Players - Squarespace

Online
Advertising
Landscape
This report is an overview on online advertising and the various players in the online and
interactive media. It is a living document and will continue to be updated. It is based on an
earlier report published by the Media Management Center at Northwestern University.
Swathy Prithivi researched and compiled this report under the guidance of Professor Rich
Gordon.
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Table of Contents
Introduction to Online Advertising ..................................................................................................... 3
Overview of Ad Networks .................................................................................................................. 3
Growth of Online Advertising ................................................................................................................... 3
Ad Serving ................................................................................................................................................. 3
Targeting ................................................................................................................................................... 4
Publisher – Network Relationship............................................................................................................. 7
Advertiser – Network Relationship/Pricing Models.................................................................................. 7
Ad Inventory.............................................................................................................................................. 9
Online Ad Sizes & Formats ........................................................................................................................ 9
Metrics for Online Marketing & Advertising ........................................................................................... 13
Online Advertising Ecosystem & Players ........................................................................................... 15
Ad Networks............................................................................................................................................ 15
Ad Servers ............................................................................................................................................... 20
Creative Optimization ............................................................................................................................. 21
Brand Protection/Ad Verification Platforms ........................................................................................... 21
Ad Exchanges .......................................................................................................................................... 22
Demand Side Platforms (DSPs) ............................................................................................................... 23
Data Exchanges/Aggregators .................................................................................................................. 24
Data Suppliers ......................................................................................................................................... 25
Ad Operations/Infrastructure ................................................................................................................. 25
Yield Optimization/Supply Side Platforms (SSPs) ................................................................................... 26
Data Optimization/Data Management Platform (DMP) ......................................................................... 27
Emerging Trends & New Opportunities ............................................................................................. 27
Regulatory Framework ..................................................................................................................... 28
Appendix A: Aggregated List of Ad Networks .................................................................................... 30
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Introduction to Online Advertising
Online advertising has truly grown up with the widespread adoption and use of the Internet. The broad
trend sweeping the industry is the use of technology to drive the online ad marketplace and as a result
those who control the best technology and use it most effectively will prosper in the long run.
Overview of Ad Networks
Online ad networks aggregate advertising inventory from multiple publishers powered by technology to
help make advertising measurable and personalized while still having a broad reach. In recent years
however, the ad network ecosystem has grown significantly to include a variety of tools and
technologies like ad exchanges and demand side platforms. While there have been predictions that
these would ultimately blow up the ad network model by removing artificial inefficiencies, ad networks
are still evolving in interesting ways.1
Growth of Online Advertising
Online advertising spending has shown substantial growth in the past few years and looks to provide
double digit growth into 2013, according to eMarketer.
Figure 1: U.S. Online Advertising Spending & Growth (2008 – 2013)
Ad Serving
The serving of online ads is an incredibly sophisticated communication loop between multiple web and
ad servers which are operated by multiple publishers, ad networks, other online intermediaries and
advertisers. This technology can serve millions of ads in seconds that are customized almost at an
individual level by publishers or advertisers. The process is illustrated in the figure below.
1
Karpinski, Rich. “Ad Networks & Exchanges 101.” AdAge.com. April 19, 2010.
http://adage.com/adnetworkexchangeguide10/article?article_id=143310.
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Figure 2: How Ad Serving Technology Works
Source: NU Media Management Center – Online Ad Networks Report.
Targeting
Online ad networks are particularly powerful to advertisers due to the way technology is able to process
massive amount of data about consumers and target specific customers at an almost granular individual
basis. Ad networks target consumers in multiple ways – demographic or geographic, contextual,
behavioral, channel/site and re-targeting.
Figure 3: Types of Targeting Used by Advertisers (2009 – 2010)
Source: Collective Media 2010 Display Advertising Study
Demographic & Geographic Targeting
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Demographic targeting is based on user characteristics like zip code, age, gender and income (ZAGI).
Geographic targeting is based on residence or current location which can be determined through a
variety of means – user’s IP address, information provided by the user when filling out forms, geography
of site or publication or interpreting terms used in search activity.
Contextual Targeting
Contextual targeting displays advertisements based on the content displayed to the user and this is
done by automated systems that serve up the ads. The ad networks that target and display ads
contextually include Google AdSense, Yahoo! Publisher Network, Microsoft adCenter and AOL
Sponsored Listings. A type of targeting is semantic targeting
Behavioral Targeting
Behavioral targeting uses the past online behavior of a user on a particular site or across a network to
determine which ads or the type of ads that get served. The range of behaviors may include anything
from searching for or consuming specific topics or content, clicking on certain links, downloading files,
filling out forms or even viewing certain ads. As a study by Collective Media shows, behavioral targeting
remains one of the most popular targeting mechanisms in the online space.2 The image below provides
an overview of the online behavioral targeting process.
Figure 4: The Online Tracking Ecosystem
Source: WSJ.com
Behavioral targeting uses technology to track consumer behavior online using tiny files and programs “cookies”
which record the websites that people visit, as well as more powerful "Flash cookies" and bits of software code
3
called "beacons." But newer tools are emerging that can monitor what people are doing in real time and instantly
assess location, income, shopping interests and even medical conditions. One technology that is making a
comeback is called “deep packet inspection” that can read and analyze "packets" of data traveling across the
2
“2010 Display Advertising Study.” Collective Media. http://collective.com/insight/2010-display-advertising-study.
Angwin, Julia. “The Web's New Gold Mine: Your Secrets.” July 30, 2010.
http://online.wsj.com/article/SB10001424052748703940904575395073512989404.html.
3
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4
Internet which is then used to monitor all online activity and not just Web browsing. The figure below illustrate
how it can be used for profiling web users.
Figure 5: Using Data Packets to Profile Behavior
Source: WSJ.com
While behavioral targeting methods are popular with advertisers they are increasingly being viewed as intrusive by
consumers and federal agencies who could potentially enforce regulate the online advertising medium.
Channel/Site Targeting
Channel or site targeting is when advertisers choose specific websites from a portfolio of content
channels, which include verticals like automotive, women’s interests and health, technology, business
and consumer electronics. Ads can also have advanced targeting options within the chosen channel like
geography, time of day, frequency, browser type among others.
Retargeting
Retargeting, also known as re-messaging or re-marketing, focuses on users who have previously shown
sales potential, such as someone who clicked an ad previously or somehow viewed content from an
advertiser. It works by placing a cookie with site visitors, tracking their key interactions particularly
things such as uncompleted purchases, then serving ads to those visitors related to the same product, or
else cross-marketing to them elsewhere on the Web.5 From a technical standpoint, retargeting requires
website owners or the client site to place ad network tracking pixels and if the objective involves nonconversions, a pixel must be placed on the order confirmation page as well.6 Below is an example of how
the process would work from AdRoll, a retargeting ad network.
4
Sonne, Paul & Stecklow, Steve. “Shunned Profiling Technology on the Verge of Comeback.” November 24, 2010.
http://online.wsj.com/article/SB10001424052748704243904575630751094784516.html?KEYWORDS=deep+packe
t+inspection.
5
Thomases, Hollis. “Retargeting Gains Traction, Part 1.” April 25, 2006.
http://www.clickz.com/clickz/column/1704925/retargeting-gains-traction-part.
6
Thomases, Hollis. “Retargeting Gains Traction, Part 1.” April 25, 2006.
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Figure 6: AdRoll’s Retargeting Process
Source: AdRoll.com
Publisher – Network Relationship:
The economic relationship models that networks have with publishers are:7

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Revenue share: The publisher sets aside a certain amount of inventory for the network which pays
the publisher a share of the revenue generated from selling the space to advertisers.
Pre-buy/Dynamic: The network buys inventory from publishers on a go-forward basis guaranteeing
inventory fill at a determined/negotiated rate regardless of monetization potential.
Arbitrage: The network purchases ad inventory from publishers on a CPM basis and sells that space
to advertisers on a CPC, CPA or CPL basis.
Simple arbitrage: Network buys inventory from publishers and resells that a higher rate to
advertisers often using segmentation and behavioral targeting to generate higher margin.
Advertiser – Network Relationship/Pricing Models
The general pricing models for online ads fall into three categories – CPM, performance & hybrid. The
performance pricing is better in measuring ad effectiveness than the CPM or hybrid models and thus is
gaining in popularity as evinced by the chart below.
7
Anderson, Scott and Silver, Mike. “Online Ad Networks: Disruption – and Opportunity – for Media Businesses.”
NU Media Management Center. 2009. http://www.mediamanagementcenter.org/research/adnetworks.asp;
Coolbrith, Robert. “Online Advertising 2.0: The Opportunity in Non-Premium Display.” ThinkEquity, LLC. September
15, 2007.
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Figure 7: Online Ad Revenue Generated by Pricing Model
Source: IAB Internet Advertising Revenue Report
CPM Models:

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CPM: Cost per thousand ad impressions (Roman numeral M for 1,000). This is the standard pricing
method for publishers.
eCPM: Effective CPM is a measure used by publishers to translate non-CPM models into a
comparative CPM figure which could also be calculated after deducting the cost of sales,
commissions, etc.
Performance Based Models:



CPC/PPC: Cost per click or Pay per click where revenue is generated for the publisher only when a
user clicks on the ad. This is preferred by advertisers and can be a flat rate or bid based amount.
CPA/PPA: Cost per action or Pay per action where revenue is paid to the publisher only when a user
completes a pre-defined action such as a download, registration, form entry or newsletter signup.
- CPL/CPI: Cost per lead or Cost per inquiry which is the fees advertisers pay to Internet
advertising companies that refer qualified purchase inquiries or provide consumer information
where the consumers opt-in.
- eCPA: Effective CPA used by publishers to translate non-CPA models into a comparative figure.
CPE: Cost per engagement where the advertiser pays only when a user interacts with the ad in a predefined manner.
Hybrid Models:

Hybrid online pricing models include any combination of CPM and a performance based measure,
most commonly CPC or CPA.
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Other models that aren’t as commonly used include CPS (Cost per sale)/PPS (Pay per sale), CPT (Cost per
time), VPA (Value per action), revenue share or flat sponsorship.
Ad Inventory
Any publisher’s average ad inventory value is only determined what is sold. Broadly, the inventory can
be of three types:8
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
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Premium: The premium inventory is sold by premium networks run by publishers themselves or site
representation firms function as an outsourced sales force for smaller publishers. This is usually
about two to eight times the value of other inventory which makes it the most important to sell
completely.
Secondary/Remnant: The secondary or remnant inventory is inventory that has been sold with no
special value ad and this is generally passed on to ad networks in an effort to help publishers
monetize their content.
Unsold: Inventory that could be sold at all
The special tools and technology in the marketplace help the publisher to add more value to their
remnant and unsold inventory by packaging them in ways that advertisers find most appealing.
Inventory can be filled through revenue share, pre-buy or dynamic which involves upfront negotiation or
100% fill guarantee at very low eCPMs but also ensures no-non-paying-defaults.9
Online Ad Sizes & Formats
Online ads are of different formats and standardized ad unit sizes. The standardized ad units defined by
the Interactive Advertising Bureau (IAB) & measured in IMU (Interactive Marketing Unit/pixels)
include:10
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
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Rectangles: Medium Rectangle (300 x 250), Vertical Rectangle (240 x 400), Large Rectangle (336 x
280), Rectangle (180 x 150), 3:1 Rectangle (300x100)
Pop-Ups: Square Pop-Up (250 x 250), Pop-Under (720x300)
Banners: Full Banner (468 x 60), Half Banner (234 x 60), Micro Bar (88 x 31), Vertical Banner (120 x
240), Leaderboard (728 x 90)
Buttons: Button 1 (120 x 90), Button 2 (120 x 60), Square Button (125 x 125)
Skyscrapers: Wide Skyscraper (160 x 600), Skyscraper (120 x 600), Half Page Ad (300 x 600)
These standards are only voluntary guidelines intended to make online ad buys easier for marketers,
agencies and media companies and so ad sizes outside of the standard can also be executed.
8
Thies, Aaron DelloIacono. “Being a Profitable Publisher, Step 4.” June 21, 2004.
http://www.imediaconnection.com/content/3675.asp.
9
Coolbrith, Robert. “Online Advertising 2.0: The Opportunity in Non-Premium Display.” ThinkEquity, LLC.
September 15, 2007.
10
Interactive Advertising Bureau. ‘Ad Unit Guidelines.’ November 2009.
http://www.iab.net/iab_products_and_industry_services/1421/1443/1452.
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Some of the most common online ad types are listed below:

Floating ad: An ad which moves across the user's screen or floats above the content.

Expanding ad: A rich media ad that can expand beyond the original size of the ad unit following a
user-initiated action. The ad appears as a layer over the page and content will not be modified or
shifted in any way.

Polite ad: A method of downloading a large ad in smaller pieces to minimize the disruption of
content being viewed
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
Wallpaper ad: An ad which changes the background of the page that the user is viewing.

Trick banner: Banner ad simulating an error message or alert that looks like a dialog box with
buttons.

Pop-up: A new window which opens in front of the current one, displaying an advertisement, or
entire webpage.
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Pop-under: This is similar to the pop-up ad but the window is loaded behind the current window so
that the user does not see it until they close their active windows.
Video ad: This ad type displays a video clip.
Map ad: text or graphics linked from, and appearing in or over, a location on an electronic map such
as on Google Maps.

Mobile ad: A text or multi-media ad that is viewed on a mobile device.

Superstitial ad: An animated ad on Web page that uses video, 3D content or Flash.
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Interstitial/Transitional ad: a full-page ad that appears before a user reaches their original
destination.
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Metrics for Online Marketing & Advertising:
Given that online marketing and advertising continues to become heavily data-driven, measuring and
tracking online metrics become of paramount importance. While the Internet does offer an abundance
of possible metrics, that also creates complexity and confusion. Some key metrics that online advertisers
and publishers need to know include:11
Impressions: A user impression is generated each an advertisement is viewed and they are also called
exposures of opportunities-to-see (OTS) in traditional media. These do not account for the quality of
viewings and thus have limited potential as a metric.
Impressions = Reach (Number of people) * Frequency (Number of times viewed)
Hits: A count of the number of files served to website visitors. However, this is not accurate to assess the
size of the online audience since hits considers not only the pages visited but also the number of files on
each page. Since each webpage often contains multiple files, this is a misleading metric.
Hits = Page Views * Files on the Webpage
Page Views: The number of times a page on a website is accessed.
Page Views = Hits / Files on the Webpage
Click-through Rate (CTR): The percentage of impressions that actually click on a link or advertisement
causing a redirection to another webpage.
Click-through Rate = Click-throughs / Impressions
Number of Click-throughs = Click-through Rate * Impressions
Cost per Impression (CPI): The cost to offer website visitors an opportunity to see an advertisement
Cost per Impression = Advertising Cost/ Number of Impressions
Cost per Click: The amount spent to get an advertisement or link clicked.
Cost per Click = Advertising Cost / Number of Clicks
Cost per Order: The cost to acquire or generate an order. This is also known as cost per purchase.
Cost per Order = Advertising Cost / Orders
Visits/Sessions: The number of times users request a page on the firm’s server for the first time
Unique Visitors: The number of distinct individuals requesting pages from the particular website’s server
during a fixed time period, usually 30 days.
The online advertising medium changes rapidly and so will these metrics to measure success. Also as the
usage of the medium grows from a short-term direct response tool into a branding mechanism, there
will be a greater trend to move beyond the click-throughs and CTRs. Gian Fulgoni, CEO of comScore, the
11
Farris, Paul W., Bendle, Neil T., Pfeifer, Phillip E., and Reibstein, David J. “Marketing Metrics: The Definitive Guide
to Measuring Marketing Performance.” Wharton School Publishing. February 2009.
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online measurement firm, says – “Let’s just accept that the click is not telling the whole *branding+ story.
We don’t hold traditional media to that same level of accountability. Why should the Internet be
measured by this immediate response metric called the ‘click’?”12 Microsoft’s Atlas Institute is pushing a
Cost per Revenue (CPR) metric that measures how much it costs advertisers to generate a dollar of
revenue from any particular site or channel which they believe allows advertise to consider both
number of transactions and dollar size of those transactions.13
The plethora of metrics in this industry to assess the success of online advertising is evident in the
surveys collected (see figures below) by Forbes and Penton Research on metrics used to measure
success and effectiveness.
Figure 8: Most Important Metrics for Online Marketing Campaign Measurement
Figure 9: Metrics Used to Measure Interactive Campaign Effectiveness (2007 – 2008)
12
Ramsey, Geoff. “Online Brand Measurement: Connecting the Dots – Special Report.” eMarketer. 2009.
http://www.emarketer.com/docs/eMarketer_Online_Brand_Measurement_Report.pdf.
13
“Evaluating the Impact of the New Cost per Revenue Metric.” Atlas Institute.
http://www.atlassolutions.com/uploadedFiles/Atlas/Atlas_Institute/Published_Content/Ev%20of%20online%20ad
%20metrics.pdf.
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Online Advertising Ecosystem & Players
The online advertising landscape has expanded from publishers, advertisers and the ad networks into a
flourishing ecosystem of companies that provide a host of supplementary services from data and market
neutral services to working with the supply or demand side exclusively. The figure below from
AdExchanger, shows the various categories between advertisers and publishers in online advertising.
Figure 10: Online Advertising Ecosystem
Source: AdExchanger.com & GCA Savvian
Ad Networks:
Ad networks as previously mentioned exist to help advertisers achieve targeted reach and scale in the
online display ad marketplace. They do this by aggregating inventory and most importantly audiences
from multiple publishers that help marketers buy ad impressions faster, more efficiently and cheaper.14
There are different types of ad networks in the display space, namely horizontal or “remnant,” targeted,
performance and vertical specific. The ad network model has also shaped mobile, video and increasingly
14
Karpinski, Rich. “Ad Networks & Exchanges 101.” AdAge.com. April 19, 2010.
http://adage.com/adnetworkexchangeguide10/article?article_id=143310.
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social advertising space, each with unique characteristics. Across different categories, advertisers turn to
ad networks for three main reasons: reach, targeting and optimization.
However there can be significant downsides. “One of the unintended but still very real outcomes of
these networks is to drive distance between the advertiser and their funding from the actual creator of
the content that motivated readers to come to the internet in the first place,” says Jim Spanfeller, the
CEO of Forbes.com.15
Figure 11: Largest Ad Networks (As of June 2010)
Horizontal/Remnant Networks
Horizontal or “remnant” networks buy mostly non-premium or unsold ad inventory from publishers and
sell them to marketers with mostly a direct response advertising perspective at low rates and broad
reach. Most of these networks operate as partially or completely "blind networks” meaning that they do
not tell their advertisers up front where their ads will run. The horizontal ad networks mostly have non-
15
Ad Network & Exchange Guide. “Top Sellers Have A Say.” Advertising Age. April 14, 2008.
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exclusive deals with publishers and control only the less desirable inventory since the websites tend to
keep the best stuff for premium networks or their own sales reps.16
Companies: Yahoo!, Google, Casale Media, AOL Advertising, Burst Media, 24-7 Networks, Tribal Fusion,
CPX Interactive, Undertone Networks, Interclick, Microsoft Media Network
Targeted Networks
Targeted ad networks allow advertisers to place online ads specifically targeted to specific online user
segments. These networks can use behavioral, demographic, contextual or channel-specific targeting
methods or even retargeting. Some of the newer targeted networks include social targeting
(Media6Degrees) and dynamic (BuzzLogic).
Companies: Media6Degrees, 33Across, Turn, AudienceScience, BuzzLogic, Pulse360, Lucid Media,
Specific Media, Lotame, Collective Media
Vertical/Niche Networks
Vertical or niche ad networks consist entirely of sites within a specific industry category like automotive,
healthcare or technology or even weddings and this exclusive focus can create significant scale of a
highly desirable audience across many high quality publishers.17 Barry Parr from Forrester Research
emphasized the importance of media companies building vertical ad networks as it would expand their
audience and meet the needs of their advertisers.18 Premium publishers like ESPN and Martha Stewart
have launched ad networks for their targeted content portfolio since it translates into higher
conversions and thus higher price points for their ad inventory. “We find that the niche networks allow
us better opportunities to reach specific audiences we define more with psychographics than
demographics," says Amy Auerbach, director of an Omnicon Group media buying and planning firm.19
Companies: Glam Media, Net Shelter, IDG Tech, Sportgenic, Jumpstart, Gorilla Nation, Martha’s Circle
(Martha Stewart), ESPN’s ad network
16
Nilforoush, Peyman. “Ad Networks: Get Ready for the Boom.” iMediaConnection.com. October 25, 2006.
http://www.imediaconnection.com/content/11835.asp.
17
Lowe, Mitch. “Vertical Ad Networks: Do They Measure Up?” iMediaConnection.com. April 17 2006.
http://www.imediaconnection.com/content/9065.asp.
18
Parr, Barry. “Ad Networks for Media Properties.” Forrester Research. January 2009.
19
Nelson, Matthew. “As Top Ad Networks Bulk Up, Can Niche Players Compete?” October 4, 2007.
http://www.clickz.com/clickz/news/1702705/as-top-ad-networks-bulk-up-can-niche-players-compete.
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Video/Rich Media Networks
The online video advertising is showing tremendous promise of growth. Video ad spending in the U.S.
alone will climb at a 40%-plus growth rate for the next few years.20
Figure 12: U.S. Online Video Advertising Spending (2001 – 2011)
Online video ads are of three types – in-stream video, in-banner video and in-text video.21 In-stream
video ads are either linear or non-linear. Linear video ads are displayed in sequence before (pre-roll),
during, or after the video content being consumed by the users. Linear video ads can be with or without
companion ads or they can be interactive ads where the user interacts with an ad message within a
video window. Non-linear ad formats run in parallel to the main content experience. In-banner video is
an actual banner ad that is viewed or played similar to an embedded YouTube video which requires a
push to play.22 In-text video advertising provides a user-initiated video format that matches ads to
relevant highlighted words and phrases within the content.23 The majority of video ad inventory is of
these three types but there are other available methods of triggering a video ad experience, mainly
brand integration with sponsorships and branded content.24
20
Ramsey, Geoff. “Online Brand Measurement: Connecting the Dots – Special Report.” eMarketer. 2009.
http://www.emarketer.com/docs/eMarketer_Online_Brand_Measurement_Report.pdf.
21
“Digital Video In-Stream Ad Metrics Definitions.” Interactive Advertising Bureau. June 2008.
http://www.iab.net/media/file/DV_In-Stream_Metrics_Definitions.pdf.
22
“Online Video Advertising formats – in-banner vs. pre roll.” Zpop Media. July 19, 2010.
http://blog.zpopmedia.com/2010/06/online-video-advertising-formats-in-banner-vs-pre-roll/.
23
Garcia, Denise. “Digital Video Advertising Based On User Control Paves Way For Growth.” March 17, 2008.
http://www.mediapost.com/publications/?fa=Articles.showArticle&art_aid=78660.
24
"A Digital Video Advertising Overview". Internet Advertising Bureau. January 1, 2008.
http://www.masternewmedia.org/online-video-advertising-business-market-guide/.
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Figure 13: Distinguishing Between In-Stream Video, In-Banner Video & In-Text Video
Source: Interactive Advertising Bureau.
Companies: YuMe, Broadband Enterprises, BrightRoll, VideoEgg, Sprout, Tremor Media, Adconion
Mobile Networks
Experts predict that mobile will surpass the PC web as a primary consumer channel quicker than
previously expected.25 According to eMarketer, the mobile advertising spending in the US alone is
expected to reach $1.1 billion by 2013 and also double in size between 2011 and 2014.26
Figure 14: U.S. Mobile Ad Spending by Format (2009 – 2014)
25
Karpinski, Rich. “Why Mobile Ad Networks Are on Cusp of Change.” September 13, 2010.
http://adage.com/digital/article?article_id=145826.
26
Elkin, Noah. “7 game-changing mobile trends for 2011.” December 6, 2010.
http://www.imediaconnection.com/content/28141.asp.
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The current state of mobile networks is similar to the early days of online ad networks. There is
fragmentation which will continue due to the proliferation of handsets/device types and the platforms
that function on them.27 However the mobile network space is still relatively consolidated with a smaller
handful of players. Mirroring the evolution of the online space, mobile will move from being used
primarily for direct-response campaigns to one that will increasingly be used for branding purposes.
Companies: Google’s AdMob/AdSense, Apple’s iAd, Millennial Media MBrand, JumpTap, InMobi,
Ringleader Digital, Yahoo Advertisin, Mojiva, AOL Advertising,
Social Networks
Social networking sites like Facebook, Twitter and LinkedIn, are growing rapidly in popularity and hence
consumer eyeballs and now account for more than 20 percent of all U.S. online display ad impressions,
according to comScore.28 However these pervasive ads have only drawn an average CPM of $0.56
compared to the $2.43 average for the internet at large. But closer analysis shows that exclusive social
networking sites, have a higher CPM – Facebook in particular has a CPM of $2.99 for every thousand
views and delivers nearly 16.8% of total online ad impressions in the U.S., according to ComScore.29
Most of the social networking sites have their own ad network. Facebook even has its own ad format,
which is mostly text and can be accessed with a self-serve tool which provides almost granular targeting
based on demographics and user-expressed interests.30 LinkedIn, the professional network, launched its
own network with Collective Media with premium pricing ($12 - $20 CPMs on text ads and $30 - $77
CPMs on display ads) for a highly valuable audience segment.31 Overall, the popularity of social
networking sites cannot be underestimated and thus social ad networks will emerge as an important
player in the online advertising market.
Companies: Facebook, LinkedIn, MySpace, Twitter
Ad Servers:
Ad servers are web servers that store online advertisements and deploy them to innumerous websites
across the internet. The servers, both agency-side and publisher-side act as a conduit to every other
player in the online ad space. Given the fragmentation and clutter in the landscape, these platforms are
27
Rao, Leena. “The Fragmented Future of Mobile Ad Networks.” TechCrunch.com. August 28, 2010.
http://techcrunch.com/2010/08/28/future-mobile-ad-networks/.
28
“Social Networking Sites Account for More than 20 Percent of All U.S. Online Display Ad Impressions According
to comScore Ad Metrix.” comScore.com. September 1, 2009.
http://www.comscore.com/Press_Events/Press_Releases/2009/9/Social_Networking_Sites_Account_for_More_th
an_20_Percent_of_All_U.S._Online_Display_Ad_Impressions_According_to_comScore_Ad_Metrix.
29
Lee, Edmund. “Social networks sink online-ad pricing.” Advertising Age. July 12, 2010.
30
Facebook Ads Site. http://www.facebook.com/advertising/.
31
Schonfeld, Erik. “LinkedIn To Launch Its Own Ad Network.” TechCrunch.com. September 14, 2008.
http://techcrunch.com/2008/09/14/linkedin-to-launch-its-own-ad-network/.
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in the best position to revolutionize the industry through campaign management consolidation which
would provide efficiency of ad buying and selling as well as more standardization in pricing.32
Companies: DoubleClick/Google, AOL, MSN, Yahoo, ValueClick, Kontera, AudienceScience, FMPub,
Kanoodle
Creative Optimization:
Creative optimization tools help advertisers and their advertising agencies maximize the impact of every
online ad impression by dynamically analyzing and then optimizing the performance of the creative
elements that make up a display advertisement. According to Karl Siebrecht of aQuantive, a digital
marketing technology provider, the critical elements of creative optimization to ensure accuracy and
effectiveness are all data related – data validity, data specificity and data inclusivity.33
Companies: Teracent, Tumri, Choice Stream, dotomi, Ad Ready, ADISN, Adoif, Struq
Brand Protection/Ad Verification Systems:
With increasing percentage of the advertising budget shifting online, the popularity of ad verification
systems is growing. Advertisers are increasingly concerned about the safety of their brands online and
are turning to technology to allay the risk factors and improve the quality of their online traffic.34 The
online world is a different ball game for traditional marketers and their agencies and hence tools that
help them audit and/or validate the audience and online impressions are garnering popularity.
According to a survey by Radar Research, companies expect to spend more than two percent of their
online budget – amounting to more than $200 million – on verification systems to protect the
contextual feel of their campaigns.35 As the importance of verification systems increases, the trend is for
verification to become partially the responsibility of the ad sellers, especially high end publishers.
The latest trend is effective measurement of display ads with tools that filter audience impressions and
advertising serving information in real time to keep marketers abreast of how campaigns are faring.36
Companies: AdSafe Media, Adometry, DoubleVerify, The Media Trust, mPire (Ad XPOSE), PerformLine,
Proximic, RealVu, SiteScreen, Click Forensics
32
McNab, Ross. “A look at the ad servers of the future.” iMediaConnection.com. December 15, 2010.
https://www.imediaconnection.com/content/28193.asp.
33
Siebrecht, Karl. “Creative Optimization: It's in the Data.” iMediaConnection.com. Novermber 28, 2005.
http://www.imediaconnection.com/content/7365.asp.
34
Dreller, Josh. “Building Trust with Ad Verification Systems.” iMedia Connection. August 16, 2010.
http://www.imediaconnection.com/content/27395.asp.
35
Shields, Mike. “Survey: Ad Verification on the Rise.” AdWeek. December 9, 2010.
http://www.adweek.com/aw/content_display/news/digital/e3i1f4f9f8a25eab371326e4b6550c2bd07.
36
Knight, Kristina. “Click Forensics beta-launches display ad verification platform.” February 26, 2010.
http://www.bizreport.com/2010/02/click_forensics_beta-launches_display_ad_verification_platfo.html#.
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Ad Exchanges:
Ad exchanges are in essence inventory-trading platforms where buyers can bid on available ad
inventory. Formally they are defined as auction based central marketplaces for ad inventory by IAB and
Ad Age. Exchanges bring higher levels of efficiency to the online ad market emphasizing "liquidity" – the
moment there are enough ad impressions and buyers (advertisers) and sellers (publishers) to ensure
that the marketplace runs on a pure supply and demand basis.37 Online ad exchanges sell impressions in
real time and the following figure explains how the mode works.
Figure 15: Online Ad Exchange Model
Source: ThinkEquity Partners LLC Online Advertising 2.0
The first ad exchange was Right Media which started in 2005 followed by other exchanges like Ad ECN
and ADSDAQ. Before the emergence of exchanges, ad networks were the main channel for selling ad
inventory for smaller publishers and remnant inventory for premium publishers. But the problem with
networks was that supply of available inventory far outpaced demand which in turn drove down CPM
rates and most importantly, devalued other display ad inventory. This led to a vicious cycle where
premium inventory became harder to sell, went unsold, became available on ad networks and thus
further lowered prices on premium inventory.38 Ad exchanges attempted to solve this problem by
establishing auction-based pricing for available display ad impressions. Like economist George Ackerlof
pointed out, these types of markets encourage publishers to be more transparent with their inventory
to even out the information asymmetry as it ensures greater insight into the pricing of their inventory.39
Also since ad networks and their high margins are not involved, all parties involved get a better deal
than they would have going through a network. Hence the main benefits of ad exchanges are inventory
transparency for advertisers, pricing transparency for publishers and more financial gains for all
involved.
37
Karpinski, Rich. “Ad Networks & Exchanges 101.” AdAge.com. April 19, 2010.
http://adage.com/adnetworkexchangeguide10/article?article_id=143310.
38
DeSilva + Phillips, LLC. “Getting Real: Ad Exchanges, RTB & the Future of Online Advertising.”
39
Ackerlof, George. “The Market for Lemons: Quality Uncertainty and the Market Mechanism.”
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Ad exchanges make money by deducting a flat fee from the both the successful bidder and the seller of
the inventory which is dependent on the number of successful bids it processes.40 The flat fee set by the
exchange can also be varied along with fees earned for value-added services like data and analytics. Ad
exchanges have sprung in growing mediums like mobile and video and they follow the same model.
Real Time Bidding (RTB) is changing how ad exchanges function and is most likely offered by all ad
exchanges. In 2009, only one percent of all online display ads were bought on an RTB basis but that
number is estimated to account for three to five percent in 2010.41 According to DeSilva + Phillips, a
media investment bank, RTB is also strategically poised to bring together display-ad marketing and
search marketing.42 Some key ways that RTB is affecting the online publishing model include:43
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Revenue: While there has little, if any, data on the revenue lift associated with RTB it must be noted
that the technology is new and only few publishers have the infrastructure to facilitate those bids.
However, studies done by PubMatic show that impressions bought via RTB are monetized at CPM
rates 60 percent higher than impressions not monetized via RTB. This definitely provides better
value for inventory but needs volume and scale to sustain effectiveness.
Brand control: The real-time nature of RTB poses challenges to maintaining brand quality control
and thus work processes need to mirror the need for instantaneous communication.
User experience: The ad served provides a much better experience for the user since RTB uses
contextual and other audience targeting methods in real time.
Streamlined ad operations: Discrepancies in online ads, with ads being priced differently or served in
different places than agreed on, are a big issue with online operations teams and RTB cuts time
spent on sorting through these issues as it allows publishers to know exactly where ads come from
and at what price. This helps streamline the entire ad operations process.
Increase in page load speed: With ad networks, there is a daisy-chain reaction involved where
publishers rely on a host of partners to show an ad which slows the page load. RTB allows the
demand side only to make a bid if they have an ad to show thus increasing speed of page loads.
Companies: ContextWeb/ADSDAQ, Microsoft Ad ECN, Yahoo Right Media, Google DoubleClick Adex,
OpenX Open Market, AdBrite, Ad Jug, Mobclix (mobile ad exchange), BrightRoll (video ad exchange).
Demand Side Platforms (DSP):
DSPs are tools that allow the management of multiple ad exchange accounts in centralized management
and reporting hub for handling any data to help with the real-time bidding valuation which is crucial to
successful ad exchange management.44 In essence, DSPs are ad exchanges from the marketer’s
perspective, the demand side. According to DeSilva + Phillips, the critical capability for DSPs is their
ability to aggregate biddable ad inventory from multiple ad exchanges into a single convenient interface.
DSPs can over different solutions – services like connectivity to a range of biddable display inventory or
40
DeSilva + Phillips, LLC. “Getting Real: Ad Exchanges, RTB & the Future of Online Advertising.”
Goel, Rajeev. “Building Real-Time Bidding.” Brandweek. January 11, 2010.
42
DeSilva + Phillips, LLC. “Getting Real: Ad Exchanges, RTB & the Future of Online Advertising.”
43
Goel, Rajeev. “Building Real-Time Bidding.” Brandweek. January 11, 2010.
44
http://www.imediaconnection.com/content/26711.asp
41
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technology like analytics to optimize campaigns and decision algorithms that use machine learning
techniques to oversee the bidding process.
Similar to the evolution of publishers developing their own ad networks, agencies and their buying
groups could benefit from owning their own DSP to avoid dependence on external providers for a critical
component of their ad trading platform. The in-house or acquired DSPs are integrated into the agency
media buying platforms. Thus the trend points to increased acquisition activity in the future or attempts
to build in-house DSPs which are integrated into their media buying platforms. Michael Brunick, VPmedia technology at Interpublic Group of Cos.' Mediabrands who owns its own DSP, Cadreon, has more
than 10 Interpublic clients currently using Cadreon and says that the number of campaigns it has run "is
well into the triple-digits."45 Darren Herman at Media Kitchen's Varick Media Management says that
“there are significant dollars flowing in to this newly created [DSP] unit."46 “DSPs are the future of how
standardized media will be bought and sold and they bring tremendous creative opportunities that allow
for real-time media buying, which lets us serve creative on an individualized basis,” Herman says.47
Companies:
DSPs – InviteMedia, Turn, MediaMath, DataXu, Appnexus, [x+1], Lucid Media, Triggit, XA.Net, Trade
Desk, Efficient Frontier
Media Buying Platforms – Omnicom Media Group Trading Desk, b3, VivaKi, Atom, Cadreon, Adnetik
Data Exchanges/Aggregators:
Data exchanges or aggregators collect consumer data from a variety of sources and collate them into
custom audience segments that advertisers can use to gain consumer insights and thus effectively plan
their online advertising spend. The source of the data could be publicly available online and offline data
like Rapleaf uses or it could be various premium data suppliers which BlueKai uses. The figure below
shows a sample of the data groups created by eXelate.
45
Bush, Michael. “Marketers Still Trying to Break Free From Inventory-Based Buys.” Advertising Age. April, 2010.
Bush, Michael. “Marketers Still Trying to Break Free From Inventory-Based Buys.” Advertising Age. April, 2010.
47
Bush, Michael. “Marketers Still Trying to Break Free From Inventory-Based Buys.” Advertising Age. April, 2010.
46
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Figure 16: eXelate Data Segments
Source: eXelate.com
Companies: eXelate, BlueKai, RapLeaf, Almond Net, Demedex, Magnetic
Data Suppliers:
Data suppliers collect consumer data from multiple sources like telecommunications providers,
household-level census information, retail sales, health records, educational institutions and travel
details among others. They usually sell this information to data exchanges or ad networks or in some
cases, advertisers themselves. Data supply companies are now expanding into value-add services like
data management tools/platform and analytics.
Companies: Experian, Acxiom, Datalogix, TARGUSinfo, IRI, InfoGroup, eBay, Expedia
Advertising Operations:
Advertising operations companies provide technology and services platforms to provide global media
buying and advertising agencies with leverage and efficiency in the online ad marketplace. These may
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include a host of tools like enterprise-wide media buying technology, order management, analytics
suite, online trafficking and billing solution among others.
Companies: Traffiq, MediaBank, Appnexus, Centro
Yield Optimization/Supply Side Platforms (SSPs):
SSPs or yield optimizers help publishers optimize their online advertising efforts through inventory
management, pricing, yield management and sales channel management. They essentially help
publishers plug into ad exchanges to make their inventory available and look to get the highest eCPM for
their inventory instead of selling it at low-cost remnant prices.
Yield optimizers today mostly focus on optimizing remnant inventory but as SSPs will evolve and find
themselves as some of the largest sources of publisher display-ad inventory they will begin offering a
plethora of more relevant services to publishers like:48
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Revenue optimization on ad networks, exchanges, direct and targeted campaigns,
Insight in yield analytics and audience data
Audience extension and potential for retargeting
Data integration with multiple third party data providers and publishers owning data
Integration with DSPs
Brand protection and verification: Protection against malware detection and poor quality ads
RTB implementation to provide a controlled bidding environment in real time
The figure below shows the workings of a yield optimization platform.
Figure 17: How Rubicon Project’s REVV Yield Optimization Platform Works
Source: DeSilva + Phillips, LLC.
Companies: Ad Meld, Rubicon Project, PubMatic
48
Niessen, Janneke. “The Current Yield Optimisers Will Evolve Into True SSPs.” March 16, 2010.
http://www.exchangewire.com/2010/03/16/janneke-niessen-the-current-yield-optimisers-will-evolve-into-truessps/.
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Data Optimization/Data Management Platform (DMP):
With the evolution of SSPs and DSPs, the ad exchange market is quickly beginning to polarize between
the supply and the demand side and there is room in the market for more neutral exchanges. A DMP
helps all parties involved in the buying and selling of ad inventory to manage their data, facilitate the
usage of third-party data, enhance their understanding of all this data, pass back data, or port custom
audience data to a platform for even better targeting.49
Companies: BrightTag, Demdex, TagMan, Brillig, Red Aril and Lotame.
Emerging Trends & New Opportunities
From a broad marketing standpoint, the way advertisers and their advertising agencies buy online ads
will continue to evolve, as evinced by this eMarketer survey below indicates. While ad networks still
dominate, DSPs, exchanges and self-services are also increasing in popularity.
Figure 18: Top Methods U.S. Ad Agencies Use to Buy Online Advertising – Q3 2010
RTB is also growing in popularity as brand marketers have an increased interest in buying display
advertising, according to eMarketer.50 Since RTB is a fulfillment technology that enables ad buyers to bid
for each and every ad which is instantly served on the publisher's site, it can be built into any of the
above mentioned platforms – ad exchanges, DSPs and SSPs.
Most players in the online advertising space are focused on premium inventory but there is space in the
market for innovation in non-remnant premium inventory from potentially a futures exchange to a
49
Thomases, Hollis. “DSPs, SSPs, RTBs, DMPs - Online Media's Newest Alphabet Soup.” ClickZ. December 14, 2010.
http://www.clickz.com/clickz/column/1931527/dsps-ssps-rtbs-dmps-online-medias-alphabet-soup.
50
eMarketer. ‘2011 Trends: Future of Online Ad Buys.’ November 30, 2010.
http://www.emarketer.com/Article.aspx?R=1008068&dsNav=Ntk:basic|ad+networks|1|,Rpp:25,Ro:1,N:779&xsrc=TopicsPanel.
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reverse auction where publishers can bid for advertiser’s business. There might also be innovation for
later delivery of premium content.
Google’s looming presence especially in the ad exchange market is a threat to the ecosystem and as a
result many ad networks and exchanges will reposition themselves as DSPs in avoid direct competition
with Google.
One thing is for certain, data-driven targeted online advertising is definitely here to stay. According to
Satya Patel, a partner with venture capital firm Battery Ventures that has invested in data exchange
Bluekai, data will be the saving grace for the online advertising industry because it makes media buying
easier, increases value of remnant inventory, and is freely available to all.51
Regulatory Framework
Privacy concerns are becoming increasingly prevalent in consumers’ minds as they learn more about the
invasive targeting methods of ad networks. The Federal Trade Commission (FTC) recently proposed a
“Do Not Track” list which would allow consumers to opt out of having their online activities tracked in an
easy way similar to the Do-not-call legislation targeted at telemarketers.52 While the government
regulations are imminent, they are and hence the industry is making a move towards self-regulation to
limit overt governmental involvement. The Online Behavioral Advertising (OBA) guidelines have been
established to ensure an industry-wide online advertising standard.
OBA – First Party Responsibilities
Under the OBA guidelines, any website publisher or operator is classified as a “First Party” and is
required of the following:53
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Providing consumer transparency especially when collecting and using data for behavioral
targeting
Having an “enhanced notice link” leading to a disclosure/notice of practices
Clearly obtaining consumer consent before changing OBA data collection or use policies
OBA – Third Party Responsibilities
Advertising networks, data companies including ad exchanges and data aggregators and in some cases,
advertisers will be classified as “Third Party” under OBA guidelines and will be held to “Third Party
Responsibilities” which include the following:54
51
Patel, Satya. “3 reasons that data will save online advertising.” April 8, 2009.
http://venturegeneratedcontent.com/2009/04/08/3-reasons-that-data-will-save-online-advertising/.
52
Nagesh, Gautham. “FTC proposes Do Not Track List for the Web.” TheHill.com. December 1, 2010.
http://thehill.com/blogs/hillicon-valley/technology/131425-ftc-proposes-do-not-track-list-for-the-web.
53
“Self Regulatory Principles for Online Behavioral Advertising – First Party Responsibilities.” October 2010.
http://www.aboutads.info/resource/download/OBA%20Self-Reg%20Implementation%20Guide%20%20First%20Party%20Responsibilities.pdf.
54
“Self Regulatory Principles for Online Behavioral Advertising – Third Party Resonsibilities.” October 2010.
http://www.aboutads.info/resource/download/OBA%20Self-Reg%20Implementation%20Guide%20%20Third%20Party%20Responsibilities.pdf.
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Providing clear, meaningful and prominent website notice to disclose OBA practices
Providing an “enhanced notice link” on the website information notice either by linking directly from
placed advertisements or from other places on the Web page where data is collected or used for
OBA purposes
Providing easy-to-use ways for consumers to choose whether data is collected and used for OBA
purposes or is transferred to another, unaffiliated entity
Providing appropriate security for the data collected and use for OBA purposes
Obtaining consumer consent before materially changing any OBA data collection and use policies
including any data collected in the past
Limiting the collection of certain sensitive information for OBA purposes
Refraining from collecting “personal information” from children under the age of 13 but since the
promotion is targeted at tweens this issue needs to be addressed by mandating parental consent
when accessing websites that engage in OBA directed at children under the age of 13
When executing online advertising, the basic laws of general advertising apply and they specify that the
advertising have to be truthful and must have evidence to substantiate any claims made in the
advertising. Online ads also cannot be misleading or unfair. Any disclosures required by law need to be
clear and conspicuous and that includes that appropriate proximity, placement and prominence to the
content that needs the disclosures. Overtly distracting factors are to be avoided in disclosure and the
language used needs to be easily understood by consumers.
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Appendix A: Aggregated List of Ad Networks
Primarily CPM Based Ad Networks
 121Media
 24/7 RealMedia
 Accelerator-Media
 Ad Solutions Network
 Ad World Network
 AdAgency1
 AdBonus
 AdDynamix / Pennyweb Networks
 AdOrigin
 AdPepper
 AdSmart
 Adtegrity
 AdZuba
 Ampira Media
 Bannerconnect
 BannerSpace
 BlueLithium
 BURST! Media
 Casale Media
 Claxon Media
 Click Agents
 CPX Interactive (Formerly Buds Media)
 EuroClick
 Experclick
 FastClick/ValueClick
 Federated Media
 Gold Group
 Gorilla Nation Media
 Hurricane Digital Media
 Impression|Up
 InterClick
 Interevco (Interactive Revenue Company Ltd.)
 Joetec
 Mamma Media / FocusIn
 MaxOnline
 Oridian
 Premium Network
 Quake Marketing
 Quin Street
 RealCastMedia
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RealTechNetwork
Revenue.net
Right Media
Rydium
The Robert Sherman Company
TMP
Tribal Fusion
Valuead.com
Yes Advertising
HyperBidder
Primarily CPA/CPL Ad Networks
 Advertising.com
 Amazon.com
 Axill
 Azoogle Ads
 ClickBank
 ClickBooth
 ClickXChange
 Commission Junction / BeFree
 CoverClicks
 DarkBlue
 DrivePM
 emarketmakers
 Linkshare
 Maxbounty
 Meta Reward
 ProfitCenter
 Revenue.Net
 ShareASale
 Strategic Affiliates
 WebSponsors
Primarily CPC AND/OR Text Based/Contextual Ad Networks
 Google AdSense
 Yahoo! Publisher Network
 AdForce
 AdHearUs
 AdKnowledge
 AdSonar
 Affiliate Sensor
 All Clicks
 AllFeeds
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BannerBoxes
BClick
BidClix
Bidvertiser
CBprosense
Clicksor
ExpoActive
IndustryBrains
Mirago
Miva
Nixxie
One Monkey
Oxado
TargetPoint
Textads Dot Biz
TextWise
Text Link Ads
Vibrant Media
WebAdvertising.ca
AdBright
Shopping/Comparison Networks
 TTZ Media
 PriceGrabber
 Chitika
 Shopping.com
 CNet Shopper
“Non-Standard” Ad Networks (PopUps, Expandables, Pay Per Post, etc.)
 7AdPower
 Opt-Media
 PayPopUp
 PointRoll
 PopUpTraffic
 Tremor Network
 WhenU
 PayPerPost
 ReviewMe
 CreamAid
Specific Demographic Ad Networks
 Absolute Agency
 AVN Ads (Adult Network)
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BlogAds
CrispAds Blog Advertising Network
HerAgency
HispanoClick
Pheedo RSS & Weblog Marketing Solutions
Qumana Adgenta Blog Ads
WayPointCash (Adult Network)
NON-US Primarily CPM Based Ad Networks
 ClickHype
 DMO Global
NON-US Primarily CPC AND/OR Text Based/Contextual Ad Networks
 Response Republic
 PeakClick
NON-US Primarily CPA/CPL Ad Networks
 TradeDoubler
 Commission Monster
 Affiliate Future
 AdLink
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