The process of buying and selling
display ad space has evolved over time. What started as a simple process of
direct interaction between the sellers and buyers, has now grown into a complex
value chain with multiple players interacting with each other to increase process
efficiency, reduce human errors, optimize ad sales real time and obtain the best
monetary value. This complex value chain is in turn powered by technology,
popularly known as Ad-Tech or advertising technology. This refers to technologies
that seek to automate the buying, placement, and optimization of advertising.
The following is a typical value
of display ad sales process between advertisers (companies sponsoring the ad)
and audience (those receiving or consuming the ad).
In order to fully comprehend this
space, it is imperative to understand each of the elements involved in this
value chain. So let’s begin then…
Publisher is the owner of advertising inventory and is the point of
contact with the audience. Advertising
inventory is the number of advertisements or the amount of ad space, a
publisher has available to sell to an advertiser. Ad inventory is often
calculated by the month. The ad space can be across multiple platforms,
including internet pages, mobile, social media etc. The currency or the value
of ad inventory is often measured in impressions
or site traffic or ad views that the publisher can deliver to the advertiser. Ad
location is another variable that impacts the value of an ad. For example,
banner ads across the top of a page in a prominent position that are visible
without scrolling are more expensive than other remote parts of the web page.
Publishers typically sell their
Ad inventory in two ways, direct and remnant. The direct sales are fixed
transactions between brands and the publisher. The brand pays the publisher to
serve ads on publishers’ websites. Direct sales are handled by the publisher’s
sales teams while the publisher relies on third parties for the sale of their
remnant ad inventory that which is not sold directly.
Ad Exchange is a technology platform that facilitates the buying
and selling of advertising inventory. The inventory is sold to the highest
bidder and almost all ad exchanges operate on a second price auction model,
i.e. inventory is sold to the highest bigger at the price of the second highest
bidder. Ad exchanges get the inventory from the publishers and the revenue per
ad sold is shared between the two in some percentage mix (ex. 70% for publisher
and 30% for ad exchange etc). A publisher often reaches the ad exchange through
other third parties and the revenue of a sold ad is split among these parties
too.
Ad networks are legacy platforms of the previous generation
architecture and came into existence as the number of publisher(s)/websites and
there by the inventory began to explode. Marketers were finding it difficult to
deal directly with the deluge of publishers and preferred to deal with ad
networks that acted as a sales broker for publishers. These networks aggregated
the unsold inventory, categorized it as per audiences and sold the packaged
inventory to the buyer. Typically, the agreements that ad networks had with the
publishers were not exclusive and multiple ad networks carried the inventory of
a publisher leading to duplication. The issue further aggravated with the increase
in ad networks, thereby generating a demand for greater efficiency in this
process and gave rise to ad exchanges. However, ad networks still continue to
exist and can both directly sell ads to media agencies or interact with buy
side platforms as well as interface with ad exchanges or SSPs.
SSPs or Supply side platforms are technology platforms that came
into existence to help publishers manage their inventory and maximize their
yields from the inventory sales. As mentioned earlier, publishers run certain sales
campaigns directly and sell their remnant inventory through ad networks / ad
exchanges. However, the publishers usually want to maximize their yields across
all different types of sales and SSPs position themselves as a platform that is
capable of managing across this layer cake and achieve incremental yields that
a human might not be able to see or realize. Overtime, this platform has become
more and more real-time.
DSPs or demand side platforms are technology platforms that help in
purchasing the inventory across channels (display, video, social or mobile)
from ad-exchanges or ad-networks in an automated fashion. These are the buy
side equivalents of SSPs and are powered by similar technology. DSPs allow targeted
purchase of ad impressions based on user attributes of the impressions, such as
geography, purchase behavior etc. Often the price of the impressions is
determined by a real-time auction, through a process known as real-time
bidding. This process does not need human salespeople to negotiate prices with
buyers, because impressions are simply auctioned off to the highest bidder, and
this process takes place in milliseconds, as a user’s computer loads a webpage.
DSPs charge a simple fee based on the sales for this facilitation process.
ATDs or Agency trading desks are centralized management platforms audience
buying and are used by ad agencies. These are layered on
top of a DSP and attempt to help clients improve their advertising performance
and receive increased value from their display advertising. Trading desk staff
don’t just plan and buy media but also measure results and report audience
insights to their clients. A typical
architecture is as follows:
The above is broad synopsis of
various players involved in the value chain of display advertising and with
time, each of the players in the value chain are evolving by developing more
sophisticated platforms capable of performing one or more functions in the
value chain.
The immediate next step is to
understand various players currently operating across each of these segments. This
is continued in the next in a desperate attempt to manage the length of the
blog post.
