Traditionally speaking, inventory is the product available for sale at any given moment. In the online marketing industry, the product for sale is the advertisement space, hence for distinction it is called ad inventory. The ad glossary website offers the following definition for ad inventory: “The number of ad spaces available for sale on a we site during a certain time frame. Determined buy taking into consideration the number of advertisement on a page, the number of pages with advertisements and the number of page views during a specific time frame.” However, as the online marketing industry evolves, the definition needs to be broadened a bit to embrace more spaces than just the advertisement on a page. While traditionally the ad space is linked to a banner or text/URL placement on a page, a slide ad attached to a page, or other embedded content.
Today, more than ever, advertisement and offers are also displayed through other means. Email marketing and twitter marketing are examples, where the offer is not directly linked to one fixed space on a website any more. Other examples are toolbars and other softwares which offer advertisement in form of splash pages upon opening the software or banners on the software interface (the number of views depends very much on the software usage), toolbars which offer an additional service (e.g. cash back services informing about new coupons), or offers displayed independently. All these new forms of advertisement spaces are part of the online inventory which can be used and should be optimized taking into account the needs of the advertiser (most accurate placement to ensure highest possible ROI) and the needs of the end user (no spamming, no irrelevant messages, respect for user privacy).
For those solutions which are not bound to one specific website, the inventory is not static, but it depends on the website that the user is visiting (usually in the form of contextual targeting) or on the websites she visited in the past (as in the case of behavioral targeting, or interest-based advertising). Theoretical this means that the entire internet is part of the ad inventory. In fact, this potential inventory is restricted both through strategic decisions as well as through technological constraints.
If the ad inventory is based on categorizing the content of websites, then it needs to be able to read those websites. This is not always possible. Usually only text content can be understand by different softwares. So flash based websites are not part of the inventory, just as they are not understood (and thus, not ranked) by google. The same goes for any other picture-dense setup with little or no text which can give a clue about what the website is about. The other main technological reason is not purely technological, though related. It is important to respect the user’s privacy at all times! This will often mean that the technology used to ensure the broadest ad inventory possible needs to have built-in checks and balances to ensure that no sensitive data is stored or shared. As inventory manager and analyst of course I would love to have more data available, but from a user point of view it is utterly important to work with a minimum of information and abstract even that minimum to a level where you can’t reconstruct the history of one particular person.
The remaining websites are potential inventory, however not all of them are interesting in terms of targeting. Some websites simply do not show a sufficient relevant content for advertisers (e.g. newspapers, religious institutions, political discussion forums – this depends on the needs of the advertisers and their ultimate target group). Other websites might be excluded, because using them would interrupt the user experience and ultimately have a more negative effect than necessary (e.g. showing offers while users are on facebook, checking their emails, etc). So at best these sites are also excluded from the ad inventory to ensure that users do not get annoyed unnecessarily.
The inventory described above is thus directly dependent on the categories that the advertiser chooses to use. Using contextual or behavioral targeting outside the site-bound advertisement space forces you to decide whom you want to talk to. Whom, not in the sense of what person, but in the sense of “person that is interested in x”. If you want to sell flight tickets, you might want to talk to people that have recently surfe on travel related websites. If you have a stop smoking campaign, other websites are important for you. This derives into three different characteristics of the independent inventory:
- Independent ad inventory is flexible in its size: by creating new categories, new advertisement place can easily be created. Similarly the space can be reduced by inactivating categories and thus excluding related sites from the traffic generation (e.g. you might want to use the category ski holiday only during certain month during the year).
- Independent ad inventory can be refined and broadened as needed. Whenever offers are very specific and do not convert well enough in a broader category, a specific smaller category can be created to be sure to target the correct audience. Of course this reduces the number of impressions received by the offer, but as long as this entails higher overall revenue, the increased quality is appreciated by advertisers (higher conversion rate) and users (less unnecessary offers) alike.
- Independent ad inventory can be shifted if necessary. If thematically close categories perform very different, it is possible to shift part of the traffic from the lower performing category to the more successful one. This ensures a higher rentability of the entire inventory. For example, Flights has an ecpm of 10.00, while Hotels only has an ecpm of 2.00. In this case it is possible to adjust the traffic as to broaden the audience for flights at the expenses of hotels. This has the result of lowering the ecpm of Flights, as now the target is not as narrow any more. But as the imps increase more than the ecpm lowers, the goal of higher total revenue can still be achieved.
So, summarizing, inventory managent is the creation and optimization of the categories needed to generate the appropriate traffic. While traffic managers usually optimize the performance of individual campaigns, the inventory department analyzes and optimizes the total amount of traffic, the ecpm, and the traffic sources in order to increase the overall revenue of the company.