Getting to grips with advertising networks

When it comes to rolling out your campaign online, should you rely on technology to place your ads or should you apply the human touch? By Sean Hargrave

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It is often said that the moment you think you understand quantum physics, you realise you must know nothing. There can sometimes be that feeling with advertising networks.

With a proliferation of three-letter acronyms and enough jargon to confuse even those running the companies, marketing managers can forgive themselves for feeling in need of a reminder of exactly what advertising networks do and what the latest developments have been.

Essentially an advertising network sits in between advertisers’ agencies and the publishers whose display space they wish to buy. While many brands will go direct to the top sites and portals they wish to advertise on, the incredible fragmentation of the online market means that no agency could repeatedly have the thousands of conversations required with thousands of publishers to give an online campaign the desired reach and frequency. This is where ad networks excel. A conversation with one network can lead to space being bought across many publishers.

There has been some complexity introduced into the market through the rise of advertising exchanges, which are generally technology-based platforms which allow publishers and advertisers to match their spare inventory with a campaign’s objectives, a little like buying and selling on an advertising eBay without the need of the network in the middle.

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In a similar vein, advertising platform developers are also enjoying growth by allowing publishers (on the supply side) to choose the best deal they can get across several advertising networks to optimise their yield (a kind of “compare the market” for display) as well as allowing brands and agencies (on the demand side) a direct route to publishers’ inventory without going through the intermediary of an advertising network.

The growing variety of alternatives to the more traditional model has seen the networks’ share of the country’s display market (£380m for the first half of 2010) dip from just over 40% to around 39% at present, with the Internet Advertising Bureau (IAB) putting the dip down to the rise of exchanges and platforms which allow advertisers, or their agencies, and publishers to match supply and demand without a middle-man network.

You’d think this would be a cause for concern for the networks because they have always relied on combining expert consultants to advise on campaigns with relationships with publishers. However, according to Ian Dowds, vice president of revenue at ad network Specific Media, brands will never be able to rely on technology alone because good campaigns will require people to ensure they are targeted, delivered and measured.

“We specialise in behavioural targeting, so brands can reach those people that are ’in market’ for their products and services,” says Dowds. “A lot of this can be done with technology, but we have a team of 15 analysts who help guide campaigns. A great example is we’ve managed to work on categories for people who are in market for holidays not just because they’ve been on travel sites but because they’re slimming and looking for bikinis. A machine wouldn’t have the intelligence to look for that segmentation and then offer it to brands.”

Marketers need to be aware of the risks involved in allowing a third party to buy inventory on publisher sites dotted across the web. While some sites are not forthcoming about some of the hate and adult material they may carry, even reputable publishers can be caught out by, say, running an ad by a kitchen utensils brand next to a story on knife crime.

Hence Rob Blake, vice-president of sales at AOL Advertising (owner of the Advertising.com network), believes brands need to pick an ad network that uses technology to scan websites in advance of placing their adverts on a page.

“We’ve been pushing for this type of technology to be mandatory – our research identified that 17% of advertising going through exchanges posed a high risk of appearing against inappropriate content,” he says. “It’s risky using a network – you don’t always know whose space they’re going to buy upfront, so you need to be sure they are using technology that will protect your brand name.”

It is a concern shared by Internet Advertising Sales House (IASH), the largest council within the IAB, which monitors best practice among advertising networks. It is widening its remit to include advertising exchanges and in January or February expects to be ensuring that available software, which can monitor publisher sites, is being used to protect brands by both networks and exchanges.

Julia Smith, head of IASH, believes that while brands will be interested in better protection next year, they will also soon start becoming immersed in improved technology which goes beyond behavioural targeting to offer real-time bidding.

“Real-time bidding is in its infancy – it’s believed to represent only something like 3% of the UK display market at the moment,” she says. “However, real-time bidding is expected to grow next year. It means a brand, or its agency, can bid for space instantly, so they may pay one fee for a certain type of web user but then they might increase that to a higher level, in real time, if a user is showing all the high value characteristics they’re looking for.”

This will inevitably rely on publishers becoming more attuned to their audiences and employing the latest technology to recognise users so they can add current surfing to past behaviour to build up a picture that will make them more valuable. This, and the rise of real-time bidding, are the big areas brands need to be aware of, according to Joelle Frijters, CEO of Improve Digital, which helps publishers sell across ad networks by picking the best deal available for each user on each page of their site.

“Publishers are becoming far more savvy about the value of the data they have on their users,” she says. “They’re starting to ask who’s using the data on their users and why and so they’re starting to use it more themselves to offer networks better leads to more targeted audiences. This is going to be very useful in spreading the rise of real-time bidding as well as allowing retargeting services to segment audiences and find who’s been interested in a particular product so they can have it advertised to them again later on. These kind of services are set to just keep growing in popularity among brands.”

In many ways, the changes that are currently taking place within advertising networks underpin the way in which they have changed from service providers which matched inventory a site could not sell itself with brands looking for reach and frequency to build on the “wow” factor they had already achieved buying “rollovers” and page “takeovers” on the country’s leading portals and destination sites.

While this is still partly the case, it is now the advertising networks that are driving the adoption of tools such as targeting and retargeting and, soon in more earnest, real-time bidding. However, this success has led to many alternative platforms and exchanges sitting in between available inventory and campaign requirements.

It means brand marketers have the choice between the more human touch of experienced advertising executives running software or adapting cut down budgets to stripping the human element out and relying on technology alone to reach their desired audience.

case study

At Glasses Direct, the UK-based internet business that supplies discount-priced spectacles, there is probably a higher reliance on display than at many other brands because a mature search market scouring the web for deals on spectacles delivered to the door has yet to develop.

Instead, online marketing manager Rick Duncan relies on raising awareness mostly through display, for which he uses one network for reach (receiving a typical click-through rate of 0.7%) and a separate one for targeting and retargeting campaigns (in which click-throughs rise to roughly 5%). He goes direct to the two networks, and others he uses less frequently, to monitor the success of campaigns.

“Ad networks give us the reach and the behavioural targeting we need to find our demographic of men who are middle-aged or slightly older who tend to be on travel or health-related sites,” he says.

“Although a lot of people use agencies, we go direct because I don’t really see the point of using an agency when we can look at how campaigns are running ourselves, and the behavioural and retargeting work involves a lot of manual work at the network, so why add another layer?”

This direct approach, which saves Glasses Direct having to buy space individually from one site at a time, gives the brand reach and precision for a good price.

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“We’ve managed to get our CPM down to around £1 and we’ve also started to do some buying on exchanges where we’ve got it down to 30p, which is pretty amazing. I get pitched every day by a different agency, network or exchange, but when I tell them what I’m paying elsewhere they really can’t compete. I still turn off a network every now and then for a couple of months at a time so we can see the impact it has and make sure we’re working with the ones that give us the best results.”

To truly measure ROI, Duncan has devised a model through which he looks at the path to purchase – he has established that network display campaigns, which are the brand’s largest marketing expense, are driving a cost per acquisition that regularly hits his target of about £30.

VIEWPOINT

Ellie Edwards, managing director, Hi-media

Ad networks can offer advertisers the right audience in the right environment to ensure that their brand is represented in the right way. You need the human understanding that technology alone cannot provide. For example, your target user will browse a variety of sites throughout their average week, but you may not want to serve them your ad late at night, when they are more likely to be surfing particular types of websites that could be harmful to your brand.

We work in partnership with advertisers, ensuring we understand the aims of each campaign, holding their hands before, during and after their campaigns.

The drive for advertising exchanges came partly from advertisers who wanted mass reach at low cost. I don’t want to tar all the exchanges with the same brush, but there’s a lot of inventory out there, and not all of it is high quality. The exchanges came in and flooded the market with inventory, forcing down CPM rates. Exchanges have their place, but advertisers need to be confident about the content their ads might appear next to.

The Internet Advertising Sales House (IASH) has done a lot of work to eradicate the problem, and there are content verification tools that can also help, but the issue is still out there, and the only way to truly eradicate it is total transparency.

Part of the reason it’s still an issue is that advertisers and agencies want lower CPMs. If you just want to drive your campaign on price, then you’ll expose yourself to those sorts of problems. If, however, an advertiser wants a quality premium audience and doesn’t just opt for the spray-and-pray approach, then they have to be prepared to pay for it.

We work in conjunction with advertisers to deliver innovative integrated solutions which engage the users. Ultimately it’s down to click-through rate; we still have to show that our targeted environment works. If we’re charging a CPM one-and-a-half times higher, then we have to prove that it works one-and-a-half times better.

The other big trend in the market is real-time bidding. This doesn’t change the fundamentals of display but enables advertisers to hit the right person at the right time with the right message for the right cost, in theory increasing cost-effectiveness by reducing wastage. But similar advertisers in similar industries will be looking for similar audiences, and that can start a bidding war, and ultimately increase price.

figure focus Q&A

Q How much of the country’s display goes through ad networks?

The IAB estimates that in the first half of the year, 39% of £380m display went through an ad network. This is down from 44% for the corresponding period the year before, mainly due to direct deals with portals and the rise of ad exchanges.

Q What sort of reach do ad networks offer?

The largest, such as Google, can claim to offer reach to 80% of the UK’s online audience

Q How many adverts might a leading ad network be able to deliver?

The latest technology is highly scalable. AOL claims that its network, Advertising.com, delivered 150bn adverts worldwide in the first six months of the year.

Q How big is real-time bidding through ad networks?

There’s a lot of talk about this technology, which is starting to allow real-time dynamic changes in prices for users as they become more or less ’in market’ for a product. It is believed to cover something like 3% of display in the UK and is estimated to be around 5% in the US. Large growth is predicted, though.

Q How many reputable advertising networks are there?

It is hard to say but a potentially useful indication for brands is that IASH, the chapter of the IAB which monitors advertising networks, has 26 members. This is expected to grow to 46 in the new year as ad exchanges are incorporated. Non-membership, of course, does not automatically equate to poor practice.

top trends 2010/11 predictions

Julia Smith
Head, IASH

Our new accreditation scheme should be up and running in the first quarter so we will have the measures in place to protect brands from sites which feature bad content, such as hate and violence. By bringing in the advertising networks, we’ll be able to widen our kite mark scheme so brands and their agencies will have a better idea of who the reputable players in the market are. We’re expecting to nearly double in size from 26 members to 46 by February.

Biren Kalaria
Development manager of YouTube and display, Google

Faster than ever before, advertising networks are offering more than reach and impressions. A lot of what will differentiate one network from another will be the combination of technology and data that networks use to target audiences.
It feels like advertisers are getting more up-to-speed and more sophisticated when targeting specific audiences. There seems to be a general trend towards adding the aspect of audience behaviour into their media mix.
The results that are generated from this type of targeting are significant, but sometimes advertisers can struggle for scale if, for example, their cookie lists are too small. This is why, when you add behavioural targeting to your overall media plan, it helps to optimise the overall performance of the campaign.

Jack Wallington
Head of industry programmes, Internet Advertising Bureau

It’s vital the market continues to educate consumers about the level of control they already have with behavioural advertising across networks, and the IAB does this through its consumer-facing website www.youronlinechoices.com. At the same time, there’s an important job to do educating the market itself about the unique, positive opportunities presented by networks. There’s a range of targeting products already available, but a world of as yet untapped potential awaits in online video and mobile networks.

Matt O’Neill
President, Admonsters

Ad networks as we know them are becoming a thing of the past. It has grown too crowded for networks to distinguish themselves in meaningful ways from one another. There are a lot of technology and data companies that exist to make sense of this complex web. It won’t be long before there is a thinning of the herd as agencies purchase networks, companies merge, and others fold.
Networks that offer a niche valuable audience or technology may remain independent and thrive. Most will not. Agencies will take control of networks as they extend their reach across the ad technology ecosystem as we’ve seen them do with trading systems, demand side platforms (DSPs), data platforms and other tools.

top tips you need to know

  • Advertising networks are generally used to give a campaign reach and frequency and so should not replace direct deals with destination sites for your industry or customer base.
  • Due to this, picking a network that can offer frequency capping is important – this will ensure the same person does not see your adverts more times than you require.
  • Talk to networks about the levels of service they offer, as many will go beyond general campaigns to offer targeting and retargeting.
  • If a highly targeted site is your aim, you may well be best seeking a network that specialises in retargeting.
  • There may well be a niche network that specialises in your industry and so may be best placed to advise on campaigns.

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