FUNDAMENTALS OF AD NETWORKS: POST 2

NETWORK BUYING MODELS

Different ad networks sell their inventory based upon different buying models. The models mirror those used by individual publishers:

• CPM ad networks sell inventory based upon a Cost Per Thousand(M).
• CPA ad networks sell based upon on a per action basis – like $X Cost Per Acquisition
• CPC ad networks sell based upon a Cost Per Click.

Most people in the industry believe that CPM networks offer higher quality inventory, though naturally CPA and CPC networks dispute that.

Many ad networks sell through multiple models – the amount of inventory available through CPC or CPA is generally far lower than what is available through CPM, because the two former models require publishers to assume some of the risk of a buy.

THE NEED FOR AD NETWORKS

Marketers and advertisers face a number of challenges that make it more difficult to effectively deliver messages to an audience:

• Media fragmentation and the decline of television audiences.
• Digital fragmentation and the decline of the portals’ share of total page views in favor of niche “midtail” and “longtail” sites.
• The labor intensive nature of digital media planning and buying versus traditional. Whereas, for example, a handful of people can buy a billions dollars worth of TV inventory in a year, it would take a large army of people to do the same effectively in digital.
• Downward pressure on media planning and buying fees, which leads to fewer people spending more money in the marketplace. This reduces the time and resources available for driving innovative and immersive media programs.
• The explosion in the number of digital platforms, from mobile and social media to widgets and in-game marketing. These new options further fragment the market without increasing planning and buying fees.
• The general lack of training in the digital media planning and buying spaces, which places enormous responsibilities on teams with modest amounts of experience.
• Further declines in the percentage of consumers who actually notice and interact with standard, widely available digital ad units.
• Increasing demand for digital advertising across the board, which makes it more difficult to deliver any large scale campaigns online.

ENTER THE AD NETWORKS

In large part due to the factors listed above, ad networks have exploded onto the scene. Their structure and services really do deliver at least partial solutions to all of these challenges.

To address general media fragmentation ad networks provide aggregated audiences of millions – sometimes tens of millions. The largest networks can actually reach upwards of 90% of all online households in a single month. Strong verticals can reach enormous percentages of the niches they serve.

To address digital fragmentation, ad networks provide aggregated audiences.

To address declining planning and buying fees, ad networks provide one-stop buying for as many as thousands of sites.

To address labor intensiveness of digital buying, ad networks offer one-stop buying, consolidated trafficking, and consolidated and automated reporting.

To address the explosion in the number of digital platforms, networks are branching into emerging media and new, emerging platform specific networks (like mobile) are now reaching critical mass. Many networks are also offering consolidated cross media reporting in some instances.

Tommorrow: Horsetrading and the role ad networks play for DR and brand advertisers.