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Most Ad Networks Hate Advertisers

hkg_hong_kong_advertisingThat is a nice, provacative title, isn’t it?

Anyway, I had an idea yesterday that made me say, “Is it really as simple as that?”

And ever since then, I have thought, “Yeah, it is.”

In managing a marketplace, your average advertising network, in many different ways, has to “choose sides”.  Are they aligned with publishers or are they aligned with advertisers when it comes to how they deal with certain issues.  One issue seems like it might be more important than any other in answering this question: Publisher payment models.

Many (most?) advertising networks pay a revenue share to publishers.  To that end, they are incented to extract the maximum revenue they can from advertisers and efficiency of the buy and optimization of the buy for advertisers is only important to the extent that they can use it to justify extracting more revenue from advertisers.  Some networks are poster boys for this model, like a Federated Media.  Some are less transparent about it, but I think it works out just the same.  Right Media is probably an example.

A few networks pay flat CPMs.  When you pay a flat CPM to a publisher, that aligns you with squeezing value out of the inventory.  That is advertiser alignment.  Figuring out how to help advertisers get more bang for their buck on that inventory suddenly is really, really important.  If you are paying $0.10 CPMs and generating $0.12 RPMs, the ability to optimize and drive that to $0.20 is much more valuable to you (creating a much bigger incentive to you) and when you do that, some advertiser is reaping the benefits of that improvement.

What networks pay flat CPMs?

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