January 8, 2009

How Online Ad Networks function

An advertising network or ad network is a company that connects web sites that want to host advertisements with advertisers who want to run advertisements. Increasingly Ad networks companies are paying software developers as well as web sites money for allowing their ads to be shown when people use their software or visit their sites.
Online advertising inventory comes in many different forms. This inventory can be found on websites, in RSS feeds, on blogs, in instant messaging applications, in adware, in e-mails, and on other sources. Some examples of advertising inventory include: banner ads, rich media, text links, and e-mails. (This is not an exhaustive list.)
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 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.
In most cases, ad networks deliver their content through the use of a central ad server.
Large ad networks include a mixture of search engines, media companies, and technology vendors.
There are three types of online advertising networks:
  1. Representative (or Rep) 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.
  2. Blind Networks: These companies offer low pricing to direct marketers in exchange for those marketers relinquishing control over where their ads will run. Blind networks achieve their low pricing through large bulk buys of typically remnant inventory combined with campaign optimization and ad targeting technology. The financial model is arbitrage.
  3. Targeted Networks: Sometimes called “next generation” or “2.0” ad networks, these 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.
Another classification of advertising networks is given as follows: 
  • First-tier advertising 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: 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.

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