Ads

The Actors

The triange:

• Advertisers: "buy" ads, demand side; eventually earn money from consumers; some advertisers rely on their own marketing team for adverting, others may hire external agencies (e.g. to handle paper work).
• Publishers: "sell" inventories, supply side; earn money from advertisers
• Consumers: consume content AND ads

The systems:

• Ad Exchange
• DSP: Demand-Side Platform
• SSP: Supply-Side Platform. Yield management: manage inventory, set best price will highest possible fill rate

A simplified and symmetrical overview:

Advertisers <-> DSP <-> Ad Exchange <-> SSP <-> Publishers

Examples:

• AppNexus, OpenX, Rubicon are some well-known ad exchanges. Facebook has FBX (Facebook Exchange), Google has AdX (Ad Exchange, but now an internal term as part of Ad Manager instead of a public product).
• theTradeDesk (NASDAQ: TTD, https://www.thetradedesk.com/) is the largest independent demand-side platform
• Magnite is the world’s largest independent sell-side ad platform. Google Ad Manager is Google's SSP/Exchange.
• World's largest ad agency: WPP
• The Internet Advertising Bureau (IAB) is the only association dedicated to helping online, interactive broadcasting, email, wireless and Interactive television media companies increase their revenues. IAB defines ad block sizes like 300x250, 728x90.

The Evolution

1. Direct Sales

Advertisers work directly with publishers. The downside is obvious:

• it does not scale, separate contracts are needed between every advertiser/publisher pairs
• publishers may have remnant inventory (inventory not sold, missing revenue opportunites)

2. Ad Networks

And Ad Network is a company that has exclusive rights to sell inventory from a specified group of publishers to advertisers.

It is a "closed" network, essentially the ad network buys inventories from publishers in bulk (and cheap) and sell to advertisers (at a high price).

This is better than direct sales since advertisers do not need to negociate with every single publisher, and the ad network may provide targeting and optimization services to make adverting more effective.

However there are a lot of networks, and it is not always transparent to the advertisers about the publishers; and the ad networks usually take a big cut.

Example: Google Display Network is one Ad Network, though it is taking a lower cut and more transparent comparing to the traditional Ad Networks.

GDN = websites serving display ads + some google properties (Gmail, Youtube, etc)

3. Ad Exchanges

And Ad Exchange is just like a stock exchange: it is auction-driven, support real-time bidding.

Ad exchange connects buyers (advertisers, ad networks, Trading desks, DSPs) and sellers (publishers).

Example: Google's AdX, Facebook's FBX

4. Trading desk and DSP

Trading desk: built by agencies that bypass the newtworks, talk to exchange directly, or talk to DSP which will talk to exchange.

DSP: tool to buy real-time on exchanges; manage audience data; transform data into bids (optimization)

Example: The Trading Desk (NASDAQ: TTD) is "the largest independent demand-side platform providing real-time ad pricing and placement for advertisers at agencies and brands."