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The online advertising industry is booming. Worldwide, over $130 billion dollars will be spent on digital ads in 2016 alone. That’s a lot of money changing hands. With so much cash being pumped into digital advertising, it’s surprising how little marketers know about how digital ads are bought, sold and placed online.
Most ads are placed on different websites through an ad network or ad exchange. There are certainly other ways to get your ads placed online, but ad networks and exchanges tend to be the most predominant. You can certainly reach out to all the publishers (i.e., websites) where you would like your ad to appear and broker deals with them, but as you can imagine that would take an enormous amount of time and effort, especially if you’re looking to get your ad placed on thousands of websites.
So ad networks are basically companies that connect advertisers with publishers (websites) that want to place ads. Ad networks have a collection of websites that allow advertisers to purchase ad space quickly and easily. The ad network will negotiate a price for the ad with the publisher and then mark it up and sell it to the advertiser for a profit. That way the advertiser doesn’t need to reach out to thousands of different websites and broker deals with them every time they want to run an ad and the ad network has a sustainable business model.
Ad exchanges are similar to a stock exchange where people buy and sell ad space through real-time auctions. Publishers place a certain amount of ad impressions up for sale and buyers purchase those impressions. Those purchases are made in real-time and purchase price is dependent upon who the ad will be served to, time of day, device, ad location, etc. This type of ad-buy is supposed to be more transparent because it allows advertisers to purchase ads for the actual going-rate as opposed to the mark-up rate that the ad network charges (you’re basically cutting out the middle-man).
The First Problem
The big problem with this model is that your typical advertisers are unable to purchase from ad exchanges as many are private. While the ad exchange model is supposed to provide transparency for the advertiser, most are unable to purchase ads anyway. Because you have over 70 billion impressions daily flowing through open ad exchanges, policing them has become difficult. With open ad exchanges much of the content comes from bogus publishers, fraudsters, robots or low-quality websites.
Due to that fact, most ad exchanges are private with ads sold through carefully selected agencies or advertisers using trading desks and demand-side-platforms (DSPs).
The Transparency Problem
Now that we know how online ad buying works today, we can start to see how advertisers really have very little transparency as to where their ad will appear. Most of the ad buying is happening with ad networks, agencies or companies with DSPs, rather than your typical online advertiser.
But publishers also deal with the same transparency issues since they are unable to identify which advertiser was actually making the final placement on their website. Due to that fact, publishers are typically unable to screen-out low-quality ads and advertisers that could potentially hurt the credibility of the publisher.
It’s crazy to think that in a $130 billion dollar industry, neither the publisher nor advertiser really know what’s going on. Advertisers are unable to determine where their ads will run and publishers are unable to determine who is running ads. Buyers can never be exactly sure where their impressions might show up. And sellers can never be entirely sure who’s buying them.
If you ask me, it’s time that publishers and advertisers start working together. With so much money changing hands advertisers should have some transparency as to where their ads run and publisher’s need to know who is running the ads.
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