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The Evolution of the Digital Media Buying Ecosystem

August 25, 2015

By Mona Khaldi - Marketing Coordinator, Platforms

This installment of the Marketer’s Guide Series provides a review of ad networks, ad exchanges, demand side platforms, supply side platforms, and trading desks – all of which are intermediaries in the adtech ecosystem, dealing with the buying and selling of digital media.

In the beginning…

Historically (i.e. the mid-1990s), if an advertiser or agency needed to purchase inventory, they would do so by directly negotiating site-level deals with individual publishers, as there were only a small handful of sites. By the early 2000s, however, the web had millions of websites, an engaged and growing audience, and advertisers willing to pay – so the traditional buying and selling method was not sufficient for scale.

Initially, ad networks emerged as closed marketplaces that aggregated, categorized, and sold remnant (unsold) inventory, so that marketers could expand their campaigns’ reach across the growing web. Many networks focused their publisher relationships within a single industry, such as pharmaceutical or automotive, to provide more appropriate inventory to their clients. Additionally, ad networks helped publishers monetize inventory that may have otherwise gone unsold.

Growing pains

By the mid-2000s, there were close to 100 million websites and numerous ad networks, so marketers needed a way to access all of these ad networks and tackle a number of challenges that arose with this new paradigm:

  • Fragmentation – There were too many undifferentiated ad networks that simply provided access to inventory
  • Lack of transparency – Ad networks often did not disclose prices or the site on which the ad was placed
  • Arbitrage – Ad networks were often accused of taking too high of margins
  • Limited reach – The daisy-chain structure of ad networks was still not sufficient to access the now millions of available sites
  • Limited targeting Targeting was based on publisher-site viewer attributes (contextual targeting) as opposed to known user behavior (behavioral targeting), which most marketers found more valuable as this enabled them to target more granular segments

Rise of automation

Similar to stock exchanges, ad exchanges soon emerged as open marketplaces where advertisers, agencies, publishers, and ad networks could buy and sell inventory via real-time bidding (RTB) – a method of buying where inventory is bid upon and purchased one impression at a time (as opposed to CPM- per thousand), using behavioral targeting (made possible by the use of cookies). This meant advertisers were able to accomplish more granular targeting of the exact audiences they wanted, which eliminated wasted spend on lesser-valued impressions.

Additionally, there was a level of pricing and inventory transparency that never existed with ad networks – as exchanges provided pricing and inventory transparency. Exchanges also provided much greater scalability as they bought impressions across the growing number of networks and publishers.

Today, ad networks have changed the way they position themselves; most now offer specialized managed media services that bundle and sell inventory from multiple sources (publishers, exchanges, and SSPs). Some of the ways they differentiate themselves include serving to vertical targeting, or fulfilling specific campaign needs, e.g., CPA campaigns.

Big steps for programmatic

While ad exchanges do accomplish more granular targeting segments without compromising scalability, marketers need a methodology behind the buying engine – this is where Demand Side Platforms (DSP) come in.

DSPs offer programmatic technology, which automates media buying and eliminates manual negotiations. While the RTB technology that makes the buy is a subset of “programmatic,” DSPs also provide the algorithmic methodology that determines which inventory to buy, how much of it to buy, and which creative to display. Through a single interface, DSPs provide centralized access to exchanges, networks, publishers, and Supply Side Platforms (SSP) – tech platforms that help sellers monetize their inventory.

As programmatic evolved, more inventory gained exposure that would otherwise go unfound and unsold, which was a good thing, but it also meant potential commoditization. So, SSPs emerged to help publishers facilitate more “control” over their inventory (e.g., with price floors and minimum bids), and to help them optimize their yield – which means not just selling as much inventory as possible, but getting the max bid possible for each impression. SSPs essentially serve the same function as DSPs do, but for the sell side.

 Centralized services

The agency buyer – to publisher rep model is still used for much of today’s digital media buying, but as programmatic has become an increasingly important way of transacting, special units of programmatic experts have emerged within agencies, or independently, called Trading Desks. Acting as centralized service layers, Trading Desks manage programmatic across all the different vendors mentioned. They also help agencies and advertisers navigate a very complex space, and reduce costs of building tech stacks and internal teams.

What have we accomplished with these developments? The amount of precision and efficiency within the buying process has increased immensely. Additionally, marketers can target more granular segments without compromising scalability, which means audiences are being served ads that are more relevant to their needs. And who doesn’t love that!

Want to learn more about the vast digital space? Check out our Field Guide to Digital Marketing!