In the race to shore up revenue, publishers are overlooking deal terms
Many publishers are struggling to keep their business models afloat with cookies dying and brands tightening their ad spend in an age of pandemic and recession. To contend with unprecedented challenges, publishers have taken to implementing a wide variety of new tactics. Some are turning to alternate revenue streams, such as subscriptions and affiliate marketing. Others are onboarding technology tools to improve ad targeting and become more appealing to brands.
These tactics are undoubtedly effective — but they’re expensive to implement, and they can’t fix fundamental ad revenue shortfalls. And many publishers are struggling to master a basic, foundational step on the path to ad monetization: setting favorable deal terms with partners.
For publishers, the first steps to robust revenue are elemental
Publishers rely on vendors to serve them the ad revenue they’ve rightfully earned — but unfavorable terms can handicap an entire campaign, or even an entire business model, leaving publishers underfunded and stripped of flexibility. Before publishers can identify and refine new revenue streams, they must master the old ones.
“Publishers need to secure terms that actually keep cash flowing into the business, even at the start of the contract,” said Matt Hoy, vice president of business development at Revcontent. “Otherwise, for all intents and purposes, they’ll find themselves losing money even when they’re supposedly making it.”
When cash flow slows to a trickle, publishers lose the ability to invest in new tactics and technologies, pay their employees and even survive. But effective deal terms can solve the problem, mandating things like up-front cash, faster payment terms or even guaranteed CPMs.
Guaranteed deals are the gold standard of revenue assurances
Experts advise that publishers, whenever possible, are well-advised to lock down guaranteed revenue in their contracts. It’s easier said than done, of course. For vendors, a deal guarantee represents a leap of faith — one that can wind up losing them money. According to Justin Wohl, Chief Revenue Officer at Salon, it’s incumbent upon publishers to demonstrate that they’re worth the risk.
“The best thing that a publisher can do is prove to the company that the guarantee is going to be worth their investment,” said Wohl. “For guarantors, the question is whether or not … the guarantee is going to end up making the money back, or whether it’s going to be a loss leader for them.”
Wohl said that one solution is to ask vendors for a testing period to prove the publisher’s value. “We’ll say, ‘Let’s do a two-week flight where you’re paying us at least that amount so that we’re not losing any money.’ At the same time, the vendor will be getting live data to prove the guarantee is worthwhile. That approach has been very successful.”
Such an approach won’t necessarily seal deals for publishers with weak data, but when a publisher can prove its worth in hard numbers, few scrupulous vendors will shoot down guaranteed revenue terms.
For publishers, the devil is in the shadowy details
Experts warn that shadier vendors will often tuck unfavorable terms into contracts. One of the most common examples comes in the form of hidden auto-renews, some of which can be activated in as little as 18–24 months. If publishers aren’t careful, they can find themselves locked into contracts they hadn’t planned to continue.
“The time with which publishers need to give notice to avoid auto-renew is often something that I find myself negotiating over,” said Wohl. “Sometimes the terms will state that the publisher needs to give 90 days notice before the end of the term, which is crazy because sometimes you’re not thinking three months out about your deal that’s going to end. When I sign a deal, and it has terms like that, I push back on it and say it should be 30-days notice or none at all. It should be a good-faith negotiation.”
Wohl pointed out that some publishers can also encounter hidden service fees that eviscerate revenue. “If you don’t read the fine print, you might be signing away the initial five or 15 percent of the gross amount, with no sense of how much they’re going to skim before the rev-share goes into effect … It’s really important for publishers to establish a baseline service fee that’s going to be removed from the gross amount.”
Flexibility and customization are essential
When it comes to deal terms, one size doesn’t fit all. Publishers can severely handicap their flexibility and revenue potential when they lock themselves into specific page templates or article layouts — a seemingly straightforward approach that some vendors insist on in exchange for a deal guarantee.
According to Wohl, it’s not worth the tradeoff. “To lock yourself into a page template or an article layout in order to get a guarantee could ultimately be devastating for your other strategies on the page if anything were to change,” he said.
Instead, it’s wiser to structure guaranteed deals that deliver promises related to specific KPIs, like viewability or click-through rate. “That way, if you have to move the edge unit one or two slots in any given direction — as long as you’re still providing the minimum performance — it shouldn’t be an issue,” said Wohl.
Terms are everything
Publishers need flexibility in their terms — and they should be wary of vendors that demand that they sacrifice it.
When publishers fail to guarantee cash flow or fall victim to damaging hidden terms, their broader plans and ambitions are often frustrated, if not outright derailed. Publishers will do better by taking a figurative microscope to their contracts and conducting extensive conversations with their partner candidates.
When they do, they’ll find themselves moving in positive directions toward new revenue streams and technologies, and it all starts with signing on the dotted line — as long as it’s carefully vetted.