization strategies involve converting published content into revenue streams through various monetization models, such as subscriptions, advertising, sponsorship, licensing, affiliate marketing, events, merchandise, and premium content offerings. – They aim to generate revenue directly from content consumption or indirectly by leveraging audience engagement and brand equity. – Content monetization strategies align with publisher business models, revenue goals, audience preferences, and market trends.
– When publishers aim to generate revenue from published content and maximize the return on investment (ROI) from content creation and distribution efforts. – Content monetization strategies help publishers diversify revenue sources, optimize pricing strategies, and create value-added offerings that resonate with target audiences and advertisers. – They are applicable in publishing environments where sustainable revenue growth, profitability, and business sustainability depend on effective monetization strategies and revenue diversification.
Digital Rights Management (DRM)
– Digital Rights Management (DRM) refers to technologies, protocols, and policies used by publishers to protect and manage the intellectual property rights associated with digital content, such as copyrights, licenses, distribution rights, and usage permissions. – DRM systems control access to digital content, prevent unauthorized copying, sharing, or modification, and enforce usage restrictions based on user permissions, licenses, or subscription terms. – DRM solutions help publishers safeguard content assets, prevent piracy, ensure compliance with copyright laws, and monetize digital content effectively.
– When publishers need to protect and monetize digital content assets while respecting copyright laws and intellectual property rights. – Digital Rights Management (DRM) solutions provide publishers with tools and mechanisms to control access, usage, and distribution of digital content, safeguarding content integrity and maximizing revenue potential. – They are applicable in publishing environments where digital piracy, copyright infringement, and content piracy pose significant risks to content creators, distributors, and rights holders.
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Guerrilla marketing is an advertising strategy that seeks to utilize low-cost and sometimes unconventional tactics that are high impact. First coined by Jay Conrad Levinson in his 1984 book of the same title, guerrilla marketing works best on existing customers who are familiar with a brand or product and its particular characteristics.
Hunger marketing is a marketing strategy focused on manipulating consumer emotions. By bringing products to market with an attractive price point and restricted supply, consumers have a stronger desire to make a purchase.
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Integrated marketing describes the process of delivering consistent and relevant content to a target audience across all marketing channels. It is a cohesive, unified, and immersive marketing strategy that is cost-effective and relies on brand identity and storytelling to amplify the brand to a wider and wider audience.
The marketing mix is a term to describe the multi-faceted approach to a complete and effective marketing plan. Traditionally, this plan included the four Ps of marketing: price, product, promotion, and place. But the exact makeup of a marketing mix has undergone various changes in response to new technologies and ways of thinking. Additions to the four Ps include physical evidence, people, process, and even politics.
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Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
