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Time to time, we will try to bring you perspective on emerging industries. To start off, lets talk about the online advertising networks and the industry dynamics.
What are Online Ad networks?
Simply put, Online Ad networks connects advertisers with publishers and makes money on the transaction – depending on the model (could be revenue share or arbitrage).
Benefits of Ad Networks?
How do publishers and advertisers benefit from ad networks?
- Publishers have remnant inventories which they want to monetize.
- Advertisers want to target niche publishers, run targeted campaigns (i.e. right audience) and of course, want better RoI from their campaigns.
Ad networks target these niche publishers, get their inventories and help them monetize by bringing in targeted advertisers.
Ad networks typically charge a premium over the traditional advertisers, since they claim to cater to niche publishers (and hence, audience) and hence, promise a better RoI.
For instance, if you rope in makemytrip/cleartrip as a publisher, you are essentially targeting a niche crowd that is Internet savvy – and hence, technology advertisers (like IBM) can potentially pay you a premium for the audience access.
Also, advertisers do not want to maintain relationship with all publishers (manage spend etc) – they need a single interface (and agency) to run the entire show.
As far as publishers are concerned, they get a better eCPM rates with ad networks (a typical revenue split is 65:35, i.e. publisher:network)
Types of online advertising networks
From a broader perspective, there are first-tier and second-tier ad networks.
First-tier networks have their own advertisers and publishers (like Yahoo and Google) and they serve ads to other networks.
Second-tier networks typically syndicate ads from other networks (like RMX) and serve ads.
In terms of operations, there are following type of ad networks:
Representative (or Rep) Networks
Represents the publications/publishers in their portfolio.
- Provides full transparency for the advertiser about where their ads will run.
- Heavily used by brand marketers.
Pricing Strategy : CPC, CPA, Revenue Share.
Example: Publicitas Digital
They are called Blind networks, because advertisers do not have visibility into the publishers where their ads will run.
Blind networks offer low pricing to advertisers, since they typically buy remnant inventories in bulk from publishers.
Pricing Strategy – Mostly CPM, sometimes CPC, but no CPA.
Example: Komli, Tyroo etc
Focus on specific targeting technologies such as behavioral or contextual. Targeted networks specialize in using consumer click stream data to enhance the value of the inventory they purchase (source).
Pricing Strategy : CPA
High up in the value chain, Affiliate networks offer full transparent performance based service.
Pricing Strategy – CPA
Example: DGM India
The Indian Opportunity
- Reach vs. Cost : 50% of page views happen outside the top 20 sites and users spend more than 60% of their time outside the top 20 sites [source].
Now, imagine the amount of effort/time an advertiser has to spend in order to reach out to these sites. Better alternative is to work with an ad network.
- Demand-Supply EquationThe biggest challenge in Indian online advertising space is not that there aren’t advertisers, but lack of quality publishers.So how does one reach out to the long tail of publishers who have a very niche domain (and a significant traffic)? There lies the opportunity.
Indian Ad Networks Strategy
Apart from increasing their network of publishers and advertisers, most of the Indian online ad networks tie up with US publishers who have a strong traffic from India.
For instance, recently launched NetworkPlay partnered with GawkerMedia (which owns LifeHacker and Valleywag) to monetize their India eye-balls.
Similarly, howstuffworks.com’s India traffic is being monetized by Komli.
This relationship with US publishers gives them instant traction, as many advertisers (e.g. online travel players) want to reach out to these power users.
What’s the future of Ad networks? What will be the impact of recession on them? – We will discuss that in the next part of the series.
What’s your take on Indian Ad networks?