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How can publishers deal with limited inventory?

October 24, 2010

This blog is Part 1 of 2 issues I thought I’d have a look at when looking at the new self-serve facility currently being tested by Groupon.com. This part contains my musings on what digital publishers can do about the question of limited revenue-generating inventory.

As a publisher, when you’re on to a good thing, it’s easy to make sales. Ask anyone. The catch is, your investors or shareholders know when you’re onto a good thing and before too long your growth and revenue targets soar to match that. But when you have limited inventory in your key sweet spots, it actually gets harder and harder to sell the product without veering away from your Unique Selling Proposition (USP).

Google succeeded at the pace it did partly because it created, in its basic Adwords solution, an effective product with unlimited inventory. As more and more businesses around the world got on the Google advertising bandwagon, the only impact of this was to drive up prices in the auction based system. Inventory was never a problem however. Fixed price advertising models often incur limited inventory and therefore this places a ceiling on the revenue you can achieve with that inventory – unless you create more, or sell inventory into areas you’re not necessarily as effective with (in terms of audience, traffic, sales effort etc).

Many online business directories succeed because of their market niche, which enables them to capitalise on SEO gains and also demonstrates expertise when selling ad space to businesses. I used to work for Catch, the online arm of Reed Business Information, who were highly effective at producing such niche directories. At some stage though, advertising inventory capacity will be met, creating new business challenges. In their case, they branched out by creating new sites with new niche expertise, but had to build each of the new ones from the ground up (still in progress). Groupon, with daily emails to opted in consumers, has severely limited inventory for what is otherwise a brilliant idea. Not so simple for them to simply create a new niche in the crowded special offers space.

My question here is simply whether they will continue to succeed simply by increasing the volume of inventory they have available. Will consumers accept the increased volume of email notification they will get? Will consumers receive less (but more targeted) offers because they set specific parameters for special offers? How does this then impact the retailers, who wanted their special offers to reach as many new potential customers as possible?

The question of how we deal with limited inventory while in growth mode is one that only Google seems to have conquered – and they did it 10 years ago.

Read Part 2 of this blog – the problem of diluting your USP.

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