Ad Ecosystem Primer

I’ve been doing some work in the Advertising and Retargeting spaces over the past few weeks. This is a very complex and dynamic domain; lots of moving parts, tons of technology, lots of acquisitions, etc. I thought it would be useful to walk through a definition of who the player are (categorically), since this type of information does not appear to be aggregated anywhere. So here we go:

Ad Exchange Ad exchanges are technology platforms that facilitate the bidded buying and selling of online media advertising inventory from multiple ad networks. The approach is technology-driven as opposed to the historical approach of negotiating price on media inventory. This represents a field beyond ad networks as defined by the IAB (Internet Advertising Bureau).

Ad Networks An online advertising network or ad network is a company that connects advertisers to web sites (also called publishers) that want to host advertisements. The core function of an ad network is aggregation of ad space supply from publishers and matching that space with advertiser demand. The fundamental difference between traditional media ad networks and online ad networks is that online ad networks use Ad Servers to deliver advertisements to consumers, which enables targeting, tracking and reporting of impressions in ways not possible with analog media alternatives.

Ad Operations Also referred to as “online ad operations”, “online advertising operations”, “online ad ops”, “ad ops”, and “ops”, refers to processes and systems that support the sale and delivery of online advertising. These are the workflow processes and software systems that are used to sell, input, serve, target and report on the performance of online ads. Ad operations are typically a department within a digital content publisher, ad network, ad technology provider (such as a rich media vendor or an ad server) or ad agency. They may fall under sales organization, information technology, or may be a separate entity. The primary function of ad operations is fulfilling the order of sale (also called an “ad campaign” or “media ad buy”) purchased directly by or on behalf of an advertiser (also called a “direct marketer” or a “client”). Therefore ad operations is a group that directly responsible for revenue generation.

Ad Server An ad server is a computer server, specifically a web server that stores advertisements used in online marketing and delivers them to website visitors. The content of the webserver is constantly updated so that the website or webpage on which the ads are displayed contains new advertisements—e.g., banners (static images/animations) or text—when the site or page is visited or refreshed by a user. The purpose of ad serving is to deliver targeted ads that match the website visitor’s interest.

Agencies These are similar to traditional advertising agencies (think Mad Men), with the difference being that now they are purely focused on digital media as the delivery method. Most digital agencies can include delivering creative services for banner ads, as well as doing the media buys for larger brands. For example, Samsung introduces a new smartphone and wants to buy advertising across a broad range of publisher sites, targeting different consumer groups with different messages. The process is complex, with lots of rapidly changing variables. It requires specialized competency that a brand like Samsung lacks, but the agency specializes in.

Agency Trading Desk The agency trading desk is essentially a service that helps advertisers and agencies buy online advertising. It is also an advertising technology platform combined with human skills in advertising and technology that provides access to a wildly complex digital advertising marketplace. In terms of customer deliverables, the agency trading desk is a collection of organizational and technology capabilities focused on optimizing digital advertisers’ budgets through real-time bidding and ad exchanges. Within a trading desk, human resources and skills are mainly software engineers, algorithm specialists, analysts and digital media strategists, account manager and buyers. On the technology side, the tools used are essentially DSPs (Demand Side Platforms), APIs, DMPs (Digital Management Platforms) and Ad Servers. Normally the DSP within a trading desk is integrated with Ad Exchanges, SSPs (Supply Side Platforms)and networks. The primary objectives of a trading desk are to optimize buying and campaign deployment according to advertisers’ goals – based on CPM (cost per thousand impressions), CPC (cost per click), CPA (cost per action) and other branding metrics.

Content Delivery Network This (for some reason) is not included in the chart above, but it is an integral part of the advertising ecosystem. A content delivery network or content distribution network (CDN) is a large distributed system of servers deployed in multiple data centers in the Internet. The goal of a CDN is to serve content to end-users with high availability and high performance. CDNs serve a large fraction of the Internet content today, including web objects (text, graphics, URLs and scripts), downloadable objects (media files, software, documents), applications (e-commerce, portals), live streaming media, on-demand streaming media, and social networks. A CDN operator gets paid by content providers such as media companies and e-commerce vendors for delivering their content to their audience of end-users. In turn, a CDN pays ISPs, carriers, and network operators for hosting its servers in their data centers.

Creative Optimization Companies in the creative optimization space focus on businesses that are trying to solve issues related to scalability and measurability of targeted advertising. In most instances, companies are able to identifying their marketing segments, but creating unique ads for each segment would result in an unmanageable ad spend. In addition, these businesses would like to know which elements of their advertising are resonating with which customers, not just base metrics such as CTR. Creative optimization companies provide the tools and services needed to address these challenges, by allowing their customers to bifurcate online ads into their separate elements, and then customize those elements to the individual customer. A travel agency could look at a customer’s geographic location or flight history and suggest trips to locations that will appeal to the user, rather than using generic copy about saving money on flights. A retailer could use the customer’s IP address to identify the closest branch of its store and display the address and phone number in the ad. Creative optimization companies deliver the ability to create copy which changes according to customer data, which means their customers get tailored messages that makes them much more likely to buy.

Data Management Platform A data management platform is the backbone of data-driven marketing, and serves as a unifying platform to collect, organize, and activate first- and third-party audience data from any source, including online, offline, or mobile. A true Data Management Platform should have the ability to collect unstructured audience data from any source, including email, mobile web and app, web analytic tools, CRM, point of sale, social, online video, and other available offline data sources.

Data Suppliers Data suppliers provide consumer-centric purchase and consumption data to help improve and define online advertising targeting by delivering a more detailed and nuanced interpretation of consumer behaviors and habits. Businesses like grocery and clothing stores aggregate shopping behavior and then sell their point-of-sale data to these companies, which interpret and package it prior to supplying it to online retailers and advertisers, which helps them fine tune their product offers and promotions to suit consumer habits and taste. This domain is populated by very large companies, and is one of the core elements of what is commonly referred to as Big Data.

Demand Side Platform A demand-side platform (DSP) is a system that allows buyers of digital advertising to manage multiple ad exchange and data exchange accounts through one interface. Real-time bidding for displaying online ads takes place within the ad exchanges, and by using a DSP, marketers can manage their bids for the display ads and the pricing for the data that they are layering on top of basic consumer profile information to target their audiences. Much like Paid Search, using DSPs allows users to optimize based on set Key Performance Indicators such as effective Cost per Click (eCPC), and effective Cost per Action (eCPA).

Digital or online advertising is a subset of the advertising industry that references electronic communication promotions and marketing. This can include but is not limited to website display advertising (banner ads or rich media advertising), text advertising, search advertising (paid search results), online video advertising, mobile and device advertising (sms, wap display ads, video, application ads), email display ads and text advertising. These advertisements are a forum of revenue generation for content providers.

Measurement and Analytics Refers to companies that track and measure consumer behavior across individual website, networks such as Yahoo and MSN, and includes mobile measurement, social media analytics and a very broad and deep range of online behavior. The companies in this sector are large, very technical, and deeply integrated with their marketing execution cohorts. This sector is probably the closest to the core in terms of how retargeting and ad serving works, since the entire ecosystem depends on analysis of vast amounts of consumer data—this is the measurement and analysis of Big Data.

Media Management Systems (also referred to as Social Media Management) refers to companies that provide customers the ability to coordinate media campaign across multiple channels (such as Facebook, Twitter, LinkedIn, Flickr, YouTube, Google+, etc.) and provides coordination and dashboarding across functions such as publishing automation, ad management, page management, web analytics integration, platform analytics, support for mobile applications, etc. It is, as you can imagine, a very complex domain, and is populated by companies such as Hootsuite, Argyle, Shoutlet, Spredfast, etc.

Media Planning and Attribution Is similar to Media Management Systems, with the addition of a much heavier focus on attribution modeling. The premise they work off is that when brands execute campaigns across multiple channels (including off-line channels) there are influences at play between the channels, and it is important to assign the right attribution to the right advertising element within the sales funnel. As an example, a consumer may see a banner ad on a search return, then subsequently be retargeted as a result of site visit that did not convert, they may see an ad delivered through a set top box, etc. all of which are focused on the same product. Attribution modeling balances out the ad stream in terms of purchase influence. Does credit go to the last thing click prior to purchase, or to the first? If there are multiple stages (and there always are), does credit go equally to all, or are some stages more influential than others? Similar to other technologies in this domain, attribution modeling is complex, algorithm driven, still in an early stage of development, and is tightly coupled to media planning and management.

Retargeting Retargeting is an online advertising technology that serves customized ads to people who have indicated an interest in a brand by visiting a specific website. These users will then see related ads as they navigate to other web sites such as blogs, news sites, or sports pages. Technically speaking, an advertiser places a pixel, or small snippet of code, on their website to begin. This pixel identifies how potential customers interact with their website and allows for segmentation of those customers for later advertising targeting. This is primarily a conversion, rather than an acquisition technology.

Supply Side Platform A Supply-Side Platform or Sell-Side Platform (SSP) is a technology platform with the single mission of enabling publishers to manage their ad impression inventory and maximize revenue from digital media. As such they offer an efficient, automated and secure way to tap into the different sources of advertising income that are available, and provide insight into the various revenue streams and audiences. Many of the larger web publishers of the world use a Supply Side Platform to automate and optimize the selling of their online media space.

Verification and Privacy This covers two areas (hence the name) that are related. Verification focuses primarily on media verification, and includes things such as inappropriate content (don’t server adult themed ads on a page pushing back-to-school sales), as well as management of black lists (sites where ads should never be served), white lists (the opposite of black lists, partner lists, etc. This has also recently expanded to include restrictions on geo-targeting, ad placement above or below the fold, double-serving (same ad twice on a page), fraud detection (including malware, hidden ads, etc.). So verification is that the ad is running as the client intended and nothing that could be subject to misinterpretation is present. The corollary to this is privacy, which includes opt-in/opt-out capabilities, automatic filtering of third party tracking cookies (which is now a browser function), etc. The privacy aspect in particular is getting a lot of attention from Congress, and is starting to have a significant impact on how advertising is delivered.

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