Demand-Side Networks: the Modern Ad Networks.

Samuel Langhorne Clemens – aka Mark Twain – is often (mis)quoted as having said, “The reports of my death have been greatly exaggerated.” In a similar vein, we have all heard about the impending demise of Advertising Networks … a slow death driven by the rise of Demand Side Platforms (DSPs), Supply Side Platforms (SSPs) and Display Inventory Exchanges. The doomsayers are often quoted as suggesting that:

• Ad Networks are inefficient;
• Ad Networks inflate margins for themselves;
• Ad Networks are becoming obsolete because of exchanges; and
• There are too many ad networks; they can’t all add value to the ad stack.

The doomsayers are overwrought, and the Ad Network isn’t dying. Instead, what we are seeing is the fundamental transformation of the Ad Network. Here at Epic, we think of the outcome as the emergence of the “Demand-Side Network”.

 

A brief history of (Internet advertising) time.

Ad Networks have been around the ecosystem for awhile now, providing efficient, scalable media buying solutions for advertisers. The aggregation of inventory and behavioral data started long before we saw Mr. Kawaja’s now-famous slide detailing the complicated landscape in interactive advertising. An “aggregation model” was developed beginning in the middle of the last decade, wherein networks provided advertisers with a solution that enabled scale, targeting and performance. For a while, this worked well. Starting around 2008 however, a thesis began to develop that the ad landscape was either inefficient or provided too much margin for Ad Networks, or both. One of the drivers of this was a recessionary economy that required advertising-centric parties to focus more on performance goals and profit growth. Partly as a result, an explosion of new models emerged seeking Ad Network market share. While describing the full new entrant landscape is beyond the scope of this article, here are the major new players, simplified for our purposes here:

Ad Exchanges. Ad Exchanges evolved from the Ad Network model. In fact, the founders of one of the largest exchanges, Right Media (RMX), started it in late 2004 in order to provide a more efficient model for the online ad ecosystem. The exchange model existed as a standalone business but never fully caught on until the rise of the DSP in recent years.

Demand Side Platforms (DSPs). The DSP model was also shaped by the Ad Network model. In fact, some of the current DSPs were once Ad Networks, but were unable to gain traction in part because of the sheer amount of competition and the established players in our space. These new players adapted their model to attempt to address inefficiencies with the Ad Network model.

Supply Side Platforms (SSPs). The SSP model was formed in part to provide publishers with a more streamlined and efficient approach to working with the hundreds of networks that were vying for publisher inventory. Most publishers found it difficult to dedicate a team to manage their Ad Network relationships, instead choosing to give 10-15% of their profits to the SSP to do it for them. You guessed it; this model, too, was created out of the Ad Network business.

 

Not your father’s slightly older cousin’s network.

People would like to paint the picture of Ad Networks as outdated and increasingly irrelevant (never mind the irony that the Ad Network model has served as the genesis for many of the current models permeating the space). At Epic, we would argue that the problem isn’t with the model itself, but rather, the definition of the Ad Network model. The traditional definition and description of an Ad Network is antiquated, though it remains the prism through which Ad Networks are typically viewed (and often negatively judged!). Most digital media press outlets and industry analysts haven’t caught up with how Ad Networks are actually operating and evolving.

And what does that evolution look like? In multiple ways and in a wide variety of capacities, the Ad Networks which continue to thrive are focused on increasing advertising efficiency throughout the ad stack and lifting the entire ecosystem as a whole. By the way, you might be surprised at how many Ad Networks are still thriving, and how many are substantially larger than their point-solution little siblings like pure DSPs.

Yes, the traditional Ad Network model has been under pressure for a number of years … and yes, like any well run business, the good Ad Networks are innovating and enhancing their suite of services for their clients.

A new definition – and our very own Three Letter Acronym (“TLA”)! – is in order, we believe: the Demand Side Network (DSN). A Demand Side Network is effectively an all-in-one offering, and has the ability to do virtually everything a DSP and an SSP can do, and much of what an Exchange can do (vis-à-vis proprietary inventory) … while also being able to bid on exchange inventory as necessary, and with scalable efficiency.

Here are the DSN’s distinctions, we believe, versus cobbling together the same capabilities ala carte via the DSPs, the SSPs, the Exchanges, etc.:

1)      Reduce costs and increase efficiency

2)      Data. DSN’s:

a.      Are integrated with all the major data aggregation providers

b.      Provide access to unique proprietary data sets not available to DSPs

c.       Provide efficiencies for accessing and reporting on performance across data providers

3)      Inventory. DSN’s:

a.       Provide access to aggregated, transparent inventory

b.      Access premium inventory which is not available on the exchanges

c.       Eliminate artificial bid pressure from inflated pricing (like exchanges do)

d.      Provide direct publisher relationships with pre-vetted premium inventory (some of which is not accessible by DSPs)

4)      More Margin to share with clients. DSN’s:

a.       Eliminate the standard 10% fee for DSP’s

b.      Can offer the same real-time bidding capabilities minus the fees

c.       Use automated optimization techniques developed over years of campaign management to meet advertiser goals more efficiently

5)      Media Buying Efficiency. DSN’s:

a.       Manage buys through their own platforms for real-time bidding

b.      Can focus on strategy and scaling campaigns through their own media buying team

c.       Can bring on direct inventory that will not sell to the Exchanges

6)      Trade desks. DSN’s can provide sell-side capabilities that allow publisher’s to present their inventory for real-time bidding.

All the while, the DSN continues to provide the same level of service to their publisher base without undermining their direct sales efforts or devaluing the traffic that publishers work so hard bring to their site.

 

The DSN: a holistic solution to defragment the ecosystem

SSPs, DSPs and Exchanges, funded by venture capitalists eager to invest in the next new thing, do bring certain efficiencies, for sure. However, the industry should realize: 1) that these businesses evolved from the basic practices and technical capabilities of Ad Networks; and 2) that these businesses were founded while certain Ad Networks were simultaneously investing in added efficiencies to stay a step ahead, built upon a solid foundation of years of effective client services.

So long as Ad Networks continue to bring value to the online ad ecosystem, they will not die. Those that have evolved are, in fact, thriving. With a bench of deep experience, technological sophistication and a track record of execution, the new Demand Side Network model can be a powerful, consolidated service offering for advertisers and publishers who are fed up with the inefficiencies of the online media buying landscape today. Indeed, one could argue that the proliferation of new point solutions – which are best thought of as feature sets rather than true stand-alone companies – does not add efficiency, but instead further convolutes the already complicated marketplace.

Defragmenting the ecosystem is the true future wave, we believe. By consolidating the key nodes of the ad stack and optimizing across those nodes, we effectively combine the otherwise ala carte capabilities of the ecosystem into a one-stop-shop. When integrated with other forms of digital advertising – Social Media, Mobile, Search, etc. – we believe the Demand Side Network becomes not only the most effective and efficient solution for an advertiser, it unlocks far greater attribution and full funnel measurability for our advertising partners by virtue of providing integrated multi-channel and transparent campaign management. And at least with the advertisers and agencies we serve, that is what it is all about.

Don Mathis is the President and CEO, and Qayed Shareef is the Senior Vice President of Business Development, for Traffic Marketplace / Epic Media Group.

Epic Media Group Q&A on AdExchanger

Be sure to check out the in-depth Q&A with Epic’s Art Shaw posted on Adexchanger.com. You can click here to view it.

Ad Networks: The Next Generation

In a recent post, we at Epic Media Group predicted the interactive marketing industry will consolidate somewhat in the months ahead. In that post, we had purposely used terms like “interactive marketing industry” and “digital marketing services companies” instead of “ad networks.” Today, we are addressing what ad networks look like now, and what they will look like in the future.

For a few years, certain industry pundits and followers have claimed ad networks would become irrelevant over time. Since our business has been categorized as an ad network, we certainly didn’t believe that and concrete industry data refutes this as well. In fact, old school ad networks have given rise to much more comprehensive digital marketing services companies that are deeper than the traditional ad network of a few years ago.

As we and other industry experts have stated, the interactive marketing ecosystem is cluttered and this chart exemplifies this point. The chart is useful as a snapshot showing all the various service providers and types of services in the chain; however it is also somewhat outdated in terms of what many of these companies are striving towards and are currently delivering for advertisers and publishers in practice today.

Speaking only for Epic Media Group and Traffic Marketplace, I can tell you we don’t consider ourselves just an ad network by the traditional definition. Sure, there is a major piece of our business that is driven by a network effect, meaning we leverage tremendous scale and reach for advertisers and agency partners by garnering distribution via dozens of safe, targeted, high-value publishers simultaneously rather than one-to-one. However, to say that’s all we are is incredibly short-sighted. Referring again to the ecosystem chart above, we could be categorized within mobile networks, performance-based networks, rich media networks, yield optimizers, DSP’s, and creative optimizers. Not to mention what we’re doing in brand protection; technology, RTB (real-time bidding) and our platform; emerging media; and across specific verticals.

While it’s easy to analyze the companies that support the industry by putting them into buckets, it can be inaccurate. Modern interactive marketing companies are a lot more strategic – and diversified – than the ad network of even a few years ago. This does not diminish the value of running massive networks; it simply doesn’t tell the whole story of what some intermediaries provide or are focusing on strategically.

Consider one definition of an ad network: “a company that connects advertisers to web sites and publishers that want to host advertisements.” If that’s all it is, you can see why hundreds of ad networks were born over the last several years.

We have stated before that the lines are blurred in the interactive marketing space unlike any other medium. People and industry experts like to analyze things in nice, neat buckets. Offline, there are direct response advertisers and publishers at one end; brand advertisers and premium publishers at the other; and there is a one-to-one relationship between advertiser and publisher in most cases.

Online, it just isn’t the same simple model, yet analysts like to put together charts such as the one linked to above with service providers lumped into specific buckets. The reality is that there will likely never be a one-to-one advertiser/publisher relationship in interactive marketing. But is it accurate to say that there are, by my count, 22 potential other parties in the advertising chain? No, but it looks great on a PowerPoint slide. New, digital marketing services companies are already performing many of the functions niche companies serve today – under one roof, no less.

The strongest ad intermediaries have businesses today that look like a good investment portfolio. They are well-diversified and bring a host of solutions to their advertising and agency clients. To some extent, they’re a one-stop-shop which was the goal of the formation of Epic Media Group. A few other companies have followed this strategy as well. Using the financial services analogy, a good intermediary’s portfolio is data-driven, squeaky clean from a compliance and brand protection standpoint, focused on technology and expansion of one’s platform, and possessing an eye toward forming long-term partnerships.

The ideal portfolio digital marketing services companies must provide to advertising clients includes in no particular order: 1) generating scale; 2) the ability to run ads on a number of devices and platforms; 3) targeting ads based on the distribution type (display, search, social, etc); 4) protecting their brands; 5) optimizing campaigns utilizing technology and real-time bidding capabilities; and do all of this on a global scale. While a network effect may be underlying a few of these items, it is not the sole thing companies who support the interactive marketing space nowadays hang their hats on; it’s much broader and more comprehensive.

It is a fair assumption to claim that there are many ad networks still out there based on the old definition, and still provide some value in that capacity. But, there are a handful of companies that go beyond that and are considered the next generation of Ad Networks. For those who believe things like RTB are replacing the ad networks of old, it is actually the networks themselves which are doing so.

Michael Sprouse is the Chief Marketing Officer for Epic Media Group.

Ad Networks and Demand-Side Platforms

The interactive ad industry is widespread with buzzwords, catchphrases and acronyms. Which new, abbreviated, “next gen” solution will unleash its “game changing” power on the digital marketing landscape? Will Demand Side Platforms (DSP) rule this brave new world? At Epic Media Group, we don’t believe so. With information moving so quickly, it is no surprise that there are so many opinions and a great deal of confusion. Hot topics like data, transparency, real-time bidding (RTB), trading desks, and search re-targeting further complicate the industry landscape for most industry onlookers rather than simplify it – fueling circular conversations that last for months.

Demand Side Platforms are making noise, sure, but just like a trendy new band, the sound may be different to your ear. Simply put, a new genre does not make all previous genres irrelevant. In fact, if you deconstruct the name Demand Side Platform it becomes far less complex than it seems. As our CMO, Mike Sprouse, recently pointed out on this blog, advertisers want online advertising to be simpler and we think that will begin happening in the near future. Simplification begins with our industry’s acronyms.

The term “platform” – a word we use a lot at Epic Media Group – means a plan of action, scheme or design. Platform is also defined as a raised, level surface – like a train platform or a stage. Technically speaking, it is a hardware architecture and framework that allows software to run.

Strong platforms should be designed to support all of a company’s business channels, allow for cross-channel functionality, and leverage massive amounts of data and data analytics to deliver advertiser campaigns across all channels. The “P” in DSP references the capability to place bids, in real time, for impressions available on inventory exchanges with a user interface that provides some degree of reporting. A strong technology platform must encompass a lot of things and is an integral part of any ad intermediary’s business.

“Demand-Side” is just another way of saying Advertiser-Side. So a DSP simply provides access to a technology set designed to serve the demand or advertiser side of the business. In other words, DSP’s focus on the advertisers’ goals, which is precisely what companies like Traffic Marketplace concentrate on.

The difference between the top ad networks and Demand Side Platforms is that networks buy inventory directly from publishers that – in our case through a very stringent, in-house compliance process – are then cleared as “brand safe”. Demand Side Platforms buy inventory largely from the exchanges…the very place where advertisers previously forbade the networks from running their campaigns due to concerns about (you guessed it) brand safety.

By definition, the top networks are considered Demand Side Platforms in practice and have been for years. The primary differences are: 1) How the inventory is sourced and 2) the inventory source itself. The top ad networks are an integral part of today’s display advertising ecosystem and are constantly undergoing measures to boost their capabilities.

Be looking for our next blog post in a few weeks which will debunk myths about top networks and explain why these companies are no longer simply “ad networks” by the traditional definition.

Charlie Black
General Manager & Strategic Development – Platform; Epic Media Group