Demystifying Online Advertising Network Business – Strategy, Indian Opportunity..and More
Time to time, we will try to bring you perspective on emerging industries. To start off, lets talk about the online advertising networks and the industry dynamics.
What are Online Ad networks?
Simply put, Online Ad networks connects advertisers with publishers and makes money on the transaction – depending on the model (could be revenue share or arbitrage).
Benefits of Ad Networks?
How do publishers and advertisers benefit from ad networks?
Online Ad Networks
- Publishers have remnant inventories which they want to monetize.
- Advertisers want to target niche publishers, run targeted campaigns (i.e. right audience) and of course, want better RoI from their campaigns.
Ad networks target these niche publishers, get their inventories and help them monetize by bringing in targeted advertisers.
Ad networks typically charge a premium over the traditional advertisers, since they claim to cater to niche publishers (and hence, audience) and hence, promise a better RoI.
For instance, if you rope in makemytrip/cleartrip as a publisher, you are essentially targeting a niche crowd that is Internet savvy – and hence, technology advertisers (like IBM) can potentially pay you a premium for the audience access.
Also, advertisers do not want to maintain relationship with all publishers (manage spend etc) – they need a single interface (and agency) to run the entire show.
As far as publishers are concerned, they get a better eCPM rates with ad networks (a typical revenue split is 65:35, i.e. publisher:network)
Types of online advertising networks
From a broader perspective, there are first-tier and second-tier ad networks.
First-tier networks have their own advertisers and publishers (like Yahoo and Google) and they serve ads to other networks.
Second-tier networks typically syndicate ads from other networks (like RMX) and serve ads.
In terms of operations, there are following type of ad networks:
Representative (or Rep) Networks
Represents the publications/publishers in their portfolio.
- Provides full transparency for the advertiser about where their ads will run.
- Heavily used by brand marketers.
Pricing Strategy : CPC, CPA, Revenue Share.
Example: Publicitas Digital
Blind Networks
They are called Blind networks, because advertisers do not have visibility into the publishers where their ads will run.
Blind networks offer low pricing to advertisers, since they typically buy remnant inventories in bulk from publishers.
Pricing Strategy – Mostly CPM, sometimes CPC, but no CPA.
Example: Komli, Tyroo etc
Targeted Networks
Focus on specific targeting technologies such as behavioral or contextual. Targeted networks specialize in using consumer click stream data to enhance the value of the inventory they purchase (source).
Pricing Strategy : CPA
Affiliate Networks
High up in the value chain, Affiliate networks offer full transparent performance based service.
Pricing Strategy - CPA
Example: DGM India
The Indian Opportunity
- Reach vs. Cost : 50% of page views happen outside the top 20 sites and users spend more than 60% of their time outside the top 20 sites [source].
Now, imagine the amount of effort/time an advertiser has to spend in order to reach out to these sites. Better alternative is to work with an ad network.
- Demand-Supply EquationThe biggest challenge in Indian online advertising space is not that there aren’t advertisers, but lack of quality publishers.So how does one reach out to the long tail of publishers who have a very niche domain (and a significant traffic)? There lies the opportunity.
Indian Ad Networks Strategy
Apart from increasing their network of publishers and advertisers, most of the Indian online ad networks tie up with US publishers who have a strong traffic from India.
For instance, recently launched NetworkPlay partnered with GawkerMedia (which owns LifeHacker and Valleywag) to monetize their India eye-balls.
Similarly, howstuffworks.com’s India traffic is being monetized by Komli.
This relationship with US publishers gives them instant traction, as many advertisers (e.g. online travel players) want to reach out to these power users.
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What’s the future of Ad networks? What will be the impact of recession on them? – We will discuss that in the next part of the series.
What’s your take on Indian Ad networks?
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Related posts:
- Online Video Roundup: Video Advertising plugin from MonsoonConnect, Launch of Times Audience Network
- Monitor Online Advertising – Vizisense Launches AdView Tool
- Indian advertising Industry set to rise – no signs of vertical ad networks
- Online advertising in India: Word of Mouth works better than search engine advertising!
- Mobile Ad Networks in India [Complete List]
Thanks to the great analysis. Look forward to the next post. More details would be welcome!
what about CPL? Is Indian market ripe for CPL business?
Hi! Ashish
That was good summary post, explaining the basics.
I think, an interesting evolution is taking place in these markets. Instead of the consolidation phase, typical of markets — there is an emergence of AdExchanges. These exchanges(Eg: RighMedia) promise to deliver the advantages of market consolidation without the actual consolidation itself happening.
-Mahesh
Celebrating Life…
Hi
Can any website in India sustain purely based on advertisement business model? I have launched a website http://www.brandsindiaonline.com which
Consolidates web site links of quality brands of products/services in Indian market
Consolidates Deals Discounts Promotional Offers on different products/services in Indian market by different brands.
Consolidates new product launched by different brands in Indian market.
Now success of this website depends upon revenue from advertisements on this site. Let’s see how this business model works.
Thanks,
Rajeev
http://www.brandsindiaonline.com
Hello Ashish,
I think you missed a prominent Site Rep ad networks for India like TribalFusion
Cheers
ST
Isn’t site rep ad network same as rep network?
am sorry..confused with ur comment
Ashish,
Two areas that would need attention are semantic ads & geo ads. IMHO Geo ads are going to be a big market in India in the next 3 years. As local content explodes in the next few years this is a market that would be important.
Not too many companies are operating in this space at the moment.
Hey,
Thanks for the great primer post. We’ve been thinking about getting into the India market for our IM campaigns. This is just the foot in the door that we needed.
Matt
Ashish,
In recent times we have seen mushrooming of online ad networks so much so we have seen comments like “its easier to start an Online Ad network than to start a website”.
But my concern is most of these so called ad networks are not investing in technology and discounting analytics alltogether.
Other concern none of the network is working on increasing the size of the market but all are running after same marketing dollar.
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Hi Ashish,
Thank you so much for this information.
I am preparing for the launch of a new community portal and in the last two weeks I have contacted more than a dozen publishers to understand their advertising charges. Only two have responded so far. In the meanwhile my marketing budget and plan is dozing.
I wish I had read this post earliar, it would have saved so much (money and time).
Anyway, better late than never.
Thank you once again.
Warm Regards
Jayesh Bhatia