Unleash the Beast – Part 2

This is Part 2 in a 3-part series on analyzing online media quality. It’s a doozy,
but an in-depth look.
Did you miss Part 1? Click here.

In Part 1 of this series, I introduced the 2 Qs Formula for revenue and profit:

Revenue = Quality*Quantity

Profit = Quality*Quantity – Price*Quantity = Quantity*(Quality – Price)

Let’s take a numeric example:
Let us suppose in a certain market the following table represent each media source
quality (in life time user’s value), capacity (the number of users they can generate)
and the minimum CPA they want in order to run.

This is only an example, in different markets the order of the media sources may be
different depend on the criteria of the users and the type of the product or service
you provide. However, there are several assumptions that are almost always true

(but not always):

• Targeted traffic has less capacity but higher value.
• The best traffic, quality wise, is the most expensive one.

So, let’s take three approaches to the market described in the table above.

The Unsophisticated Approach
An unsophisticated advertiser can’t distinguish between the different media sources,
he sees all the traffic he gets as a one and tries to set one CPA that will fit all. The
traffic he gets is all the traffic that requires a minimum payout that is smaller than the
CPA.

Here is the sensitivity analysis of this advertiser:

Media = all the media that the Minimum CPA (i) required is smaller the CPA the advertisers offers.
Example – for 3$ CPA only the Pops and the incentivized traffic will agree to work.

Total traffic = the sum of capacity of all media



Revenue = the sum of the capacity of media times quality

(Average Quality = Revenue/ Total traffic
Cost = Total traffic x CPA
Profit = Revenue – Cost)

As you can see, the maximum profit for the unsophisticated advertiser is by setting $3 CPA
he gets 100K users with profit of $80K. He is only uses 62.5% of the capacity of the media
and losing all the high quality traffic.

Stay with me here…

You can also see that the average quality is a logarithmic function of the CPA:

*The “X” axis is the price and the “Y” axis is the quality

The green line is the “Break even” line when Price = Quality.
For CPA higher than $5 – Price > Quality and the advertiser loses money.

The Semi-Sophisticated Approach

The semi-sophisticated advertiser usually sets one CPA to all media sources but he
adds restrictions that don’t permit low quality traffic to run. Let’s take for example
advertisers who don’t allow incentivized traffic to run their offers. In this case, their
sensitivity analysis will look like this:

In our example, by not allowing incentivized traffic, the advertiser get more profit

than the unsophisticated one ($100,000 instead of $80,000) but uses only 43.75%
from the traffic available.

Go to Part 3…

Unleash the Beast – Analyzing Media Quality

Contributed by Yuval Ben-Harush, Director of Advertiser Relations

This post is divided into three parts. 

Very often I use the word “Beast” to describe the World Wide Web. It is an

amazing advertising platform that can bring you unbelievable quantities of

customers, from all over the world, at all ages, genders, and socio-economic

levels. Unleashing the beast, meaning using all the traffic sources available,

can bring you, as an advertiser, millions of impressions and hundreds of thousands

of potential clients every day. That’s a fact.

The problem is that this Beast can eat you if you fail to control it. I have seen it

happen that failure to monitor, optimize and control traffic can cause companies

to lose a lot of money.

The Two Q’s Formulas

In order to understand better the beast model, let’s go back to the science of

performance: The two parameters that control the revenue are the two Qs:

Quality and Quantity. From that perspective, “Quantity” is the number of users

(the conversions) and Quality is measured by the users value ($$$$)

Revenue = Quality*Quantity

Profit = Quality*Quantity – Price*Quantity = Quantity*(Quality – Price)

As you understand, in order to maximize revenue and profit we need to maximize

the two Qs. Of course, in order to make a positive profit the following equation

must exist:

Quality > Price

The challenge begins when unleashing the Beast. Working with the large quantities

required from large networks (like Adsmarket) that contain a variety of media

sources, each media source brings a different user value (quality), has a different

capacity (quantity) and asks for a different CPA (price). The unsophisticated

advertiser, the one that does not know how to control the beast, might decide

on a uniform price for all the publishers based on the average quality of users; in

this way he prevents good, high quality publishers from running his offers.

Go to Part 2… and stay tuned by signing up to

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