Understanding online ad networks

Ad networks are the first set that came into existence when the online advertising ecosystem started evolving. When the number of websites and high quality websites started increasing, it became difficult for both advertisers and publishing websites to optimally and individually take care of advertising contracts. Advertising Networks connected these two parties. The main function of an ad network is to aggregate ad space supply from publishers and sell/match it to advertisers' demands. The unique proposition of ad networks was to provide advertisers, a single platform to reach a large online audience with high targeting capabilities; at the same time having a low-cost inventory.

Most of the ad networks have a unique set of websites for each domain category they cater to (Eg: Real estate, fashion, small business, B2B segments etc.). Even with the advent of ad networks, significant amount of the transactions used to be personal in nature involving a sales team.Examples of ad networks include Google AdWords, Chitika, Adblade and so on. Here is a wikipedia list of notable advertising networks.

Depending on the targeting capabilities, an ad network provide, they can be classified into vertical ad networks and horizontal ad networks. Vertical Networks provide advertising capabilities for a specific domain (for example - fashion). They also offers customization in terms of where the ads can appear from a web page perspective (like banner or right side-panel etc.). An example for a vertical ad server is sportgenic (now part of Mode Media) which focuses on Sports as a domain. Horizontal Networks generally delivers ads across a wide range of publishers and domains. No customization or targeting is available. They focuses on inventory suitable for general audience.If brand awareness is the objective, an online marketer can often use horizontal ad networks since they offer high reach.Horizontal Networks are also termed as a Blind Networks since in most of the cases, they don't provide the exact information on where the ads are shown. They often offer Run-of-Network (RON) campaigns as opposed to Run-of-Site (ROS) offered by Vertical Networks. BrightRoll is an example for horizontal ad network.

An OpenX whitepaper on ad networks and ad exchanges categorizes the steps taken by ad networks to connect between advertisers and publishers as below -
  1. Forecasting how much inventory an ad network have to sell across its publisher web sites (Essentially this step involve aggregation of ad inventory across publishers and forecasting inventory volume based on historic data; and then bucketing the inventory into demographic packages which can be sold to advertisers)
  2. Doing deals with advertisers to sell that inventory (Essentially this step involves the inventory sales in advance; often a sales team based transaction)
  3. Delivering sold advertising (Essentially this is the actual ad delivery; showing ads across publisher sites based on various pre-defined/pre-agreed criteria)
Off-late, another segment of ad networks emerged known as audience networks or targeted ad networks. In my opinion, these are a hybrid of vertical and horizontal networks; allowing an advertiser to buy audience segments by demographic criteria, behavioral traits or focus areas.Most of these don't offer transparency as in the case of direct sales or vertical networks.

Of course, as you may have guessed, the classification logic is more for an understanding purpose and in reality the line of separation is often blurred. What do you think?

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