In this article, you will learn:
- What the value exchange is in digital advertising
- How roles have evolved in the advertising ecosystem
- How the change with cookies affects the supply-side
The digital world is a complex ecosystem designed to simplify the access to information and help people connect easier with fewer limitations. While not paying for it directly, we need to remember that apart from being a content platform, the Internet is also an enormous marketplace, where we – as users – are clients.
Brands, called “advertisers” in the advertising industry, pay publishers to display their ads to convince us to buy their products. Publishers want to earn money on the content produced without having to make their users pay anything. To understand how this works, we have to dig into the evolution of the digital advertising process.
At the very beginning, it was a simple process, where advertisers bought inventory (space dedicated to displaying ads) from the publishers through direct deals to display their ads. The currency of such a transaction was (and still is) CPM (Cost Per Mille or cost per thousand impressions).
Today’s picture is a bit more complicated, but the value exchange is still the same. For example, ads are displayed to the users through specialized technology vendors – on behalf of the advertisers. Only the most prominent brands have the tools and capabilities to manage this process on their own, but most of them outsource it anyway.
In the late 2000s, the industry started using real-time bidding (RTB) technology, allowing inventory exchange in a more automated way than ever before. Networks selling traffic transformed into Supply Side Platforms. The currency for such transactions – CPM – remains the same. The advantage was more tailor-made inventory buying possibilities. New roles have been introduced to optimize the exchange process both on the buying and selling sides.
SSP: Ad Network – aggregator of inventory collected from publishers, ready to be sold/bought.
SSP: Ad Exchange – advanced digital marketplace offering both sellers (publishers, ad networks) and buyers (advertisers, agencies, DSPs) space for earning or spending money, by selling and buying traffic in RTB.
Advertiser – in the world of digital advertising, it is an entity that owns a website, provides services, or offers products that undertake advertising activities to attract the user to its website to purchase a product/service or leave contact details – depending on the advertiser’s business profile.
Agency – an entity representing the advertiser.
Publisher – an entity that offers inventory; in other words, space on the Internet – such as a website owning dedicated slots for advertising, allowing tech companies to display ads on behalf of advertisers.
Header bidding – a highly developed technology allowing publishers to sell their inventory to many ad exchanges. The general idea of this methodology of selling traffic is to allow multiple entities to bid together – directly – for the same impression. It helps to increase the publisher’s profit.
Why is the change with cookies affecting the supply-side?
As we discussed in our previous articles, cookies are currently used to save users’ interests for personalization purposes. They also allow adtech vendors to differentiate programmatic auction bids between users in order to only target the most relevant ones. However, because in most cases there is an advertiser for whom the user is relevant, cookies resulted in much higher average winning bids. This consequently means an increase in revenues received by publishers and the entire supply-side.
As Google’s 2019 study shows, disabling cookies without providing relevant alternatives would result in a 52% decrease in publisher revenue. This should be a sufficient warning sign for the entire supply-side. To earn money in digital advertising of the future, advertisers and publishers have to adjust to new requirements and methods. This shift requires them to make the best use of their data by implementing strategies maximizing data collection, analysis and activation.
Most publishers have the potential to monetize their direct audience data. However, this will require them to prove their value proposition to potential buyers. They can also make sure that they comply with the Privacy Sandbox requirements, to enable demand-side platforms to bid using this method. As a third alternative, they can cooperate with external vendors that build individual-level identifiers subsidiary to 3rd-party cookies.
Regardless of the chosen monetization method, the key for building strong revenue streams in the cookieless world will be to cooperate with the best in class technology partners which can make the best use of the available data.