Advertising itself seems pretty simple on the surface doesn’t it. There are advertisers with products and publishers with visitors. Advertisers want to get their products exposed to those visitors and publishers want to get paid for their space to allow it. BLAMMO! there ya go, a match made in heaven. Hey wait, you’ve got a website and some space for ads… you can just swing open the doors and money will come pouring in from desperate advertisers! Right? Well hold on there partner, there’s a bit more to it than that.
The truth of the matter is that for most sites, advertisers aren’t going to come to you. While you do have what they’re after (visitors) you don't have it in the quantity and quality they must have to succeed. Wait… What? Did I just say you didn't have quality traffic? You bet I did. Let me explain.
In my experience many publishers have a hard time understanding exactly what an advertiser needs. To have a successful campaign advertisers need the following 4 things:
- Volume. In other words, piles of impressions. This gives campaigns reach and the ability to cast a wide net looking for new customers.
- Uniqueness. The less a visitor has hit your site in a 24 hour period the better since that ups the chance that the visitor will click or convert. The more unique a visitor is, the more they are worth.
- Performance. Clicks and conversions. Without performance campaigns don't succeed and without success campaigns don't renew. That's less for everyone.
- Targeting. The more a user can be targeted and advertised to, the better the chance for a click or conversion.
Those are the 4 basics needed for campaign success. There’s quite a bit more to the picture including where the visitors are located in the world (GEO target) as well as elements like user recency and frequency. (refer to part 1 of this article if you need a refresher on the jargon) ON the whole however, if you can provide all four of these basic elements you’ll do well with ads on your site.
We now have a basic understanding of what advertisers need and you can gauge whether or not you can offer that as a standalone. Realistically, there are a handful of sites that can provide all four reliably. For those that cannot, that’s where a network, exchange or agency trading desk comes in.
Networks, Exchanges, and Agency Trading Desks provide help to website publishers at all 4 critical points. Lets examine.
- Volume. Networks, Exchanges, and Agency Trading Desks aggregate impressions by partnering with website publishers like you, as well as other networks, or in the case of Agency Trading Desks, aggregating exchanges. This volume is typically attractive to advertisers as they’ll get that important reach they are looking for. Networks and exchanges can also add more benefit here by implementing good content screening and categorization policies. This improves the impression pool and provides more comprehensive brand protection. Your mileage with individual networks in content screening, categorization and brand protection will vary based on the network/exchange you choose.
- Uniqueness. Once again aggregation plays a vital role. By aggregating large volumes of impressions from various sources, networks and exchanges can "pixel" a user as someone who has already seen an ad a certain number of times and not show it to them again across all partners. That means the same user is unique to the campaign, not the publisher. While not a boon for publishers, its exactly the kind of frequency that advertisers are looking for. And lets face it, advertisers pay the bills so we have to keep them happy.
- Performance. Networks, Exchanges, and Agency Trading Desks can typically provide a much more robust system for tracking performance than a stand alone publisher. Add to that the ability to nail down click fraud and normally a team of people optimizing each campaign based on its individual needs and you’ve got a combination that's hard to beat. Optimization experts at these levels have years of industry experience, this experience provides assurances to the advertiser that every angle is covered.
- Targeting. Our middle men can provide targeting capabilities well beyond what a single website can do. What's more, especially in the case of Agency Trading Desks, this targeting can be used across an aggregation of networks and exchanges from one point of contact.
In addition to these 4 critical areas, there are some other elements that advertisers look for:
- Transparency - Where their ads are running. Advertisers demand to know where they are running ads and demand removal from sites they dont like.
- Brand Protection - Advertisers want to know that wherever they are running ads they are assured its safe for an image conscious brand to be on. (more on this in another article).
So great, we’ve got this middle man here who adds to the value proposition for advertisers and makes it simple for web site owners to manage advertisements. You’d imagine they get paid for this service, and indeed they do. Here’s how it breaks down.
- Advertisers set the rates, the campaign type and buy the media (that’s impressions to you and me) from the source (network, exchange, trading desk). This is also the point where advertisers will choose GEO targets, frequency caps and other options for the campaign.
- The source traffics the campaign and pays out to publishers based on various criteria. Most pay out on a Revenue Share basis. That simply means that Revenue (advertiser payment) is shared between the network and the publisher, usually in a % split.
- On a straight revenue share you’ll earn a percentage of the rate for impressions you run. e.g. If its a $1.00 CPM campaign you’ll earn .60 CPM at a 60% revenue share.
Some sources offer a Flat Rate for some of your traffic and a revenue share for the rest. Suppose you are getting .75 CPM for your unique US traffic and the rest of your traffic is at a 60% revenue share the break out would look like this. $1.00 CPM and you had 500 impressions of unique US traffic the rest being non US or non unique. For the 500 unique US impressions you would earn a flat rate of .75 CPM, for the rest .60 CPM. Your eCPM (earned CPM) is .675 CPM. Of course that formula is very simple and does not take into account the varying volumes of each type of traffic, but you get the idea.
Most sources tend to pay out on a Net X days basis. For example, if you are on a Net 60 payment time, you’ll receive your payment 60 days after the activity period (month) has ended. In other words, payments for January activity will come April 1 and so on. Whoa! You mean you have to wait for your payment? Yes and here’s why.
- Advertisers do not pay up front. Well, for the most part at least. Most providers have to wait for payment to come in before they can issue payment to you. If advertisers are on a Net 30 basis, you can expect you’ll be on a Net 60 basis to allow some grace time for payment to arrive.
Numbers must be certified. Before anyone gets paid the stats in the ad server(s) must be checked and double checked. Fraud must be ferreted out and inconsistencies resolved. Sometimes this results in an adjustment of numbers.
We’ve talked about how the online advertising system works, what advertisers need and want and what role publishers, networks and exchanges play. We’ve also taken a look at how publishers get paid in the equation and followed the money. All in all its a good primer on the industry and how things work. The concepts and ideas here are culled from years of personal experience, and they surely dont represent each and every scenario.
Have questions or comments? We'd love to hear them. Let us know.