Times change, and so does the actual meaning of any given term. An ad network is no exception. Advertisement Network, short for ‘Advertisement Network’ came to be a few decades ago. It mainly signified ” outlets that produce and distribute ads for radio, television, billboards, and magazines.”
But as general consumer population and organizations turned more and more towards doing their business online, the term currently mainly refers to its online formats.
As Tipalti (above) explains, “an advertising network is basically a company that acts as the middle man between advertisers and websites that have real estate available for advertising. By actively maintaining a database of advertisement opportunities, advertising hosts are able to leverage these connections as a way to provide products and services to companies seeking online advertising space.”
The online possibilities that advertisement networks offer are wide in range. They include banner ads, RSS feeds, pop-windows and others. Currently, one of the most popular forms the ad networks offer is video ads pre-attached to a ‘regular’ video.
A current, succinct definition of an ad network is that of “a technology platform that serves as a broker between a group of publishers and a group of advertisers”. It is a term that now exclusively refers to online advertising.
The above definition does not include all the elements and intricacies of ad networks but does represent its essence. The mentioned intricacies crop up when analysts describe types of ad networks.
Tipalti (above) sees three types of ad networks:
- Vertical Networks; and
- Targeted Networks.
Clear Code sees more types of ad networks, and as the main ones list the following:
- Premium Networks;
- Vertical Networks:
- Specialized or Inventory-Specific Networks:
- -Performance and Affiliate Networks.
The need for ad networks
The main premise on which an ad network operates is that online advertising is a two-way street. On one hand, the advertisers need to use the opportunities online business represents.
According to data compiled by Lori Lewis and Officially Chadd on Visual Capitalist, a single internet minute holds 1 million Facebook logins, 4.5 million videos watched on YouTube, 1.4 million swipes on Tinder (right or left, we can’t say for sure), and a total of 41.6 million messages sent on WhatsApp and Facebook Messenger. That same internet minute also contains 3.8 million Google queries, 347,222 scrolls on Instagram, and almost a million dollars spent online.
On the other hand, site owners and admins face fierce competition to monetize their online presence. Placing ads on their sites is one of the ways to secure a source of income. That is the place where ad networks come in.
As Clear Code (above) notes, ads display was the most intuitive way for advertisers to monetize their content. “To do this, publishers could sell some of their advertising space via direct sales by finding advertisers willing to display their ads on the publisher’s website, but because of a certain fill risk involved in the process (some inventory could end up unsold), there was a need for a platform that would allow them to sell their remnant inventory.”
Based on that concept, any given ad network started out by collecting “unsold ad inventory from multiple publishers and offer this pool of impressions to advertisers at a much lower price than a publisher’s direct sales. This kind of inventory is often referred to as non-premium or remnant.”
The current state of affairs
But, as online advertising evolved, some networks have adopted a more strategic approach. They offer their advertisers “more exclusive deals at premium prices. They cherry-pick and pre-buy inventory from a number of top-tier publishers, and then resell it at premium prices. While this arrangement may be more expensive for the advertisers, it ensures premium placement of their ads.”
Differing approaches have brought along differing categorization of ad networks. Tipalti (above) recognizes three main categories of ad networks.
The first is Blind networks. With this concept, networks “ask media buyers to give up their control of where their advertisements will be displayed within a network. In return, they will have lower costs than that of a targeted network.”
The vertical network is a category many other analysts and marketeers quote. There, the emphasis is on revenue share and high-quality traffic. Also, the media buyer should have transparency about the placement of their ads. “Vertical Networks usually run off of a Run-of-Site campaign and are more expensive than that of a blind network.”
Targeted networks are run on the premise of specific advertisement campaigns. “Target networks focus on contextual and behavioral activity in order to dictate when and where an advertiser’s ads are run within a network. These networks are sometimes referred to as demand-side-platforms or supply-side-platforms.”
The Clear Code categorization differs slightly. It first mentions premium ad networks. These are ad networks that offer inventory from popular publishers. For vertical networks, it uses a few examples like a technology ad network or automotive ad network.
Specialized or inventory-specific ad networks as the name implies focuses on a certain type of inventory. Also, it could be device-specific (mobile, video). Performance and affiliate ad networks use revenue share based on different pricing models.
Ad networks have different operating procedures
MarTech Today gives a detailed look at different approaches ad networks use.” At the most basic level, ad networks pool inventory of unsold ads from publishers and sell it to advertisers. They earn money by taking a cut of ad revenue, sometimes marking-up inventory before selling it.”
Ads are delivered to a publisher’s site by an ad network’s ad server via code on the publisher’s site that calls the ad. Performance is tracked via a tracking pixel from the ad network that the advertiser places on the conversion page(s) such as a thank you page on its site. The ad network’s ad server powers ad targeting, tracking and reporting on the campaign.
As they point out, many ad networks “manage campaigns on behalf of agencies and advertisers. In these cases, an ad network and buyer negotiate the terms of an ad buy such as audience targets, impressions (the number of times an ad is served) and the average cost per impression (CPM). The ad network then executes the targeting, optimization and reporting on the campaign.”
CPM though is not the only manner in which an ad network can calculate its pricing. The other two are CPC and CPA. As Skillkrush explains, CPM stands for cost-per-mille. Mille is Latin for one thousand. In the land of online media, media companies charge advertisers for impressions, which are counted in 1000s.
CPC stands for cost-per-click. This is the rate that websites charge advertisers every time someone clicks on an ad. If the CPC for a site is $50, and an ad gets clicked 1000 times over the course of the month, the advertiser pays the publisher $50,000.
CPA stands for cost-per-action or cost-per-acquisition (CPA). When a media company charges an advertiser using a CPA model, the advertiser only pays out if a user clicks AND does a specific action. For example, it could be ordering a catalog or buying a product.
An ad network should serve the right purpose for both sides
Defining how an ad network works can seem a bit complicated for the uninitiated. The reasons lie in the fact that different ad networks have different methods of operation, all depending on the clientele. That includes the advertisers, online sites, as well as the online visitors.
To complicate matters a bit further is yet another form advertisers and publishers can use. That is an ad exchange. As explained here,” an exchange represents an online marketplace that gives advertisers and publishers a chance to buy and sell ad inventory. This is usually done via real-time bidding and is carried out automatically. “
Still, in the end, the purpose of any given ad network is to reap benefits for both sides of the spectrum. On the one hand, advertisers should have the best possible online campaign. On the other, publishers should have financial benefits from hosting ad campaigns. Keeping up a successful online site is not an easy affair.