Ad Business 101

what is online ad value chain?

Advertiser Agency Network/Exchange Publisher

Demand Side Supply Side

What’s the product?product equals “advertising inventory”

advertising inventory is the supply of opportunities to display advertising in a particular medium.

then what is an “impression”?

an ad impression is a single viewing of a single ad by a single individual.

Calculating Ad Inventory• two variablesthe number of page impressions on the site,

the average number of ads per page.

The players

• Advertiser• Publishers• Ad Network• Ad Agency

AdvertiserMarketing objectives:– Brand marketing– Direct Response marketing

typically says "I have x million dollars this quarter for online ad display, and there is this campaign I want to run. I want to target Males, 35-45 years, love football, with family, stay in LA, have a dog…Buy me the best media to reach this target audience".

Publishers• a site, game, blog, mobile portal –

Yahoo, Google, Facebook, MSN, CNN• ad inventory as monetization model• Maximize revenue, minimize risks• Monetization model• Larger publishers – have own sales team• Small publishers – sell to ad networks• Search engines – Google, Yahoo, MSFT

Ad Network - I• outsourced sales houses• strikes deals with lots of publishers • sells inventory to advertisers and agencies• value proposition to publishers – sell inventory that the publisher can't sell itself

• value proposition to an advertiser– Ad can appear on lots of sites

• business model = buy inventory cheaply; sell expensive• Types:-– premium networks– vertical networks – contextual networks

Ad Network - II Simple Arbitrage

Vertical Aggregation

Behavior Targetting

Performance

Platform Specialization

Platform Specialization

remnant inventory

Go to Market - small

publishers

Ad Exchange

Targeting Methods

Placement Options

Nature of Inventory

Pricing Model

Technology platforms

Efficiency in Ad imp buying

Auction based model

Buy audience vs

Buy sites/ placement

Ad Agency

Create Ads

Buy Media

SSPOptimizing Remnant inventory

Network Optimizers

DSPManaging

multiple Ad Exchanges

One tool, centralized reporting

Central Hub for Data

Data Exchanges and DMPsManage the Big

Data

Cookie warehouse,

with analytics firepower

Data Agg – allow

Advertisers analytics

Provide purchase and consumption

base data

Integrate your data w/ 3rd Party

Data

How does An Ad work?1 2

3

4

Get real?1

2

Ok, get really real!!

Credits• Many blogs – • Ben - http://

www.adopsinsider.com/ad-serving/how-does-ad-serving-work

• Ian Thomas - http://www.liesdamnedlies.com/online_advertising_business_101.html

• http://www.allaboutcookies.org/ad-serving/• http://www.adopsinsider.com/ad-serving/what-is-holistic

-ad-serving/#more-733

• http://www.adopsinsider.com/ad-exchanges/ssp-to-dsp-cookie-synching-explained

• The rise of performance-based advertising Article by Brandt Dainow

Appendix….and Bonus Slides…

New Problems

Some Terms…..• price discrimination, volume discounts and bundling• rate card • frequency capping• guaranteed vs 'discretionary' or non-guaranteed inventory• retargeting• remnant inventory & spot pricing• floor price• spot priced• forward prices• premium publishers• velvet rope advertisers • 'filler' inventory

Why newspapers are like airlines?• both seem to be going out of business • other similarities:-–perishable inventory–finite supply of inventory– charge different customer differently (aka price

discrimination)–high fixed costs–maximize revenue by selling as much of their

inventory as they can at the highest average price possible.

RTB - I

User BrowserWebserver

Ad server

SSP

Exch

1 2

3

4

56

78

9

1011

12

13

DSPs

RTB - II• Advertisers get impressions at a price that matches

their goals and objectives. • Publishers use SSP with supply side algorithms to get

the maximum yield out of ad inventory• RTB involves a real time auction for each ad

impression in which buyers and sellers come to an agreement

• basic premise of RTB • ad impressions are not commodities to be sold in bulk,

and that each ad impression is unique• Auctions take place at a blink of an eye. • Volumes of bid requests and bids are also staggering. • Emerging Standards - OpenRTB

Yield Management - I• In eighties, American Airlines led a

transformation of the US airline industry• Introduced "Ultimate Super Saver Fares"

(1985) • Why? People pay more for same airline ticket

when purchased at short notice• Helps airline to sell and advertise tickets at a

much lower price for advance purchases. • Hence, yield management business is born.

Yield Management • Yield management• “……practice of maximizing the average price

received for inventory through a number of techniques, amongst them price discrimination…”

• Yield management specifics:- – a publisher has flexible control over the cost of

sale– volume discounts important for sale of online ads

• yield management is maximizing gross profit rather than top-line revenue.

RichMedia• “…umbrella term for ads which are more interactive, or use sound and/or

video to get their point across...”. Eg:-– An expandable banner with embedded video– An ‘advergame’ (a mini-game embedded inside an ad unit)– A video ad served before, after or during a video clip– A ‘page takeover’ ad (an ad which covers the page it’s on, or interacts with that page or

the other ads on it in some way)

• Rich Media Vendors• Atlas Rich Media (MSFT), DoubleClick Rich Media (GOOG), Yahoo! Rich Media,

Eyeblaster, EyeWonder, Pointroll, Interpolls, Rovion, Unicast• Challenges rich-media campaign:-

– Creating the actual ads themselves (the creative)– Trafficking the ads (getting them actually placed onto publisher sites)– Managing and serving the creatives themselves, and measuring delivery and response

• Where next?• Available to Big & small Advertisers• Technology to create one single creative to fit all screens.• Uniform playing field

Convergence of Purchase Funnel