Day 4: Advertising Revenue for Startups

This post is part of a 5 day series where we lay the groundwork for a startup to generate advertising dollars from agencies or brands.  Note:  while this is focused on startups, it could apply to any company of any size.  The first post that sets up the series is located here, second post is located here, third post is here, and it’s based on this presentation.

If you are a publisher and you are looking to generate revenue from advertising, then read this series.

Today’s topic is on the evolution of the paid online advertising ecosystem.   Essentially, where do you (as publisher) plug in to generate revenue from myriad of sources.  Lets tackle them one by one.

On slide 11 of the presentation, it highlights 5 different areas:  Sell Side Optimizers/Platforms, Ad Networks, Google, Ad Exchanges, and DSP Integrations.

  1. Ad Networks:  As a publisher, you could contact any ad network and try and have them represent your website.  Depending on how large you are or how much publicity you have around your brand, you could potentially negotiate for better revenue spits, monthly guarantees, and potentially advance payments.   Ad Networks sometimes want exclusivity but as a publisher, make sure you get better deal terms if you agree to it.  Ad Networks are a quick way to make a few bucks with your inventory, though as an agency person, I don’t love ad networks.
  2. Google:  Technically, Google is a network and exchange, but I pull them out to their own line item because they are such a beast.  Many publishers love Google because of the simplicity around Ad Sense/Ad Words.   You could be up and running accepting Google ads within 24 hours.  Google if not already, is going to mix their search and exchange inventory to yield the highest amount to a publisher (and thus, net a high yield themselves).
  3. Ad Exchanges:  As a publisher, you can allocate all or a portion of your inventory to ad exchanges such as Ad Meld (MeldX), Right Media, Google AdX, AppNexus, ContextWeb, and a host of other platforms.  By doing so, you are opening up your inventory to be bid on by the demand side.  It’s similar to an eBay auction – where in real-time (or near real time), impressions are transacted and ads are run.  It’s rather simple to participate in this, but it’s not as simple to master it without any knowledge of the space.  Luckily, there are people like PubGears who can help you navigate it (disclosure:  I’m an advisor).
  4. Demand Side Platforms:  If you want to try and be as close as possible to the big agency dollars, then integrating with a DSP directly might be the best way to go.  While hard to get on their radar screen if you are extremely early stage and without much inventory, DSP’s are aligning themselves as close to the client dollar as possible and 2011/12 is going to be the year of direct integrations for publishers with DSP’s, bypassing intermediaries such as Exchanges.
  5. Supply Side Optimizer:  Not all above is mutually exclusive.  As a publisher, you can implement a SSO/P and plug into all of the above and have it maximize your yield.   There are a few players in this space such as Rubicon, Pubmatic, Admeld, YieldX, that all plug in and allow for yield optimization across your creative units.

All of the above opportunities are for standardized units.  These include the IAB and OPA standardizated creative.  Slide 12 & 13 talk about how you need to add data to your impressions to make them of real value to advertisers.  There are billions of impressions so how do you make them stand out… that’s by adding as much data around them as possible for advertisers to understand and buy.  This is key… otherwise, you’ll be selling your impressions for <$1.00

Stay tuned for the next Advertising Revenue for Startups post on my overall thoughts on the business and where I would start.  It’ll be the last writeup in this series.  I hope it’s been helpful.

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  • ben

    Darren, good write up, but suggesting a publisher can work directly with DSP’s to get closer to the brand budgets is only partially accurate. The rub is that DSP’s and agencies won’t guarantee fill rates or a certain level of monetization… so what happens to all the impressions that an agency or their DSP doesn’t end up buying? Low fill rates dramatically affect yield, and perpetuates the big problem the ecosystem faces today– lots of tonnage available, but little premium inventory (why would you make premium inventory available if you’re not going to make any real money?). And the availability of low quality inventory on the exchanges isn’t helping brand dollars migrate to programmatic environments…

    This is where the SSP’s come in. They’ll provide you, a publisher, access to ALL the brand dollars through ALL the intermediaries, and ensure you actually make some real money, safely. In turn, you’ll make more premium inventory available on these platforms, and better inventory will allow more brand budgets to migrate over into this type of buying environment. Everybody wins.

    We’re not going to get where we want to be if you ignore the role of the SSP’s….

    • http://www.darrenherman.com dherman76

      Totally agree. Depending on the agency/brand, they might garauntee dollars but that’s few and far between. SSPs are extremely important to the mix.

  • ben

    Darren, good write up, but suggesting a publisher can work directly with DSP's to get closer to the brand budgets is only partially accurate. The rub is that DSP's and agencies won't guarantee fill rates or a certain level of monetization… so what happens to all the impressions that an agency or their DSP doesn't end up buying? Low fill rates dramatically affect yield, and perpetuates the big problem the ecosystem faces today– lots of tonnage available, but little premium inventory (why would you make premium inventory available if you're not going to make any real money?). And the availability of low quality inventory on the exchanges isn't helping brand dollars migrate to programmatic environments…

    This is where the SSP's come in. They'll provide you, a publisher, access to ALL the brand dollars through ALL the intermediaries, and ensure you actually make some real money, safely. In turn, you'll make more premium inventory available on these platforms, and better inventory will allow more brand budgets to migrate over into this type of buying environment. Everybody wins.

    We're not going to get where we want to be if you ignore the role of the SSP's….

  • http://www.darrenherman.com dherman76

    Totally agree. Depending on the agency/brand, they might garauntee dollars but that's few and far between. SSPs are extremely important to the mix.