DSPs, SSPs, and RTBs … oh my! These are just a few of the sales channels, or platforms, in which digital media advertising gets bought, sold or managed. In this post, we’ll make sense of the ‘alphabet soup’ of digital media buy/sell channels.
Series Overview: In the first installment of this three-part series we posed the central question: What should publishers consider when creating great account plans? To create a solid plan of attack, successful sellers have to navigate the complexities of multiple inventory types, sales channels, and increasingly, the trend toward programmatic buying. In Part 1: Understanding Inventory Types, we addressed the first of the three complexities: inventory types, including premium guaranteed; audience; and remnant. Here in Part 2 we explain the buy/sell channels and how they impact account planning factors like the number of deals, deal value and timing of ad buys throughout the year. In our next and final post, Part 3: Programmatic Ad Buying, we’ll explore how this quickly growing way of buying and selling inventory via the use of algorithms to make buy-decisions promises greater ad relevance, reach and ultimately profitability.
The internet created a new way for publishers to advertise; and, as a result, the amount of space available to display advertising increased tremendously. In fact, the rate of growth outpaced the rate of demand, leaving behind a surplus of unsold advertising inventory or space. To continue the ‘billboard on the side of the highway’ analogy from Part 1, the internet essentially ballooned the highway system, leaving a lot of empty billboards, particularly those on secondary roads. Here’s how all that billboard space gets bought/sold.
Direct from Publisher: Direct negotiation between a publisher’s Account Executive (AE) and an advertiser (or sometimes the advertiser’s agency of record) is still the preferred way for both parties to secure a deal. Although the number of such transactions bought/sold in this manner in proportion to other ways to buy is decreasing, the average dollar value of individual deals remains high. It’s no surprise premium guaranteed inventory is generally negotiated this way. Think of this inventory like the most highly visible and frequently seen highway billboards you know, maybe off of I-95 (for those of you on the East Coast) and the I-5 (for those of you on the West Coast). As we discussed in Part 1, the largest portion of a publisher’s revenue comes from premium guaranteed inventory, typically 50-85 percent. The negotiation and pricing of premium guaranteed inventory often occurs a year in advance, thus representing more predictable sales from an account planning standpoint. A good account plan starts with a clear understanding of an advertiser’s potential spend on premium guaranteed inventory and their timing of negotiations. The publisher’s AE has the greatest control over this sales channel and can certainly influence an advertiser’s spend proportion earmarked for this type of buy.
Ad Networks: Third party ad networks aggregate and allocate unsold ad space, or remnant inventory. They provide scale, significantly lower price points and categorization. Most publishers wouldn’t want an AE to spend any time negotiating the sale of advertising buys that are not only mere fractions of a percent in value of premium guaranteed inventory, but also extremely high in volume. By pooling together enough unsold ad space, an ad network can turn ‘low dollar and high volume buys’ into a profitable business. Horizontal networks, like Google or Yahoo!, provide a platform that reaches a broad audience population. Vertical networks, like Sportgenic or Gorilla Nation, provide access for advertisers looking to engage more specific audiences. For example, Sportgenic “connects sport enthusiasts with products and information to fulfill their passion for sport,” while Gorilla Nation targets users in the “premium entertainment and lifestyle communities.” Even more targeted platforms, those arguably best suited to provide the exact desired audient to an advertiser, are called “audience networks.”
Audience Networks: Third party audience networks help advertisers identify and target very specific audiences, even more specific than users in the “premium entertainment and lifestyle communities” as highlighted in the Gorilla Nation example above. For example, “males between the ages of 18 and 34, with a college degree, and part of premium entertainment and lifestyle communities.” The more specific the audience, the greater the relevance of the message and therefore difficulty in finding that audience successfully time after time. From an account planning perspective, most advertisers will spend significantly less on targeted ads as a percent of their total spend. This may seem counterintuitive. After all, why wouldn’t advertisers be willing to pay if they can get access to the very specific audience they’re after? The challenge has been delivery. Few audience networks have been able to live up to the promise and successfully (and repeatedly) deliver the advertiser’s desired audience. As a result, this portion of an advertiser’s total ad spend is still relatively small.
Demand Side and Supply Side Platforms (DSPs and SSPs): SSPs were created to help publishers manage access to inventory and track which agencies/advertisers are buying what. They help publishers manage revenue coming in from the various ad and audience networks. More importantly, they create a bidding environment so publishers get a better price for their remnant inventory. DSPs were created to help agencies, buying space on the behalf of advertisers, to manage the real-time bidding environment, or RTBs. The creation of RTBs subsequently led to the creation of agency trading desks tasked with executing programmatic buying — which we will explain in the third and final installment of this series.
The number of ad and audience networks continues to grow. And the unique value proposition of each network seems to be less and less distinct from one another compared to a few years ago. Here’s the key: Your Ad Sales AE still plays a critical role in negotiating and securing the largest portion of an advertiser’s total spend — the premium guaranteed inventory. And they can play an increased role in helping advertisers understand their options across the other inventory and network types. As proportional spend on audience and remnant inventory increases, the account planning process will only get more complex. Stay tuned for our final installment of this three-part series: Part 3: Programmatic Ad Buying.
Read Part 1 of this blog series.
Learn more about digital media sales best practices.