Online Advertising has evolved a lot during these past 10 years, new technologies, new 3rd party players, intermediaries, and many more, appeared to changed radically the way digital advertising works nowadays.
This article is part of a series of articles for founders, marketers, and anyone interested in the display advertising world. If you need to market your product or service you've come to the right place.
What is display advertising ?
Display advertising refers to the banner ads appearing in designated areas on websites, social media, or any type of online platform monetizing their traffic through advertising.
Display ads come in a variety of different forms and formats but they still revolve around the same core principles. They try to catch the attention of customers by displaying a creative piece of design and transform this attention into an engagement for brands promoting their product.
Basic advertising glossary
You probably came across numerous times on several terms such as IAB, CPC, CPM, ROAS, and many others... below are quick explanations for some of them:
- Interactive Advertising Bureau (IAB): is an organization that develops the advertising industry standards (formats such as 300x250 / 728x90 / ...). They represent a large number of the biggest advertising companies worldwide.
- Cost Per Click (CPC): is the price you pay for each click in your pay-per-click (PPC) marketing campaigns. You can read more details about CPC on this article: https://www.wordstream.com/cost-per-click
- Cost Per Thounsands (CPM): is the price you pay for each 1,000 ad impressions, it is sometimes referred to as Cost Per Thousand or CPT
- Return On Advertising Spend (ROAS): is a marketing metric used to calculate the efficiency and performance of digital advertising spend.
- Through Rate (CTR): The percentage of people visiting a web page after clicking on a particular advertisement.
The oldschool online advertising lifecycle
In order to generate revenue, many websites and services have a business model revolving around advertising, to do so they optimize their website layout and create ad spaces in order for advertisers to promote their product or service, using display ads.
Before the advent of modern digital advertising, ad spaces buying and selling was done manually by ad buyers (Ad agencies) or sales (Advertisers in house marketing team), this method of work was time-consuming and unreliable for both advertisers and publishers.
The ad serving process was pretty straightforward:
- An advertiser wants to promote a product/services
- They set up their campaign on an Ad Server
- The publisher displayed an ad each time a user loaded a page
Most of the time it was a flat rate based on CPC or CPM negotiated beforehand with the media buyer.
There was a massive flaw with this system, the ads were displayed to anyone with very limited targeting options, as an advertiser, it meant that a big part of your budgets was spent on useless impressions because only a small percentage of the people you reached was your target customers.
With the ever-expanding numbers of internet consumers, publishers had growing leftover ad spaces, which resulted in a loss of revenue on their side.
In order to resolve all these issues, the advertising industry began to shift into a cheaper and more efficient way to manage ad buying and selling, programmatic advertising was born.
The rise of programmatic advertising
Removing humans from the process wherever possible is the motto of programmatic, by adding automation the industry was able to sell more efficiently as ever the remaining ad spaces inventory for publishers, this also enabled advertisers to have more granularity and be more cost effective on their online advertising strategy.
Over the years programmatic has vastly evolved and improved, but it also added a layer of complexity for newcomers as it became more sophisticated. The introduction of RTB, DSP's, SSP's, Ad-Exchange, and many other new stacks of technologies (these will be explained in this article) set the industry standards for the future of advertising.
There is, however, a frequent misunderstanding that all programmatic is real-time advertising. RTB (Real-time bidding) is a subset of programmatic, a way for publishers and advertisers to instantly buy and sell ad spaces through an auction-based model.
What is RTB and why you should care
The advertising platform you will most probably use at first will in most case be Google ads or Facebook ads, both of them are principally based on Real-time bidding (RTB) technologies.
Brands or agencies (the media buyers) very often use a demand-side platform (DSP), in order to set up which impression to buy, how much to pay for them, and others parameters.
Meanwhile publishers (the media sellers) use a supply-side platform (SSP) where they sell their available ad space to media buyers. SSP's and DSP's platforms are then matched up in real time on an Ad Exchange which is basically a real-time marketplace.
The simplest visualization of the RTB lifecycle look like this:
- An advertiser wants to promote a product/services
- They set up their ad campaign usually on a DSP
- DSP's are connected to an Ad-Exchange where the bidding takes place
- The Ad-Exchange are connected to the SSP
- SSP's are connected to Publishers
- The publisher display the ad each time a user loads a page
A publisher is connected to one or more SSP's where he has full control of his ad-spaces inventory, he can set up his minimum impression price and provide his collected audience information using cookies.
On the other hand, an advertiser is connected to one or more DSP's which enables them to set up every single detail of their campaigns: target segmentation, budget limits, timeframe, content, visual assets ...
How does this actually work?
Whenever a user loads a page with ad space for sale, this is what happens:
- The publisher SSP collect all the data (User cookies, geolocation, ....) needed and send a bid request to an Ad Exchange.
- The Ad Exchange (basically a digital marketplace) creates an auction containing all the previously collected data.
- In response to this auction the DSP's compile these data and look for an advertiser that has matching campaign criteria.
- All the advertisers (through their respective DSP) whose targets align with this specific impression enter the auction and place their bid. Since the whole process needs to happen in less than 100ms, the advertisers can only bid one single time, which means that the first highest bid always wins.(depending on the Ad Exchange bid rules, ie: Google Doubleclick has a first bid strategy).
- The Ad Exchange sends the bid winners data to the publisher Ad server.
- This Ad server will then pull the ad from the winning bidder's Ad server and displays it (we call this ad served) on the user browser.
- Finally, the advertiser ad server collects the user ad interaction (clicks and other data).
Keep in mind this is a simple representation, big actors can be SSP and DSP at the same time (ie: Google Doubleclick) and there are many other actors established in the advertising industry, all providing a stack of technology and services such as:
- Dynamic creative optimization (DCO): DCO is a display ad technology mostly used in retargeting strategies, it uses the data from the website visitors and matches it with an advertiser catalog in order to generate "personalized" ads that are then ad-served in real time.
- Data management platform (DMP): A DMP is to put it more simply big data for advertising, it consolidates customers data for companies such as in-store purchases, geolocation, customer rating, and many more... all these data are gathered in order to better segment and target users based on these past interactions.
- Fingerprinting: Is a mean to identify and track a specific user throughout his browsing experience and ad interactions, the most known are "cookies"
- Anti-fraud solution: Ad fraud is defined as any deliberate activity that prevents ads from being served to human users (hidden ads, impression laundering, click hijacking, bots, ...). The companies providing anti-fraud solutions, ensure every ads are served to legit users.
You can learn more about potential ad fraud technique reading this article: https://clearcode.cc/blog/rtb-online-advertising-fraud/
The advertising Ecosystem is very wide and keep expanding as new player enters the industry.
What's next ?
In this first part we have gone over the basics of how modern digital advertising works, and explained the many terms and processes of advertising and how everything is tied up to the concepts of offer and demand, auctions and bidding.
These various moving parts of the advertising world are rather important to understand, it is pretty complicated but hopefully the illustrations have made the whole experience digestible.
In the next part, we will cover the various marketplaces and platforms that allow you to distribute your banner ads and their peculiarities. We’re going to do a deep dive into why you should choose a certain platform over another and the advantages that come with it.