Scalable

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Definition of Scalable

A proposed ad spend for which a constant pricing metric can be expected at a lower total budget.

Scalable in Depth

This term is relevant primarily to display ad proposals prepared by members of a sales team. Advertisers or agencies will often request that proposals be “scalable” to different budget levels. This generally means that the same pricing level applied to a proposed spend would be applicable even if the client elects to spend a smaller amount of money.

In practice, this means that the advertiser is requesting that any volume discount offered for large spends can be transferred to smaller spend amounts as well. This term is frequently used when publishers are invited to submit proposals that include multiple budget levels.

Scalable In Action

To understand what an advertiser or agency means by “scalable” an example is very helpful. Suppose that an advertiser sends out an RFP inviting publishers to submit proposals at a $100,000 budget level with scalable line items. Our theoretical publisher includes a line item that looks like this:

Example of Scalable Line Item

If the advertiser requested scalable line items, they would expect some flexibility in changing the size of this spend component. That could extend higher, if the advertiser decided they would like to spend more money on this placement:

Example of Scaled Up Line Item

More importantly from the advertiser perspective is the ability to scale down this proposed component of the campaign if desired. This would essentially allow them to receive the same pricing (in this case a $10 CPM) even if they cut back their budget:

Example of a Scaled Down Ad Spend

There are obviously some challenges to publishers in presenting scalable line items.

It inherently involves offering a volume discount on low volume spends that wouldn’t normally qualify for such a reduction in price. In the example above, the publisher may only offer a discounted CPM of $10 on spends that involve 1 million or more impressions. Offering that rate on much smaller spends means lost revenue for sales reps and the publishers they represent.

While each situation is unique, any concern about lost revenue associated with presenting scalable ad impressions should be minimal. It is relatively rare for clients to return a counter-proposal that would feature a significantly lower number of impressions with any line item.

Moreover, lost revenue from a scaled down spend is still good news for most publishers: it means that they’ve won a campaign from an advertiser and have successfully made a direct sale. For large well-known brands that have no problem attracting advertisers, this may not be all that noteworthy. But for smaller sites trying to transition from ad networks to a direct sales infrastructure, this is a big accomplishment.

See Also

Related terms include: RPM.