When planning media buys — or any purchase at all, for that matter — you need to weigh the pros and cons of every option. Highly targeted placements, such as on search or shopping sites, are expensive. High-profile placements, such as on financial sites or portals, also come at a premium and often yield very little return. On the other hand, low-cost placements on networks often lack targeting and site quality.
When faced with all these challenges, advertisers must find the media buys that balance targeting, prestige, audience quality, and pricing in a way that works for them.
Low Price, Great Reach
At the same time, few would dispute the value of working with ad networks because they generally allow for lower-cost ad placements with the potential to obtain a tremendous audience reach, with viewers across hundreds, if not thousands, of sites.
Most networks, aside from those representing specialty sites, have similar demographics and offer comparable targeting opportunities. Many even have very similar targeting channels (lifestyles, women, sports, travel, business, etc.) but differ as to the actual sites represented.
However, site quality and corporate image have a lot to do with the value an advertiser places on a network. For example, DoubleClick will sell its ad inventory at a higher price than its competitors sell theirs, but it represents some very popular, high-end sites. At the other extreme is a lower-tier network that sells ads at a low cost or on a performance basis. Both scenarios can be good options, depending on the nature and goals of the advertiser.
Each network, however, operates in a unique way, from pricing to payout ratios to the proportion of a site’s inventory that it represents. It is very likely that a site handles media sales in-house and turns to a network to sell off the residual. It is very hard to sell out a major site’s ad inventory at prices demanded by site publishers. Simply put, a publisher often tries to maximize its sales revenue in-house, then takes what it can from a representing company, such as a network.
A site that sells directly to an advertiser may charge prices of $10-75 CPM, depending on the audience. On the other hand, ads running on that site as a result of a network may potentially be sold as part of a run of a network deal for as little as $1 CPM or $0.25 per click. In this case, the site generally takes home only 40-60 percent.
These publishers place a higher value on relationships with advertisers that buy directly from them — and for good reason, because they are the ones that really pay the bills. It only makes sense for publishers to fear that these advertisers might find out that they can buy the exact same ad placements via a network at a lower cost. For this reason, sites often ask their networks not to disclose to advertisers where ads will be running.
Show Me the Ad!
Here is a scenario that all buyers are undoubtedly familiar with: Once all the campaign terms have been agreed upon, where are the advertiser’s ads actually going to be running? Where can the buyer and its client view the ads? Imagine the following conversation:
- Buyer: I have $15,000, and I am looking for a low-cost run-of-network placement.
After some haggling…
Vendor: Sure, I can do $x CPM for you right now.
Buyer: OK, I think I’ll take it.
Vendor: The IO is on its way.
Buyer: Oh, and I need a list of all the sites where my ads will be running, please.
Vendor: Can’t do that.
Buyer: How can I give you $15,000 without knowing what I’m getting?
Vendor: Sorry, we have a confidentiality agreement with our sites.
Buyer: Seriously? Then what am I paying you for? I can’t do the deal then.
Vendor: Oh, OK. I’ll see if I can get you a small list.
From here, the salesperson usually comes back with something that lists the best 10-20 sites (although the resulting referral logs often look nothing like the list). Even though buyers understand the need for confidentiality, the other perspective also needs to be recognized, especially when a client starts questioning whether its media dollars have actually been spent at all.
Imagine walking into a department store looking for a sweater. The salesperson says that he or she will give you 30 percent off on a sweater, but you can’t see it or try it on. The store will mail it in a couple of weeks. Don’t worry, though, the merchandise will be stylish and top quality. That would be a tough sell!
Trying to Please Advertisers and Publishers
Getting back to the network scenario: There is a definite conflict here. You, as an advertiser, have the right to know what you bought. At the other end of the spectrum, the network must try to sustain its publishers’ ability to retain top-tier advertisers (those that pay the premiums).
From the buyer’s point of view, it is understood that it is almost impossible to obtain the required reach and pricing by negotiating media buys with each site individually. Were a buyer to try to do so, a campaign’s cost would likely increase fourfold and the time to coordinate it could take weeks. But at least the buyer would know what specifically was bought.
I remember an incident last spring when a client of mine requested to be placed on a high-end financial site. We negotiated a deal with the site that had us, in essence, paying for the high-status profile of the placement. A few days in, we realized that the site was overdelivering three to four times the volume purchased.
It turned out that one of the networks we were running with at the same time represented some of the financial site’s inventory, so the ads were being served from two sources. But the inventory we negotiated directly with the site came at a high cost, while we were paying only $0.30 per click through the network. Needless to say, this was a hard pill to swallow, so we renegotiated the deal with the site.
Nobody wants or expects to pay more than the next guy, especially when the next guy is yourself. Everyone wants a good deal. So it’s hardly surprising that advertisers find ambiguous offers hard to take, regardless of the pricing.
Video consumption keeps increasing and Facebook is serious about a video-first world, encouraging us all to explore its full potential. Ian Crocombe, ... read more
Mike Andrews Ph.D is Chief Scientist (Forensiq) at Impact Radius, and is carrying out some fascinating work around digital marketing and ad ... read more
A new organization, The Coalition for Better Ads, has been launched to “leverage consumer insights and cross-industry expertise to develop and implement ... read more