Prologue

In the 1980s and early 1990s, traditional media, like TV, radio, and print were the dominant source of news and information. The Internet changed all that with the onset of computers, servers, browser-technology, and Internet Service Providers (ISPs). As consumers migrated to online sites for news, information, and shopping, offline publishers, who earned their revenue from selling advertising slots to advertisers, began migrating to online publishing formats. In like manner, advertisers had to migrate to online sites to reach their target consumers.

At first, publishers sold their ad slots directly to advertisers. However, with the proliferation of online publishing sites, not all ad slots could be sold and remnant online ad slots became an issue because unsold ad slots represented lost revenue. The technology was needed to mop up unsold ad slots. This need heralded the advertising technology (AdTech) known as ad networks and the business model for operating it. At inception, the business model of ad networks was to buy up remnant ad inventory, segment them, mark them up and resell them to online advertisers. With time, some ad networks adopted a much more deliberate tactic of cherry-picking premium ad slots from premium publishers for resale to top-tier advertisers.

 

“Today, ad networks, ad exchanges, supply-side platforms (SSPs), demand-side platforms (DSPs), data management platforms (DMPs), real-time bidding (RTB) auction constitute the heart of programmatic advertising ecosystem.”

 

What Is An Ad Network?

An ad network is a technology platform that stands as a “middleman” between publishers and advertisers facilitating ad inventory buying and selling between groups of publishers (sellers) and groups of advertisers (buyers).

Metaphorically speaking, this is akin to acting like a technology “stockbroker.” Much like the typical stockbrokers in a stock exchange floor, ad networks collate large volume of ad impression from publishers, re-classifies them into groups with common parameters, like age, gender, location or region, offline interests like music and sports, browsing history, household income, family size, social network, lifestyle, behavioral cues and so on, then re-sell each group of inventory with markup for profit to advertisers. Ad networks, much like ad exchanges, supply-side platforms (SSPs), demand-side platforms (DSPs), data management platforms (DMPs) are a component of today’s advertising technology (AdTech) ecosystem, and they are widely used in the digital media marketplace.

“Ad networks refer only to the technology-driven activities of online ad inventory transaction and excludes TV, radio, and ink-on-paper print advertising.”

Just like ad exchanges, ad networks free up time and other resources for both publishers and advertisers, so that publishers can focus on what they are best at doing, which is writing compelling articles. In like manner, it frees up advertisers and ad agencies from investing, building and mastering online ad inventory buying technology so that they too can focus on what their core competencies are, which is creating compelling ads.

 

The Conventional Ad Network Business Model

To facilitate the selling of online ad inventory (by publishers) and ad inventory buying (by advertisers), the typical business model of an ad network runs thus:

1. An ad network mops up online ad inventories from various publishers.
2. These online ad inventories are then segmented into groups or segments with common parameters, like geolocations, language, gender, age, interest, lifestyle, and online activities, to name a few.
3. Groups or segments of ad inventory with common parameters are packaged as a segment, marked up, and re-sold to interested online advertisers.
4. On the buy-side, advertisers set up their advertising campaigns on the basis of their respective budgets, frequency caps, target consumer groups, and so on.
5. These campaigns are then set up on a typical ad network campaign-management dashboard by the advertiser.
6. Advertisers retain the original ad copies and creatives in their ad servers but install ad tags on the ad network ad servers.
7. An ad is served once there is a match between the parameters set by both the publishers and advertisers.
8. Without seeking permission from a publisher, an advertiser can switch one banner ad to another banner ad and then to a third, a fourth, and so on using the publisher’s campaign-management dashboard without any need to revert to the publisher.

 

Today, online advertising technology has advanced to include both the Supply Side Platforms (SSPs) and Demand Side Platforms (DSPs) and publishers can now use multiple ad networks, with some focused on premium sites only and others on remnant ad impressions to ensure greater ad space fill rates across all platforms.

It is important to note that publishers can always sell their online ad inventories directly to advertisers under a process known as direct deals. This has the advantage of earning for publishers, higher CPM (cost-per-mille) but on the downside, fill rate and aggregate revenue may be lower.

Ad networks that focus on only premium ad impressions from premium publishers can attract medium CPM but the fill rate can be low.

A focus on remnant ad space inventories may achieve the highest fill rate but at the lowest CPM.

Each scenario has its rewards and risks as demonstrated graphically below.

 

Waterfalling

Waterfalling is the tactics publishers employ to maximize the fill-rate of their ad inventory at the most attractive price. In this respect, the “most attractive” price may not necessarily be the highest price as "waterfalling" technique works almost like selling remnant ad inventory. This is also known as “daisy-chaining.”

 

How Waterfalling works:

• Unsold ad inventories vary both in specialty and in selling prices. An ad inventory may remain unsold with ad network A due to a number of factors. For instance, the target audience and floor price may render some inventory slots unsold.

 

• This ad inventory or impression is then offered to ad network B at a lower rate. If the impression still remains unsold, then it is offered to ad network C at even a much lower rate.

 

• This process continues until the ad impression is eventually sold. This is why the process is termed “waterfalling”.

 

The 6 Main Types of Ad Network Display Formats

 

1. Display Ads:

Display ads are visual images and video ads displayed on a publisher’s website. There are basically three types of display ads; namely,

• Site placement ads
• Contextual ads, and
• Remarketing ads.

 

2. Native Ads:

According to Dan Greenburg, the founder, and chief executive of Sharethrough, a native ad is “a type of paid media that fits the form and function of the user experience on the site or app in which they’re placed. In short, they’re ads that fit in.” There are approximately six native ad formats; namely,

• In-Feed Units
• Paid Search Units
• Recommendation Widgets
• Promoted Listings
• Display Ad with Native Elements, and
• Custom Native Ads

 

3. Video Ads:

There is no universally accepted definition of what video advertising is. Some media experts claim that video advertising is any digital ad with video content. In this category, they include banner ads and in-text ads with video elements. Other experts include video streams with ad content, irrespective of the content, and so they include in-stream ads with video ads, in-stream branding, and interactive overlay a

 

4. In-image Ads:

Wikipedia defines an in-image ad as a form of advertising that “uses data about the image, its tags, and the surrounding content to match images with ads that are contextually relevant.” By embedding an in-image ad into the script of a website, the ad image pops up once a visitor hovers her mouse on the image, thus revealing the ad. The in-image ad may remain for a while or may disappear once the mouse hovers away from the in-image ad. In some instances, the in-image may appear as a pop-up box, and if clicked, the visitor is directed to the ad in a new page.

 

5. In-text Ads:

In-text ads are pop-up ads that are embedded within the content of a page and are represented by two underlines. By hovering your cursor over them, a pop-up window displays the ad, and by clicking the edge of the display ad, the ad disappears. This type of ad can be quite intrusive and annoying.

 

6. Content Recommendation

Content recommendation is an ad format that recommends related content to an audience visiting a website or webpage. For instance, an advertiser on a publisher site may include suggestions about a related product or service from another page or site to an audience, especially when such content is related to or suggestive of a continuum of viewership from one content to another. On Amazon.com, such recommendation ads are common. For example, when you view or buy a product, a list of related products or services may be recommended to you.

 

Advantages of Ad Networks

Both advertisers and publishers enjoy a number of benefits from the use of ad network technology platforms. A few of the advantages run thus:

 

Focus: Ad networks do the heavy-lifting of curating ad space inventories from publishers, aggregating them, marking them up and re-selling them to advertisers. This frees up publishers to focus on what they are best at doing, which is publishing compelling articles for their niche or general-purpose audience, without the expense of building and managing online ad selling technology like supply-side platforms (SSPs).

 

Likewise, advertisers are freed from investing time and resources in financing and building ad buying platforms such as demand-side platforms (DSPs), so that they in turn are able to focus on their core competences of crafting winning ad copies and ad creatives.

 

Range: Through ad networks, both publishers and advertisers have a wider range of options to sell (by publishers) and to buy (by advertisers) ad space inventories that meet their audience parameters. For instance, an advertiser may opt not to have its online ads displayed in a particular region of a country or of the world. It could determine the particular audience or customer parameters like age, gender, income, lifestyle, social media interest, language, geolocation and so to target. Publishers can equally discriminate legally what type of online ads to accept. For instance, it is almost certain that CNN online or BBC online would not permit incendiary ads from extremist groups to be displayed on their respective pages.

 

Maximization of Brand Awareness and Revenue: By ensuring that all media ad impressions are sold, ad networks play a very vital role in enhancing the revenue earning capacity of publishers by disposing off unsold remnant ad inventory. They also help brands reach their target audience, either to create a lead or to increase brand awareness.

 

Ad network Inventory Pricing Options

Ad networks can sell ad inventory by Real-Time Bidding (RTB) auction or as packaged deals to advertisers. Ad network inventories are usually sold using any or all of the under-listed pricing options:

 

• Cost Per Mille (CPM)
• Viewable Cost Per Mille (vCPM)
• Cost Per Click (CPC)
• Cost Per Acquisition (CPA), and
• Cost Per View (CPV) for video ads.

 

Factors to Consider in Choosing an Ad Network

Not all ad networks are created equal. Therefore, it is pertinent that you take the following factors into consideration in making a determination about your ad network of choice:

 

The Quality of Ad Inventory It Is Warehousing:

As already stated, some ad networks specialize in premium ad inventory from premium sites; others focus on remnant ad inventory. Still, some offer a combination of both. Therefore, as an advertiser or an ad agency, your choice of ad network should match the type of audience you want to reach (as an advertiser) or ad inventory specified by your client advertiser (if you are an ad agency). For instance, ad inventory from Harvard Business Review (HBR) online site will be grossly inappropriate for a blue-collar audience, who are sports enthusiasts, with no college education.

 

1. Ad Network Size:

As an advertiser, size matters when choosing an ad network.  This is because, for advertisers, the size of an ad network has a direct relationship with the flow of inorganic customers (traffic) from paid advertisements placed in publishing sites. For instance, a large ad network can guarantee a steady flow of paid traffic for an eCommerce site from premium publishers. the same is also true when an upscale hotel chain uses a large ad network with access to premium publishers.

 

2. Audience Targeting Capabilities:

The type of audience you want to target matters in your choice of an ad network. Various ad networks offer different targeting opportunities based on the parameters of the ad space inventories in their repository or ad warehouse. An ad network that has as one of its main inventory criteria, anti-aging personal care products ad for women in their late 40s to mid-60s, would find almost no audience in a baby care publishing website. A luxury brand of women online magazine is not adequate for male golf enthusiasts.

 

An advertiser may specify the criteria for ad networks they will buy ad inventory from and the criteria of sites to run their online ads. They may want to target consumers in a specific geolocation, or ethnic group, or profession, for instance, aeronautic engineering sites, or websites that carter to college-educated millennials, and so on.  Therefore, in choosing an ad network, it’s important that you match its audience profile with your target consumers.

 

3. Ad Format:

A publisher may limit its display format to video ads only, while as an advertiser or ad agency, your client may limit its choice of format to only display banner ads. As ad networks sell online ad spaces on behalf of advertisers, this limitation will place considerable incompatible limits on available ad formats.

 

4. Network Interface and Network Dependability:

Some ad networks require some element of coding to integrate them with your ad server. Others are pure plug-and-play plugins. Some ad networks are cloud-based, while others reside in an ad server. Cloud-based ad networks’ performance is dependent on the speed of the Internet at their disposal and this may pose a considerable challenge in the event that there is an Internet service disruption. This is one of the most important factors you must consider in your choice of ad networks.

 

Types of Ad Networks

Though ad networks aggregate ad space inventory from publishing sites, polish and re-sell them at markup prices, and though some ad networks operate very much like ad exchanges by participating in Real-Time Bidding (RTB) auction, nevertheless, not all ad networks have the same focus. The following are some level of specializations found among ad networks:

 

• Premium Ad Inventory Buyers and Sellers: Some ad networks focus on a very narrow range of ad inventory that is considered premium. They aggregate only premium ad inventories from premium sites and re-sell the same to premium advertisers.

 

• Vertical Ad Networks: These are ad networks that specialize in specific topics or industries. An ad network, for instance, may specialize in technology domain areas only, or male wellness or female wellness, or on education, and so on.

 

• Specialized Ad Networks: These are ad networks that may cater to a particular type of ad inventory source like ads for mobile devices only, or video device ad inventory or native ads only.

 

Main Takeaways

An ad network is a technology platform for buying and selling ad inventory in bulk. This is usually sold after the ad inventories have been segmented into groups with similar parameters like age, gender interest, education, and so on. Ad networks free both advertisers and publishers from the business of building buy-side platforms (DSPs) and sell-side platforms (SSPs). They act like ad brokers in a stock exchange. Ad networks have various formats that include but are not limited to display ads, native ads, video ads, in-image ads, in-text ads, content recommendation ads, and so on. Ad networks have many advantages that include but are not limited to a focus on particular types of ad inventory. Through ad networks, both publishers and advertisers have a wider range of options to buy and sell ad inventory, maximizing brand awareness, and revenue. Ad networks can sell ad inventory through real-time bidding (RTB) auction or as packaged deals to advertisers.