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7 things you don't know about ad networks and are afraid to ask

7 things you don't know about ad networks and are afraid to ask Greg Skipper
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Ad networks are one of the most confusing areas of the digital industry. Here are the answers to seven of your most pressing questions.


It is important that my brand not be next to certain types of content. Can ad networks provide marketers with full transparency?


An ad network can be fully transparent in the sense that it passes on the exact information it receives from a publisher, but that information is often not complete information. Publishers drive the level of transparency; the ad network does not. If a publisher is selling its premium inventory through a direct sales force at $18 CPMs and that same inventory is available on an exchange or an ad network for $2.00, cannibalization will occur, which is why some publishers choose not to disclose complete information.


But there's more to transparency than just a site URL. Real transparency extends to the frequency and placement of both the user and the ad being acquired. Unlike DSPs and ATDs that focus on exchange and RTB inventory only, high quality networks stand to gain the most as advertisers get more sophisticated with regards to transparency. These networks leverage higher funnel, higher quality inventory acquisition techniques -- focusing on inventory before its gets to the exchanges, SSPs, and RTB marketplaces.



I've heard that ad networks' margins are really high. Is this true?


Networks generate profit margin from the inventory they buy and sell. These margins vary on a macro level from network to network, and on a micro level from impression to impression. Ad networks really can't operate at high margins given the performance standards they are generally held to. If they charge too much, advertisers won't buy; if they charge too little, publishers won't leverage the ad network.


For advertisers, it's important to keep in mind whether the network is passing on this "margin" to them in the form of ROI or not. Do the campaigns they run on the network meet their goals? What kind of data and technology does the network provide to help drive performance? More times than not, buying directly from all the publishers that the network works with would not drive performance on par with the network buy, and would create massive operational costs that are entirely eliminated by working through the network. This is the value that the network passes on to an advertiser.


Are DSPs more cost effective than ad networks?


Because of the many layers of fees that DSPs add on, in addition to the direct cost of an impression (publisher fee, advertiser fee, exchange fee, data fee, etc.), the actual margin generated from these fees can become greater than the "margin" that a network generates from the sale of an impression.


In general, if you are defining metrics and establishing goals (CPA, CTR, engagement, reach, etc.), you should be able to evaluate success based on those metrics. If your programs are not hitting your goals or are less defined in terms of objectives, you may wind up overpaying (and this is not limited to networks, DSPs, or publishers, but all forms of marketing).

How do ad networks differ from exchanges?


Networks are different from exchanges in that they buy inventory, add value in the form of data, technology, and optimization, and then sell that inventory to advertisers. Exchanges simply facilitate the sale of an impression between a publisher and an advertiser.


Exchanges in today's ecosystem lack mature optimization technology and unique or scalable data. And because an exchange simply facilitates a transaction, advertisers don't have certain buying advantages that they can get from buying through a network such as bulk rates, risk-free CPA/CPC, etc.


What is the effect of duplication on a plan?


Duplication means wasteful ad dollars that provide no incremental ROI. It can limit overall delivery and can cause you to pay more for what you could essentially get for less. That said, it is important to recognize how duplication manifests itself in order to plan for it. There is more to duplication than inventory alone -- it transcends the users you reach, and when or how you reach them.


Imagine the multiple non-reserve partners you have on a plan going after the same conversion, as multiple people, showing up at the same place, hunting for the same 10 ducks. They are each equally likely to see the same 10 ducks, but they are unlikely to see each other, or see who is shooting which ducks. Collectively, they end up wasting a lot of ammo (money and impressions) as each individual tries to shoot all of the ducks. If you were to arm just one of these partners -- preferably the one with the best optimization engine, targeting system, data, or inventory access -- and send them out, you would eliminate wasted ammunition and money, achieving the same results. Most importantly, you'd increase your ROI.


Display advertising is obviously more complex (and less violent) than duck hunting -- but the example of multiple hunters on a single hunt defines how many of us buy every day. Duplication is something we need to understand and solve through consolidation.


Access to comprehensive, high-quality, non-reserve, and RTB inventory and audiences at scale are attributes of a partner that can solve for duplication through consolidation. Access to exchanges and RTB inventory alone is not a differentiating factor -- they are publicly accessible to all with technology. Having a publisher services team and maintained relationships with a network of sites, allows access to inventory and audiences that would not be reached through exchanges. There are a lot of different factors that go into duplication. It is important to test, control for those factors, pinpoint wasteful media, and remove that duplication.

If everyone has access to the same inventory, why wouldn't I purchase inventory at the cheapest possible price point, no matter where it is available?


All inventory is not equal, and everyone does not have access to the same inventory. While many publishers do make their inventory available within multiple ecosystems (both networks and exchanges), the inventory is very different in each.


For example, an ad network may have a strong publisher relationship that allows for upper funnel, high value access. That ad network would purchase the non-reserved media from the publisher at a premium price to ensure that the publisher is getting optimal value for their inventory. Once that publisher has sold its entire valuable inventory, there may be inventory left that is low funnel, high frequency, and not very valuable. That lower value inventory would go to the exchange to be bid on and drive as much revenue as possible for the publisher at that value level. So while you could purchase inventory from many of the same publishers on both ad networks and ad exchanges, those impressions would not be of equal value to your campaign.


When evaluating inventory, it's important to look beyond the URL. Are the users the same? What is the frequency of the impression? What is the frequency of that user overall? Are the impressions within the publisher on the same pages? Are they above the fold or below? What engine is bidding on your behalf to buy those impressions, and how is it calculating its bid on your behalf? Keep in mind that you get what you pay for.


Why would I run with a network on a CPA when I can target audiences and data on a CPM with a DSP or exchange?


Agencies and advertisers should evaluate direct response efforts against KPIs like effective CPA and ROI (ROAS). A CPA guarantees you a particular cost per action, while fixed CPMs, dynamic CPMs, and targeted audience buys with DSPs and exchanges can put some risk on the advertiser. Any of these metrics might "work." But, ultimately, it is about backend performance and scale no matter the metric, eCPA on the initial conversion or the eCPM on the media buy.


Evaluate the scale and quality of the actions your non-reserve partners are driving. Many networks have spent years developing deep publisher relationships that reward the highest quality, best performing inventory. A heavy skew toward bottom of the barrel remnant inventory can net you better eCPMs, but it also confines your presence to lower quality inventory, limited scale, and -- eventually -- lower quality bookings on the backend.


Networks are not limited to CPA alone. Most networks are capable of and happy to offer other metrics including CPC, CPM, and eCPM. Moreover, the most advanced networks are as integrated into third-party data providers, DMPs, and targeting solutions as ATDs and DSPs. This makes programmatic buying not only possible, but scalable and capable of being optimized.


How does the AOL-Microsoft-Yahoo alliance affect network buys?


Advertisers now have a broader opportunity to reach targeted audiences through premium network display advertising, aligned with one's marketing objectives. Advertisers cannot buy only one inventory source, but instead must buy from a pool of approximately 50 inventory sources. For example, an advertiser cannot come to AOL and just buy Microsoft or Yahoo inventory, but is able to purchase it in a pool of premium inventory.


We all want marketers to benefit from enhanced choice around premium inventory and scale of their digital spend. This partnership allows the three partners to have greater access to premium inventory to offer clients that will achieve the benefits of scale and efficiency.


Greg Skipper is director of East Coast sales at Advertising.com.


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"Children are playing on green meadow examining field flowers using magnifying glass" image via Shutterstock.

  As Director of East Coast Sales, Greg Skipper oversees new advertiser acquisition, custom client solutions and product innovation for Advertising.com, the leading display network of AOL Advertising. In this role, Skipper helps top...

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Comments

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Commenter: Alice Hilal

2012, September 21

Greg,

It is very confusing to some media buyers identifying whether a network is a actually network or an exchange,


Whether they have proprietary relationships with publishers or are simply purchasing through other networks/etc.,

Is there a resource a media buyer might turn to?


Thank you,
A