Latest / The Yield Doctor with James Deaker / Blind and Transparent Ad Networks

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Blind and Transparent Ad Networks · The Yield Doctor with James Deaker

• 0:00
  Some of the biggest names in digital media are  still running blind ad networks and advertisers,  
• 0:08
  they keep buying. Why is that?  Because sometimes blind works  
• 0:14
  better than a transparent ad  network in certain situations.
• 0:19
  Let's break down the differences. And if  you're a publisher or an ad network owner,  
• 0:25
  we'll look at which model might  make the most sense for you.  
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  I'm James Deaker. I'm the yield doctor.  I run a consulting practice that focuses  
• 0:34
  on these types of problems. So, if you're  grappling with them, you're in the right  
• 0:39
  place. I previously did a video on retail media  networks that I'll link to here. And in it,  
• 0:46
  I talked about the differences between a retail  a blind network and a transparent ad network. And  
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  in that discussion said it probably would  warrant its own video. So here we are.
• 1:00
  The first thing I need to clarify  is the key attributes of a blind  
• 1:05
  ad network. If you do a web  search on blind ad network,  
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  the definition will come up and reference things  like the impressions that are purchased by the  
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  ad network are not available to the buyer. In  other words, they are blind to the delivery.
• 1:24
  Now, if we rewind the clock a decade or more, this  is exactly the type of model that advertising.com  
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  used many years ago. They would take budgets  from advertisers who would give them money and  
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  in return ad.com would drive some kind of outcome,  usually a click or an action or some other type of  
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  thing that was of value to the advertiser. This  is a possible definition for a blind ad network,  
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  but I think it's increasingly obsolete for a  number of reasons. The first is that in a world  
• 2:02
  where advertisers are increasingly seeing  nonhuman traffic and fraudulent traffic,  
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  advertisers just aren't prepared to accept the  just trust me kind of handwaving from ad networks.  
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  They are demanding transparency around delivery  and in some cases the ad networks are giving  
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  them at least partial visibility. So in doing  so they're staying blind to a potentially more  
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  important element of the ad network which is that  the blind ad networks tend to hide their margins  
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  and their cost of their inventory. So increasingly  the key distinction for a blind ad network is less  
• 2:48
  about the transparency of the inventory and more  about the transparency of the business model.
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  Now, some commentators in our industry say that  all ad networks should be transparent with the  
• 3:02
  implication that being transparent on all or most  dimensions, the delivery, the economics, the fees,  
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  etc., is a better thing than being blind.  I'm not going to take that position. Blind  
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  ad networks can be useful as long as they  can be relied on for trusted key dimensions.  
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  In recent times, they have tended to be  successful in an environment where a tech  
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  company owns a platform or for example, it  could be ad-tech, it could be a social media  
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  platform or it could be search and in return  they reach a desire from advertisers who want  
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  to participate and don't demand the level  of transparency that they might otherwise.  
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  So again, it could be a large social platform.  It could be a large retail media network who  
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  is running a blind ad network to expand its  reach. As one might expect, a transparent ad  
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  network is the exact opposite. They are generally  transparent on where the delivery is occurring  
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  and on how fees are assigned and accrued.  So all of this is a little theoretical and  
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  so I want to give an example of how this might  work in practice and what the advertiser sees.
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  First, let's look at the transparent ad network  and an example where the advertiser is spending  
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  $100 and let's assume that that $100  is spent on three different sites.  
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  The ad network has disclosed that they take  a 10% margin and in general when they run  
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  the campaign that margin will be the same across  all the inventory. So in this graphic I'll draw  
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  your attention to the fact that the $100 that  is given to the ad network. $10 is retained  
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  by the ad network and the $90 goes on to the  publishers in direct proportion to their spend.
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  Now let's look at the same model or the same  example but for the blind ad network. They also  
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  get given the $100. But now the advertisers don't  know where it is spent. If we were actually able  
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  to follow the money flow, we might see that the  spend that arrives at the publisher site is $40,  
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  $25, and $18. So, in this example, the publisher  is getting paid a total of $83 and the ad network  
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  is keeping more. They're keeping $17. Now, I'm  putting numbers against each of these flows,  
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  the $10, the $5, and the $2. And those  numbers merely reflect the fact that  
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  the ad network may have negotiated different  arrangements with each of those publishers.
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  The arrangements could be in the form of  revenue share or some other arrangement.  
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  It is possible that the ad network is not even  tracking the profit on each one of the flows  
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  with each one of the publishers. So let's now  compare side by side the blind ad network and  
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  the transparent ad network. And I'm going to  make some generalizations because I have to.  
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  The first two rows we've already talked about  the business model and the inventory blindness.  
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  One thing that we haven't talked about is  how each of the ad network types adds value.  
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  A blind ad network, if and again I say  if it doesn't own its own inventory,  
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  generally needs to have a good relationship with  publishers in order to get access to inventory  
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  or they need to have a really good algorithm  for delivery. Transparent ad networks on the  
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  other hand tend to differentiate by the quality of  their user experience. And of course here the user  
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  experience we're talking about is the advertisers.  They basically want to give the advertisers the  
• 7:03
  controls and the reports that the advertiser  is looking for. At this end of the spectrum,  
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  the difference between a transparent ad network  and a DSP potentially really starts to blur.
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  The other key difference is that for a  blind ad network, they have traditionally  
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  again traditionally been focused on lower  cost performance-oriented inventory. And  
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  transparent ad networks tend to have operated  at higher prices. The major exception to this  
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  is one that I already mentioned. If you are a  blind ad-network run by a social media company  
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  or potentially a high quality retail media  network, they tend to operate at higher prices  
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  than the blind ad networks run by performance  advertisers. So with all of that context,  
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  if you are a publisher and you are thinking  about a model, which one is right for you?  
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  This is a major decision and it's often one that  publishers don't think about enough. They say to  
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  themselves, I'm limited by the amount of inventory  that I am selling on my owned and operated. I  
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  think I'll develop an audience extension  product that'll allow me to sell onto other  
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  sites. And then without even realizing it, they've  created a blind ad network by default. And again,  
• 8:34
  blind ad networks often have higher margins, but  then you need to set up the systems to ensure  
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  that the quality of the delivery on those other  sites is the same as your owned and operated.
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  If it's not, you're going to get a lot  of complaints from your advertisers.  
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  So in short, both can work, but you need to  pause and think about what each model will  
• 8:58
  do for your business and how advertisers  will react to each mo each model one to  
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  3 years down the road. So blind versus  transparent isn't a one-size-fits-all.  
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  Some of the biggest platforms in digital  media run blind ad networks and they run them  
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  successfully while others are fully transparent.  I'm James Deaker. I'm the yield doctor. And if  
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  you'd love to hear more about which model, you  know, you think gives you the most advantage,  
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  please drop your thoughts and comments down  below, or subscribe for more insights. And if you  
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  want guidance tailored to your business, get in  touch. This is the kind of thing I do every day.