An online advertising network or ad network is a company that connects advertisers to web sites that want to host advertisements. The key function of an ad network is aggregation of ad space supply from publishers and matching it with advertiser demand. The phrase "ad network" by itself is media-neutral in the sense that there can be a "Television Ad Network" or a "Print Ad Network", but is increasingly used to mean "online ad network" as the effect of aggregation of publisher ad space and sale to advertisers is most commonly seen in the online space. The fundamental difference between traditional media ad networks and online ad networks is that online ad networks use a central ad server to deliver advertisements to consumers, which enables targeting, tracking and reporting of impressions in ways not possible with analog media alternatives.
The advertising network market is a large and growing market, with the top 20 companies earning about $2 billion in revenues during 2007. This represents around 13% of the total display advertising market, forecasted to grow to 18% by 2010. This growth has resulted in many new players in the market, and has encouraged acquisitions of ad networks by large companies entering the market.
Ad networks are primarily involved in selling space for online ads to appear. This online advertising inventory comes in many different forms, including space on websites, in RSS feeds, on blogs, in instant messaging applications, in adware, in e-mails, and on other sources. The dominant form of inventory continues to be third-party websites, who work with advertising networks for either a fee or a share of the ad revenues.
An advertiser can buy a run of network package, or a run of category package within the network. The advertising network serves advertisements from its central ad server, which responds to a site once a page is called. A snippet of code is called from the ad server, that represents the advertising banner.
Large publishers often sell only their remnant inventory through ad networks. Typical numbers range from 10% to 60% of total inventory being remnant and sold through advertising networks.
Smaller publishers often sell all of their inventory through ad networks. One type of ad network, known as a blind network, is such that advertisers place ads, but do not know the exact places where their ads are being placed.
Large ad networks include a mixture of search engines, media companies, and technology vendors.
Types of ad networks
There are 3 main types of online advertising networks:
- Vertical Networks: They represent the publications in their portfolio, with full transparency for the advertiser about where their ads will run. They typically promote high quality traffic at market prices and are heavily used by brand marketers. The economic model is generally revenue share. Vertical Networks offer ROS (Run-Of-Site) advertising across specific Channels (example: Auto or Travel) or they offer site-wide advertising options, in which case they operate in a similar fashion to Publisher Representation firms.
- Blind Networks: These companies offer good pricing to direct marketers in exchange for those marketers relinquishing control over where their ads will run, though some networks offer a "site opt out" method. The network usually runs campaigns as RON or Run-Of-Network. Blind networks achieve their low pricing through large bulk buys of typically remnant inventory combined with conversion optimization and ad targeting technology.
- Targeted Networks: Sometimes called “next generation” or “2.0” ad networks, these focus on specific targeting technologies such as behavioral or contextual, that have been built into an Ad server. Targeted networks specialize in using consumer clickstream data to enhance the value of the inventory they purchase. further specialized targeted networks include social graph technologies which attempt to enhance the value of inventory using connections in social networks.
There are two types of advertising networks: first-tier and second-tier networks. First-tier advertising networks have a large number of their own advertisers and publishers, they have high quality traffic, and they serve ads and traffic to second-tier networks. Examples of first-tier networks include the major search engines. Second-tier advertising networks may have some of their own advertisers and publishers, but their main source of revenue comes from syndicating ads from other advertising networks.
While it is common for websites to be categorized into tiers, these can be misleading. While Google is in the clear majority of advertisement impression served, other networks that could be labeled as tier 2 actually dominate over these tier 1 ad networks as far as the number of customers reached.
Mobile ad networks
In addition to online ad networks, there are ad networks that focuses on serving ads on the mobile web and within mobile apps. Three issues with ad networks …
1.Positioning: Most ad networks don’t disclose impressions per site. This means that advertisers or media agencies aren’t sure where their ads will run. This can be a dangerous proposition if your ad turns up in website that you don’t want to be associated with.
2.Price transparency: Let’s examine a scenario. An ad network packages display inventory to an agency at say $10 CPM (cost per mille – or cost per thousand impressions). The ad network would then buy a very small portion of the inventory on premium publications at $50 CPM and a large portion of the long tail inventory at $2 CPM. The real eCPM (effective CPM) of the campaign for the ad network is around $2.50, and is far from the agency’s claim of premium inventory. The marketer is however appeased with screen grabs of his ads appearing in premium positions, oblivious of the masquerade while the ad network walks away with a big margin.
3.Ad Relevance: More often than not, the ads were out of relevance with the website content as a fall out of point 1, and also because there weren’t intelligent contextual engines built into the ad servers (the server system that churns out the ads) of these ad networks.
- Ad exchange
- Ad serving
- Online advertising
- View-through rate
- Contextual advertising
- List of advertising networks
- List of mobile advertising networks
- Khan, Imran et. al (2007), "The Rise of Ad Networks", JPMorgan Chase & Company, Retrieved 04/28/10 from http://www.mediamath.com/docs/JPMorgan.pdf[dead link]
- Clifford, S. (4-28-2008.). A Web Shift In the Way Advertisers Seek Clicks. New York Times, Retrieved 04/10/10 from LexisNexis database.