Ad Networks Explained...

The Shoestring occasionally posts articles written by guest bloggers. The following explanation of advertising networks comes from Bill Wittur of Bottree Media Consulting.

Ad Networks 101
Do you want to make more money from your web site, but you don’t have a sales force? Have you tried “always on” ads from certain search engines, only to find that the revenue earned is not enough?

If you’ve answered yes to either question, you might want to consider joining an online ad network. Networks provide a service that advertisers and publishers value and need.

Increasingly, they provide value to consumers as well because ads become more relevant. This article introduces some of the basics related to networks, including what they are and why they exist. I will approach the topic of networks from the perspective of a publisher and will attempt to address the pros and cons with respect to joining a network. Finally, I’ll speak to some of the upcoming factors that will have on impact on networks, including targeting, reporting, billing and vertical networks.

What is an Ad Network?
An online ad network represents an aggregation of just a few to a few hundred web sites under one central organization. The goal is to represent these sites as part of a cohesive business and marketing strategy. The intent is to create mass from a collection of seemingly fragmented sites, or publishers.

Picture for a moment the needs of an advertiser or media buyer that represents a client with something to sell. Using a traditional model, these people want to speak to the largest possible audience with a common message. Ad networks help advertisers place their ads more efficiently across a broad range of sites while simultaneously helping these sites generate revenue.

When you join an ad network, you are making a commitment to give that network access to a certain portion of all ads that run on your site (your ‘ad inventory’), in exchange for revenue from advertisers that are already using that network. The network charges a commission, which is deducted from this revenue, to account for services like sales, administration, reporting and billing.

There are basically three types of ad networks:

1. Rep shops with ‘transparent site lists’. These organizations work proactively with clients to integrate advertising with publishers. They also seek to maximize the revenue earned per site. They are ‘transparent’ because advertisers know all of the sites that the rep shop works with.
2. Semi-transparent. Only some of the sites, usually ‘marquee’ brands in the industry are advertised. The other sites are only identified in terms of audience size or vertical appeal and may not command as high a premium.
3. Blind. Advertisers cannot determine what sites belong to this type of network. Campaigns are bought on the lowest possible Cost-Per-Click (CPC). Content advertising with search engines works this way.

Types of Pricing
Generally, there are 3 types of pricing for ad networks:

1. Cost-Per-Thousand Impressions (CPM). Advertisers pay each time the ad is shown to a user.
2. Cost-Per-Click (CPC). Advertisers pay when someone clicks on the ad.
3. Cost-Per-Action (CPA). Advertisers pay an agreed amount when users buy goods, sign up or do other ‘actions’.

What are the Pros of joining a Network?
There are many benefits to joining a network:

• A sales force if you don’t have one
• Consolidated reporting
• Learning provided by the sales network as to how to maximize the revenue from ads on your site
• Sharing of technology
• Audit-quality billing and invoicing
• Potential for new audience
• Improved visibility with media buyers and advertisers (if you’re part of a Rep network).

At no point is the autonomy of the individual web site sacrificed. With most networks, you get to control the type of ads that are seen on your site (although this will limit your revenue).

What are the Cons?
Generally, these are the cons of joining an ad network:

• Commissions paid. You’ll have to surrender 20 to 30% of your ad sales to the network. If you’ve already got strong sales, they may not be worth it.
• Visibility. If you choose a semi-transparent or blind network, you may not get the visibility you thought you would.
• Change. Some sites are reluctant to change and your users may not want to see ads on their favourite site. However, unless you’ve got a rich uncle paying your bills, you will have to make this trade off.

Conclusions
Ad networks may not be for everyone, particularly if you’re a mature and stable site with a strong sales force. However, even those “Type-A Superstars” won’t be able to sell every last ad on your site, so ad networks offer a great way to sell of what’s called ‘remnant’ or unsold inventory.

Increasingly, WANs are more appealing to advertisers because they allow for a sense of mass while also delivering a unique and custom audience for their products. It’s this kind of customization that will be appealing to consumers.

About Bill WitturBill Wittur owns and operates Bottree Media Consulting and has been involved with the Internet industry since 1995. Services provided include the development of online ad revenue strategies, instruction, web marketing strategies, and digital media services (media buying and planning, Pay-Per-Click search campaigns).