It seems that at this point in the interactive world there could be an entire book written on ad networks. For the sake of brevity, and your sanity, we'll keep this much shorter. The most basic introduction is that there are two kinds of ad networks: Those that own their own inventory across multiple sites and sell them as a "vertical network," and those that don't own any content but operate like a Priceline or Hotwire for online ads. The latter are horizontal networks, which take the millions of unsold ad impressions available at any time of day and sell them in aggregate.
Let's start with the first kind: those owning their own content. A good example would be Martha Stewart Living's Omnimedia (MSLO). This company owns all of the Martha Stewart-branded sites plus WholeLiving.com and Pingg.com. A rep from MSLO can offer you inventory across all of these sites and create a custom program, often with custom ad content or packages within these sites.
A big benefit to using networks like these is the ability to have your ads look or behave differently than a normal IAB ad unit, if you have enough money. Plus, if you and the publisher share an audience, the partnership works well. The downside is if you're an auto manufacturer, while much of MSLO's audience may at some point be your target, very few of their users are shopping for a car at any given time.
Now, imagine you are a large website or even group of sites. Your site has 20 billion monthly impressions available to sell and your 50-person sales force sells around 10 billion of those per month at rates of $8 to $12 CPM. There are 10 billion unsold ad impressions each month that, without a secondary market or avenue for this inventory to be monetized, would be a wasted opportunity for that publisher. Publishers like these have the choice of running house ads (for which they receive no immediate monetary pay out), PSAs (same problem), or offloading them onto an ad exchange or network at a severely discounted rate.
Nearly every publisher, large or small, faces this scenario to some degree or another. The challenge for the publisher is that if they sell the other half of their inventory for less than it's selling for in the market, the market may not want to pay $8-12 anymore; advertisers will want to pay the discounted rate.
So, how does the market for unsold impressions work? The inventory is sold through secondary-market ad networks (SMAN). There are two primary types of ad networks operating within this group. The first is the arbitrage-style network and the other is a demand-side network using a demand-side platform (DSP) as its technology. Both buy inventory across hundreds (or thousands) of sites and resell it to their clients in bulk fashion.
There are currently about 50 secondary-market ad networks. These networks differentiate themselves in five basic ways: inventory quality, method in which they buy inventory, research data associated with each impression, customer service, and the ability to optimize your campaign to generate the best results.
Within each of these characteristics are multiple methods and styles. Understanding the network game can be complex, but it is an area of the business well worth knowing. Often times, inventory sold by these networks is discounted 50 percent or more compared to the regular "retail" rate charged by the publishers outside of the network. The trade-off to the buyer is they normally will not be allowed to see how individual sites perform; metrics are reported in aggregate. Individual site report could compromise the publisher and the sales staff's ability to sell inventory on their own at higher CPMs.
Here is a quick guide to understanding these five differentiators and ways you can ensure good, safe performance for your clients when working with these vendors.
Inventory quality
Originally, SMAN's were made up of thousands of long-tail (read: small and unknown) websites that didn't have their own sales staffs. Nameyobaby.com isn't necessarily a bad site, but very few media buyers would look at that site and say, "Wow, now that is premium quality inventory!" Premium is only premium based on the definition of the media buyer, but most media buyers define "great quality inventory" as inventory coming from sites their clients are familiar with.
These sites could be People.com, ESPN.com, and others. Some argue the site doesn't matter and it's the user that counts. Others argue the site trumps anything and ad content seen within the context of familiarly-branded content is crucial. Because of this, along came "premium" ad networks. Some of these do in fact offer brand-name inventory. Many claim to be premium, but their inventory certainly wouldn't meet the definition described above.
The only real way to know what kind of inventory you're using is to use a verification service such as Adometry to see the exact sites where your ads are being placed. This way, if a network shows you a list of 100 great sites but only runs you on 10 of those -- and they are all of lesser quality -- you will know whether or not you want to work with them again.
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