Taking the guesswork out of ad pricing | Fin24
 
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Taking the guesswork out of ad pricing

Nov 15 2018 09:21
Glenneis Kriel

In the 0.04 seconds it takes for a website to open, the browser is auctioned off to hundreds of advertising agencies. 

While advertising agencies have their own data to determine the value of a browser, online media publishers have had relatively little insight into their audience. 

Most charge standardised industry rates resulting in missed money-making opportunities.  

To solve this problem, Paul Stemmet and Kevin Dayton developed YAP, a company that sifts through thousands of data points to allow media publishers to “sell browsers” for better prices. 

“Our engine allows companies to run 80% fewer advertisements against 50% higher revenue, by giving the publishers a better indication of the value of a browser. 

The browser benefits from only seeing advertisements that apply to them,” Stemmet says.     

The engine also offers a real-time display of campaign performance, allowing publishers to make more informed decisions in terms of content planning. 

The idea was born in 2013 while Stememt took a two-month sabbatical after his other company, Shinka, lost its main client, Mxit. 

The recollection of how the Bank of England went from merely printing money into becoming financiers described in Felix Martin’s book, Money:

The Unauthorized Biography, caught Stemmet’ s imagination. 

According to the book, Sir Thomas Cook visited the island of Yap, where people measured wealth in huge limestone-polished stone wheels, called rai.

Part of the stones were lent out, without the stone being moved because of its heaviness, which resulted in a complex IOU system. 

“The story inspired me to create a solution that would bring more transparency to the valuation of browsers that visit online publishing sites,” Stemmet explains. 

The business

YAP is not only a reference to the use of the rai, but also stands for Yield Automation Platform because it “uses big data, advanced targeting algorithms and artificial intelligence to maximise yield for publishers”. 

Data is collected from various sources, including Stats SA, Blue Kai, Oracle Data Cloud and another of Stemmet’s programmes, Marketwise. 

The data provides information about the financial and social demographics of each browser, as well as their browsing behaviour. 

“As people, we tend to think we are special, but we are actually highly predictable. Credit bureaus and credit scoring institutions for privacy reasons are unable to sell individual data on clients, but do so in bundles of 5 000 to 6 000 people for relatively cheap. The data is anonymous, but we are able to match it with people through the programmes we have developed over the years,” he explains. 

Along with browser information, the appeal of published articles is also brought into the equation through a taxonomy scan. 

The scan basically looks for words that would appeal to certain groups of people. 

The word “money”, for example, is usually equated with more affluent readers, according to Stemmet.

Depending on the value of the browser, YAP allows publishers to lift the floor price for advertising space from the average R20 to R150.

“An advertising agency is willing to pay more for browsers that are likely to react to their campaign. When selling a holiday, they want the trip to be in line with the interest of the browser, and it must be within their financial means,” he explains. 

He adds that some websites are sometimes slower to display these advertisements because the “auction” process might have taken long.    

The engine is changing the role of traditional advertising sales staff at publishers, resulting in them becoming more like account managers. 

This means that a company needs fewer traditional sales staff, in effect lowering sales costs, he says.   

Plans for the future       

Stemmet used seed funding from Ole! Media Group and personal savings to start YAP, along with Dayton and two other employees, Lerissa van Schalkwyk and Stefan Havenstein. 

Tilt Shift Agency later also bought into the company, resulting in them and Ole! 

Media Group now having a 25% stake in YAP.

Publishing house Caxton was their first client, with most of the work devoted to boosting online advertising income for specific publications. 

Today, the engine is used by more than 700 websites. 

“I think we managed to break into the market because of our appealing remuneration model, which is based on a percentage of turnover generated through our service.

We usually enter into a 12-month contract with clients, which is annually renewed,” he says. 

YAP’s biggest challenge is that its growth is restricted by the size of the publishing industry, dominated by three players, Naspers*, Caxton and Tiso Blackstar. 

To overcome this, the company has started to service overseas companies, such as Planet Football, and recently opened an office in Berlin, as the German publishing model is very similar to the SA one. 

Services have also been expanded to brands, with Nedbank being the first company to sign a five-year contract.

Stemmet is planning on acquiring growth capital to expand the reach of the company, but is cautious about this: “The company is doing reasonably well, but we would need a big investment if we want to take it to the next level and greatly expand our footprint. 

The choice of partner, however, needs to be highly strategic, to ensure the new company shares our views and vision,” he says. 

*finweek is a publication of Media24, a subsidiary of Naspers. 

This article originally appeared in the 22 November edition of finweek. Buy and download the magazine here or subscribe to our newsletter here.

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