Industry Perspectives

Airlines benefited from the synergies of a full-stack platform. And so can digital publishers.

Blog Post
The AppNexus Team

Click here to download the latest whitepaper: The Future of Yield Management in Advertising.

If they haven’t already, digital publishers should take note: the ad tech sector is consolidating itself into a small cadre of major players. The days when 2,000 disparate companies could earn their keep by acting as point-solution go-betweens between buyers and sellers… those days are fast-fading, soon to join the ranks of other panned-out Gold Rushes in American history (cc-ing both “Sutter’s Mill” and “dot-com bubble” on this one). Consolidation may transform the industry for the better by simplifying the notoriously complex ecosystem, commoditizing expensive services, and aligning the interests of advertisers, publishers, and their technology partners.

The move towards full-stack platforms affords digital publishers the opportunity to increase their profit margins in ways that might have seemed quite ambitious a few years back. Since full-stack platforms eliminate the need for middlemen on either the buy side or sell side, communication and transparency between advertisers and publishers is greatly enhanced.

Moreover, the granular data point collection, forecasting, and analytics abilities of tomorrow’s full-stack platforms could enable publishers to practice yield management, a business science first pioneered by the global travel industry. By applying detailed forecasting models, publishers would be able to anticipate the number of expected buyers during any month (or hour) of the year – and price their inventory accordingly with great accuracy. Rather than scrambling to reap a profit off Class 2 inventory from day to day, publishers would the luxury of thinking holistically, which in turn would help them maximize their total, year-end revenue.

But before publishers break out into worldwide champagne and song, they need to brush up on the history of wide-scale viewability and yield management. By studying the end-to-end platforms first pioneered by the global travel industry, publishers will find themselves better able to use tomorrow’s ad tech platforms, which feature similar levels of inventory viewability and intelligent forecasting. One specific model worth close study is a technology platform known as Sabre.

Developed as a result of a chance, in-flight conversation between Cyrus Smith (the then-CEO of American Airlines) and an IBM sales exec that Smith happened to be sitting next to, Sabre was released to an unsuspecting travel industry in 1960 – and promptly took it by storm. Before Sabre, the process of booking a seat on a flight would average 45 minutes from start to finish. But by providing different airline sales agents at different airports with better insight into the “real time” availability of a given seat, Sabre reduced booking time to a mere three seconds.

Not too bad for 1960. But Sabre soon eclipsed its original functionality to become the world’s first Global Distribution System (GDS). Global Distribution System… no points off if you’ve never heard the term! But there’s every chance you’ve used a GDS many times when reserving a plane seat or booking a hotel on another coast or continent. In terms of sheer scale, reach, and cross-connectivity between different subsets of the global travel industry, Global Distribution Systems are just plain unrivaled. The three major GDS organizations in the world –Sabre, Amadeus, and Travelport – accounted for over 50% of all travel bookings in 2014.

But reach and scale aren’t all that Sabre provides. Unlike other GDS platforms that partner with airlines’ yield management systems, Sabre went for a full stack of services. In the early 1980s, Sabre made the strategic move to acquire data analytics and forecasting technologies that could provide its clients (airlines, travel agencies, global hotel chains, and the like) with the anticipated number of passengers flying to specific destinations on any given day of the year. And ever since that time, Sabre has been improving upon its forecasting models, hour after hour. In comparison, Tim Berners-Lee made his first public proposal for a commercial Internet in 1989…

All those decades of data point analysis and forecasting have naturally born results for both Sabre and Sabre’s clients. Unlike the data points currently available to most online publishers, Sabre’s forecastables go well beyond a user’s mere operating system and geo-location. They include minutiae like whether a passenger is more likely to purchase tickets on a given route to London in summer or winter; or whether a traveler is more likely to stay at a five-star hotel versus a three-star hotel during a given travel season – just to name two minor examples. Sabre’s technologies also take into account seasonal, daily, and even hourly fluctuations in inventory demand, all in the interest of letting its clients achieve the highest levels of yield management and total revenue. After all, there’s a reason your plane ticket costs more if you book it the day before Thanksgiving (“Red Wednesday”, the most traveled day in North America) rather than, say, an uneventful day in mid-April. And there’s also a reason that the price of your Red Wednesday plane ticket just went up by $75 from five minutes ago. There’s little point in arguing beyond blaming it on the system…

If online publishers had access to the same scale, reach, data, data analysis, and forecasting capabilities that a full-stack platform like Sabre can provide for the global travel industry, they could use that across-the-board insight to practice yield management at a world-class level. After all, a 320x480 CPM worth $5 on a dog day afternoon in July in Pittsburgh shouldn’t have the same $5 value on Super Bowl Sunday during Half Time when the Pittsburgh Steelers are down by only three points. Not only does a full-stack platform account for all these factors, it applies them to far less momentous occasions. And it applies them with a worldwide scale and reach. At AppNexus, we call such a full-stack platform the AppNexus Publisher Suite.

Click here to download the whitepaper.