OMM- How Display Media is Traditionally Bought and Sold Online

For this installment of Online Media Mondays, we will discuss how display media is traditionally bought and sold online (we will cover the newest methods in a future post).

What is Being Sold?
If the publisher of a website wants to monetize content by featuring ads, it will allocate a certain amount of screen ‘real estate’ to show advertisements. Every page that has this allocation is part of a publisher’s ‘inventory’ and can be sold to an advertiser. Sales are generally made on an impression basis, so that the advertiser pays for each time the ad is loaded onto a new page. However, some publishers might use different revenue models in including performance (clicks and conversions), revenue sharing or time-based sponsorships (ie: homepage takeovers).

Direct Sales Teams
In order to sell its inventory, larger publishers will generally have a sales team that will organize direct buys for advertising space. This team will often focus sections of the site with the highest traffic/reach for a specific audience that an advertiser is interested in (‘premium inventory’). These sections could be homepages (yahoo.com) or specific sections (health.yahoo.com) and will be priced at high CPMs, generating significant revenues.

Selling premium inventory through a sales team makes sense for premium inventory where CPM values are very high. However, the direct sales model does not work for the remaining or ‘remnant’ inventory because sales teams cannot scale operations as easily as a site can increase available inventory (given the low cost of publishing content online). This leaves a significant amount of content that the publisher cannot monetize.

Enter Ad Networks
As the amount of content on the internet grew, publishers struggled to sell off their remnant inventory. A number of companies named ‘Ad Networks’ started aggregating this remnant inventory and selling it to advertisers over a significant discount over the publisher’s direct sales rates. The only stipulation that publishers applied was that advertisers not be able to directly target sites/sections that they wanted, but rather target a ‘channel’ of similar content across multiple publishers to make sure their direct sales teams were not undermined. Ad networks therefore started to focus on aggregating content within specific verticals (ie: Travel) to make sure that their ‘channels’ were still of high value to advertisers.

Ad network inventory is sold to advertisers through direct sales teams, very much like premium inventory. However, the lower pricing of inventory and limited targeting choices make it much easier to negotiate contracts and sell in high volume, resulting in a much more scalable business model.

Now that we have built an understanding of how ad serving works and how internet content is bought and sold, we will bring this all together to build a front-to-back understanding of the ads you see on a site end up there in next week’s post.