I generally sway a bit in regards to my thoughts about outsourcing sales to a third party.
On one hand I can see the benefits it offers everyone. For a small site it give them a commercial presence in a hard to enter market. For advertisers it limits the amount of sales touchpoints they have. For the third party it allows them to build up a network of ideally best in breed websites they can take to market and commercialise.
On the other it seems a bit clunky to me. Generally, the best things happen when you own the content and can commercialise it … not when you split out the two disciplines across 2 seperate companies. I also think sometimes the deals favour the sales house and not the content creators.
Anyway – right now I think it’s a good time for outsourced sales for those who don’t have the resource to set up their own commercial/sales division. Why?
1/ Low upfront costs
2/ Integrated sales/ops/invoicing benefits
3/ Lack of talent in market
But the deals generally still seem clunky to me and that’s where the opportunity lies.
Generally, content creators/publishers I feel overestimate the value of outsourcing their sales and the value of how hard it is to get in front of agencies and advertisers. My thoughts on this are, if you have a truly compelling product that is packaged well people will make time to see you. It’s when your product isn’t very good or your pitch is bad that your calls aren’t returned or people won’t take your meeting requests.
It’s common place for publishers to give their sales house anywhere between 30-50% of revenues in exchange for the sales house representing their site(s).
This feels high. It really should be around the 25% mark as selling your content shouldn’t cost you over 1/3 of your revenues. That’s a lot of money to pay for someone to open a door that you probably could yourself if you tried hard enough. Yes, there are benefits operationally but are these worth giving someone else 30-50% of the revenue for? Not convinced.
The main problem is this. Publishers are giving x% of their total revenue away in what are generally pretty simple deals where the focus is on a total revenue figure.
Here’s the problem – these deals should be based around effective CPM or extraction.
For a publisher the game is all about getting the most money per pageview … not the most money per order.
It seems like there is an opportunity for someone to look closer at this model and base their deals on extraction. Outsourcing your sales shouldn’t be solely about feet on the ground, it should be about smart sales strategy and in depth knowledge of the market and the category in which you operate. They are your insiders.
For instance, if entertainment Site X goes with Saleshouse Y they could structure the deal as follows. Lets assume a fair value for ths site is around $20cpm so anything above that is a great result.
For any deal where the effective CPM is under $15 the % the sales house gets is 15% – this allows the sales house to cover costs
If the effective CPM is between $15-$25 – the % rises to 25%
If it’s between $25-$35 it rises to 35%
$35-45 cpm – 40%
Over $45 cpm – 50%
This incentivises the sales house to generate the best yield, not the highest order amount. It also means the sales house puts some skin in the game and can operate within a predefined scope in terms of expectations. There’s no point paying someone 50% of revenue to open doors for you, if the result of them opening the doors is still a CPM below what works for you or they are giving away your inventory below a fair value trying to close deals.
I guess the key term here is ‘fair value’ … there’s no doubt some site owners have an unrealistic expectation of what their inventory is worth. This process upfront would look at what is realistic in the current climate.
The real benefit of outsourcing your sales is to give your product professional, smart and leading representation that will result in the best result and the highest yield.