The Digital Advertising Ecosystem - Part 2
how to re marketing fans and welcome back before we talk about ad exchanges and real time bidding. Which is the current state of online advertising in its most popular form. I want to summarize the rise of ad networks and some of the problems the ad network model created because the understanding the ad network is a very important part of the evolution of digital advertising and it still remains a really important aspect of the online advertising ecosystem today. So let's jump into this presentation here real quick as we know, ad networks rose to power because of the tremendous oversupply there was a huge amount of supply. Publishers were continuously adding new websites. There were literally zillions of potential ad impressions and the human sales teams were simply not able to keep up with the demand. So you had with the supply. So you had all these advertisers and all these you know agencies and their sales teams trying to strike deals with all these different publishers. But yet pub...
lishers had literally billions of ad impressions that were remaining unsold. They were ending up as a remnant inventory. So the ad network was this sort of necessary intermediary which bought huge amounts of impressions in bulk contextual impressions. And remember when we say contextual impressions they generally would buy these impressions um for specific categories they would kind of package them up in these nice deals and they would and they would then broker them in bulk to the advertisers at a margin. So that was the intermediary, the brokerage of the ad network. So they rose to power because they create a more efficient system that helped publishers sell their inventory, the remnant inventory and they also helped buyers scale up their campaigns. They help advertisers reach more people to read a direct quote from Joanna O'connell and Michael Green Forrester analysts. Media fragmentation driven by a dramatic uptick in websites in the last decade made it increasingly difficult for buyers to manage the multitude of individual publisher buys necessary to meet marketers needs. So that's a direct summarization of what we just explained. And the ad networks provided a one stop shop for agencies and advertisers instead of having to kind of hack down multiple, um, different sales teams and multiple different publishers. So let's say you were you were Sony and you wanted to advertise their there literally thousands and not hundreds of thousands of websites that you potentially wanted to get your advertisements in front of instead of having to literally get on the phone and develop personal relationships with each one of these different publishers. The ad network allowed you to make a one stop by that would reach all those different publishers. They were able to syndicate their ads across all those different publishers in one shot. So that was the rise of the ad network. And just for some historic trivia, there were different types of, of ad networks. You had ad networks that just resold media from one type of publication. So for example, you might have had audio auto enthusiasts or travel enthusiasts or people who were into electronics. So you had ad networks that kind of specified they built their niche and they became experts in that niche and they sold inventory on a CPM model for that specific niche. You also had ad networks that were that were only selling premium publisher inventory. So they were ad networks that kind of were more expensive. They would buy premium inventory. And when we say premium, we mean just from better sights, higher quality sites, sites that received higher quality traffic Forbes the Wall Street Journal, um those, you know, Newyorktimes dot com. MSNBC. Yahoo all those different news outlets that were considered premium. The ad networks would buy them at a high price and they would sell them off at an even higher price. You had those luxury ad network, so to speak. And then you had the third type of ad network which brought a mix of impressions at really dirt cheap prices and they bundled huge amounts of impressions over to the advertisers. But the advertiser could not be selective on which sites their ads would appear and to what type of audience they're ad would appear. You just have to kind of let the Adwords ad network reach into their grab bag and and give you whatever they had in their inventory. Those add those ad networks were very similar to the dollar store. All three different types of ad networks claimed to have proprietary equations or algorithms that helped optimize the bidding and help optimize the delivery of these ads. But that was the basic structure of the ad networks. But the ad networks were not a perfect model. There were some major problems with ad networks that became so overbearing to the advertising industry, to both publishers and advertisers, which ultimately led to the ad exchange and the current real time bidding structure we use today. First of all, there was a major issue with inappropriate placements because you're buying, you're pre buying, you know, huge lots of contextual inventory. Advertisers didn't really know exactly which websites were showing their ads. So you might have a, a company that's trying to advertise their cruise ship and their ads might show up on a news article That's talking about the late, you know, the latest cruise ship disaster that killed 45 people, whatever it may be. So that would obviously not be good. And there was very little transparency. These ad networks because they had so much control because they had so much power because they were so necessary at the time. They weren't very transparent with which websites these ads showed up on some of the ad networks did some of the ad networks didn't, but there wasn't a lot of trust or transparency in that system in the relationship between publisher ad network and advertisers slash higher slash slash agency overall. So there was a real lack of transparency, um, which ultimately led to a lot of inappropriate placements where um advertisers were bidding and buying inventory that they really didn't want. So that was one of the major issues. There was also a lot of confusion, confusion in the pricing model between the ad networks, buyers and publishers. Ad networks were buying inventory and they were reselling it to the advertisers, but the advertisers didn't know what cost the ad networks were paying for the inventory that the advertisers were buying for a marked up price. They knew that there was some sort of profit margin. Of course, everyone's got to make a buck. There's no problem with that, but they didn't know how much and that confusion is a major point. It's a major factor because an advertiser who's spending tens of thousands, hundreds of thousands of dollars a month on buying this inventory from the ad networks in the back of their mind, there's this nagging feeling, hey, if I would have cut out this middleman, if I would have just, you know, picked up the phone and called these publishers directly, I could have gotten a much better price. If these ad networks are making such a profit, then obviously these publishers are willing to sell pretty low. So there was a lot of confusion about, about the pricing model. Um and that led to just a kind of souring and a distrust or lack of trust in that relationship similar on this line. There was this idea of pricing resentment otherwise known. You know, people in the industry call this channel conflict, they were saying, they were saying as we just described if a publisher is really willing to sell all this inventory, all their remnant inventory to ad networks for so cheap. To the point where the ad networks can make such a profit, reselling it to the advertisers and the agencies. I know this is getting confusing, but it's really just keep in mind it's that same relationship between advertiser and publisher the entire time. If publishers are willing to sell this inventory for so cheap to the ad networks and ad networks sometimes even resell it to other ad networks and that that ad networks sells it to another ad network. There were sometimes so many different stops. Then the advertisers started thinking then why why go through this? Why go through this whole ad network process. Anyway, let's just go to the publisher and tell them we're only going to buy inventory at this lower price. The advertisers were also still buying premium inventory. Remember they were still buying a certain amount of their budgets, a certain amount of advertiser, budgets were still going to premium direct buys. I was picking up the phone, we were developing relationship, we negotiated a deal. What happened with the ad networks was it uncovered? It showed that the publishers would really be willing to sell this inventory for cheaper. So this pricing resentment, this channel conflict led advertisers to kind of say, okay, I'll give up the scale, I'll give up a little bit of the reach that I could have. But I'm gonna knock on your door and I'm gonna demand a lower price for your premium premium inventory because you showed that you'd be willing to sell that inventory for cheaper on the ad networks. So that's what led to that pricing resentment. The last issue is duplicate buys because we had so many different ad networks and and one ad network was buying the inventory from the publisher and there was a lot of um confusion and a lot of duplication of selling the same inventory. So that same spot on the website and this is an oversimplification. It expands to millions and billions of impressions. But those same web spots and websites were being sold to different ad networks more than once. So it was a kind of below the table. I would call it fraudulent practice on the side of the publishers that were reselling the same ad spot. Two different ad networks. What that happened what that led to was ad networks, different ad networks approaching different advertisers and selling their block of of impressions which were supposed to be unique or exclusive. And this advertiser was gonna get a million impressions, but the same advertisers were buying the same impressions over and over and over again. And of course you can only have one ad in one spot at a time. What it turned into was big, big brands that had lots of money that were spending millions of dollars a year and tens of millions of dollars a year on advertising. They were just throwing money at it because they still rely tradition, They still relied on their traditional media outlets like print, like tv like radio. Um like, like newspapers, they, that was the core at the time of the networks, you know, for big companies, online ads was was still a pretty small, you know, piece of piece of the puzzle for for these agencies. So they said, okay, you know, put 50 grand into it this month, put put 250 grand into it this month. If you know, if they, if they bought the same inventory 10 times, if it showed up on bad sites. Um, if there wasn't so much transparency find. So the big brands were able to get in because there was just the marketing budget was there regardless, regardless regardless of its, you know, proven efficiency. But smaller companies, mom and Pops small to medium sized businesses were really getting killed um, in an ad network structure that wasn't clear to all the different players involved, how things working. So now let's jump in and talk about what the modern advertising looks like, how real time bidding, how real time bidding really shook things up in the industry and what this all has to do with remarketing, I hope this wasn't too much hope it wasn't too confusing. I hope you're you're starting to get a sense of, of kind of the evolution of the digital advertising ecosystem and we'll see you in a couple of seconds in the next video.