How to (not) buy an online ad impression?

MIKKO KOTILA
25th of April 2019

This article provides a useful model for thinking about the supply-chain that is involved in the process of acquiring an online ad impression. The model is part of a wider effort to establish a robust transparency framework that can be readily applied regardless of brand category or other factor.

A brief history of online advertisings

Twenty years ago in the advent of digital advertising, a typical media buying process included the advertiser, the publisher, and the internet user. As a result, the value exchange between the advertiser and the publisher was clear, as was the value exchange between the media owner and the internet user.

In its simplest, online advertising can be explained as an interaction between the three principal parties. People, advertisers, and publishers. Today a typical investment in an online media impression involves a convoluted supply chain where strict responsibilities are unclear and the majority of the advertiser’s money ends up in other pockets than the publishers’.

In the three-party transaction, responsibilities were clear and 100% of advertiser’s investment went to the publisher. Because publishers were appropriately compensated for their investment into content production and infrastructure, the idea that they would have allowed data collectors and other intermediaries between themselves and the advertisers would have seemed absurd.

For example, there was no need for ad networks. Ad networks appeared in the marketplace as they saw an opportunity to become part of the rapidly growing market. Ad networks made themselves relevant by promising a) advertisers (and their agency partners) efficiency and scale, and b) publishers steady supply. What neither advertisers or publishers clearly understood, was that ad networks were really focused on making money for ad networks, as opposed to making advertising better. A typical ad network charged at least 50% of spend as commission and made the marketplace far less transparent. The lack of transparency became the basis for a plethora of other problems, including fraud, rampant brand safety risks, and data leakage.

In the following two decades, many new parties were introduced in the ecosystem. Virtually all of these parties followed the same model; promise scale and efficiency while charging a commission from the advertiser’s media spend. Knowing that online advertising would eventually end up a trillion dollar market, it became the go-to for those seeking quick internet riches.

As a result of the market opportunity, there are today roughly 10,000 companies that compete for their share of the advertisers’ money. These companies can be readily categorized as secondary, tertiary, and bottom feeders. In a future article we will go deeper into explaining the distinction of each. The key point is in the degree of connection a player has with the advertiser whose money their earnings are resulting from.

What can advertisers do?

In the above-described complex, and opaque market, advertisers are best positioned working with partners whose sole focus is on working with advertisers. For example, everything else being the same, advertisers are likely to get better results from working with a DSP that only works with advertisers, as opposed to one that also works with agencies. Same applies to verification companies, data partners, and basically any other category of company.