Guide to Ad Tech in a nutshell

Let’s take a look at the history of Ad tech landscape. Then we can understand what’s going on beneath the surface.

Here’s a timeline of the evolution of the Ad industry.

By now one thing is pretty clear that companies have moved from the age of static advertising to programmatic advertising. It is a sharp weapon in the modern marketer’s arsenal. The need to build more targeted, personalized and engaging ads has led to the discovery of Programmatic Advertising.

Earlier, Brands/Advertisers used to buy media or Ad space via the Agencies. Publishers owned this Ad space or inventory. This was a completely direct and manual way to buy and sell inventory. The currency used to trade inventory is known as impressions and is traded on a CPM basis i.e cost per thousand impressions. For example: Advertise can agree to buy at the rate of $1 CPM. This rate depends on the type and quality of inventory.

Over the period Publishers began to create significant content and had billions of impressions to sell. Seeing there was many opportunities a new breed of players came up called Ad networks. Now, these Ad networks started to act as a mediator between Advertisers and Publishers. They began to aggregate the inventory from multiple Publishers. Soon there were so many ad networks they started to make it became difficult for both buy side and sell side to work with them. Insufficient transparency was a major issue. Advertisers did not know where exactly their ad was being placed & publishers did not know who is exactly buying their inventory. Hence, a new type of concept called Ad Exchanges emerged which helped trade inventory in an auction-based model. Publishers could now expose their audiences and advertisers could bid on selective audiences & could have their ad in front of the right audience at the right time. Advertisers invested in trading desks or demand side platforms to carry out the bidding efficiently. Publishers achieved the same by working with Supply-side platforms and working directly with exchanges. You can see there are many players working. This is an interconnected web of networks. Many layers between the advertiser & Publisher raises 2 major issues: Low margins & Insufficient transparency.

So there are many actors in the ecosystem. You must be wondering what role does each play in the industry. Let’s find out:

There are 3 parties which interact — the user, The publisher and The Advertiser.

1. The User who navigates/browses the internet and the desktop or mobile webpages.
2. The Publisher who owns the web pages and generates the content consumed by the users.
3. The Advertisers who want to get the attention of the user by placing ads on the Publisher’s inventory.

But, the creation and delivery of ads is a pretty convoluted process and involves many parties like:

1. Ad Agencies: They handle buying of media on behalf of many Advertisers/Brands.
2. Dsp’s or Demand Side Platform: They allow advertising clients to buy digital media on several selling systems, or exchanges, through one interface
3. Ad Network: Think of it as a Broker between a group of Publishers and a group of Advertisers.
4. Ad Exchange: A marketplace that enables advertisers and publishers to buy and sell advertising space, often through real-time auctions.
5. SSP’s or Supply Side Platform: They allow publishers to access demand from various networks, exchanges, and platforms via a single interface.

There is a strong belief in the whole ad tech community it is more complex than the Wall street. Well, you might be thinking how can we compare Ad tech landscape to Wall street. Well… if you look at amounts of transactions that happen in this industry at any given time, you will soon realize it is close to 400 billion transaction-like events per day, while the New York Stock Exchange processes six billion trades.

It’s already huge and it’s getting bigger at a fast pace. It’s even more fragmented with many layers of middlemen in between taking away margins and eroding the value for the Publishers and Brands. The whole ecosystem is full of many players like on one hand there are Brands, Advertising agencies, trading desks, Demand Side Platform, Ad exchanges, Ad networks and alternatively you have Supply-side platforms, Publishers who want to monetize their inventory in the best possible way.

Ad fraud is another problem plaguing the industry. Advertising fraud is typically done by creating fake ad traffic using content-scraping websites or other environments or creating other fictitious mechanisms for delivering ads that are not seen by consumers.o

Many companies have recognized the need of change in transparency in the industry dominated by Google & Facebook.

Recently, a new concept emerged called “ Header Bidding” aimed towards leveling the ground which till today has been dominated by Big players.

Ad tech is a crowded space and is changing fast. Companies like Google, Facebook, Yahoo, AOL etc dominate the industry today for their sheer scale and powerful network effects. Over the past couple of years there’s significant consolidation going on because there are many companies fighting for the same pie.

Ad tech companies had a tough 2015, and so far, 2016 has not been any better. But one thing is for sure to stay ahead of the curve, both advertisers and marketers, will have to become more data driven. I believe it’s just the beginning and there are more exciting things waiting to happen. Stay tuned!