The outsourced sales opportunity


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.

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4 responses to “The outsourced sales opportunity

  1. Hi Ben,

    I think this is a great start to approaching good ways to look at publisher/sales relationships. It does a very good job from the publisher point of view of trying to maximise the efficiency of the outsources sales team. (And I’m obviously all for outsourcing sales)

    The difficulty is that in your model above you have to look at the rewards and incentives of the sales team. Why would they bother selling any inventory at a level that just covered their costs? They’ll just start cherry-picking to maximise their time/profit results as any smart business would.

    The trick is to go that step farther than incentivising individual campaigns and CPM, but incentivising the entire inventory. In general it is hard to beat a straight commission for that if inventory limited.

    If inventory isn’t limited, then you can get into ways to incentivise maximising total value, and I’d argue (a discussion fro another day) that the proper way to do that is my maximising the entire relationship, not just the revenue. There are many more ways a sales network can help a publisher if they’re a partnership more than a service.

    Cheers,

    Eric Rowe
    Network Manager
    Flossie Media Group

  2. Interesting article.

    Where I work we’re in the process of bringing our online advertising sales division inhouse after originally outsourcing when we were smaller.

    Our experience has been, and I accept that this isn’t necessarily so for everyone, that being just one client of many for the company wasn’t that successful for us.

    There were benefits of outsourcing when we were smaller and they have done a good job.

    They had the infrasctructure, they got our name out their more in the media buyers minds and they have had success.

    But at the same time, they were removed from our offices, they weren’t here, we weren’t able to instill in them the enthusiasm we had for the company.

    I guess on some levels there was never the kind of efficiency and flow that one might have hoped would have occured.

    Despite sales increasing recently we sat down and did the numbers to find, happily in this case, that it was going to cost less to employ the same amount of people inhouse than we were paying in commission and fees to the agency.

    I think our situation may be more about the natural ebb and flow of business – during different stages of the business life cycle different things make sense at different times.

    For some companies though outsourcing simply is the best option. Sometimes employing an outsource partner such as such as Ebay did with Fairfax Digital is just the more prudent option.

  3. Very interesting post Ben.

    I think there are certain situations where it makes perfect sense for website publishers to outsource online sales.

    It makes sense for an overseas site to outsource its sales. No point in last.fm having sales people here when this isn’t their core market.

    But it’s not always so clear.

    Being a small publisher, this is an issue I debate often.

    Only today we met with a firm regarding outsourced sales for our sites. The numbers they presented were compelling for us.

    But at the end of the day, no-one wants to talk about eCPM across all a publisher’s inventory; nor about minimum monthly sales levels / guarantees (which I believe Flossie are doing for certain publishers – well done!).

    So the relationship seems to be skewed in risk against the publisher.

    But interesting to read this and think more about how it might be better structured.

  4. Neil Ackland

    Another good post Ben! At Sound Alliance we made the decision very early on to invest in our own sales team – effectively to control our own destiny. A fair share of our revenues comes from areas that no ad sales networkscould effectively target, like the music/event industry. Also, we have worked hard on integrated brand partnerships which go beyond impressions and CTR.

    There are opportunities for targeted ad sales networks to add value but really in owning a niche, like the flossie model. We are representing a few very targeted sites for festivals like Splendour and Future Music where a very specific advertiser places a high value on their audience and it is working really well.

    I agree that a model that rewards a higher yield is a smart approach. I think that ad networks have just focused on the total $ amount and not yield which holds niche publishers back. It’s interesting to see new models emerging.

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