Digital Media Ad Network Business Models


Digital Media Ad Network Business Models

(Abhishek Uppal, Piper Jaffray Investment Banking; Reference to The User Revolution)

The ad networks typically take on one of three business models: dynamic network, the traditional ad-network, and ad representation.

Dynamic Network Model
Under this model, the ad network will buy inventory from the publisher¡¯s sites in advance at a specified rate, group the inventory and select the best types for each advertiser, and resell the inventory to an advertiser or agency at a higher price. Given that there are no assurances this inventory can be resold or resold at a profit, this model presents the most risk for the ad network. The ad networks under this model may obtain preferential inventory from the publishers as the ad network guarantees payment. These networks include Advertising.com and DrivePM (owned by aQuantive). While the lead generation companies often use the at-risk model as well, do not consider them a pure ad network model as they typically buy inventory from wherever they can (including email and search) in order to drive leads with little value-add in the process.

Traditional Ad Networks
In a the traditional ad network, the network contracts with the publisher to sell inventory at a certain price but does not guarantee that the inventory will be sold. Essentially, an ad network will represent all or part of a publisher¡¯s inventory and agrees to pay the publisher a fixed percentage or revenue share. The ad network under this model would typically pay a higher price for this inventory than a network that guaranteed payment, but does not assume the risk for unsold inventory. ValueClick, 24/7 Real Media, Casale Media, Tribal Fusion, and Burst Media are examples of the traditional ad-network model. These networks also group their inventories and add value to them, but the process is not as complicated as the value-added groups.

Ad Representation
The third business model, which may not be considered a true network model, is the ad representation model. Under this model, the ad representation company will typically represent all or a majority of the ad inventory from a group of sites and will receive an agency commission for selling the inventory. The ad representation company essentially serves as an outsourced sales force. The margins are also typically lower for the ad representation companies, in the 20% range, given that these sites are often larger and there is less risk to the ad network. For the publisher, ad representation can offer higher ad rates than working with the other network models. Additionally, the ad representation companies typically only work with the larger publishers (usually in the top 1,000). Ad Representation companies include Winstar Interactive, Specific Media, and Gorilla Nation Media.

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  1. #1 by guzen on August 10th, 2010

    @takebackus I’m gonna send you this in email the way it was supposed to be read then I’m gonna get to work because I’m way behind now and will be working very late to get caught up.

  2. #2 by Rajat K on August 10th, 2010

    Yes, in theory. CDMA is supposed to have higher transfer rates and better connectivity.
    But, in practice, GSM uses a better and much more flexible network structure which means that the possibility of running out of signal is smaller than in CDMA networks.
    One more point of view: 3G comes to solve the transfer rate. The problem is that GSM 3G, just as CDMA has a small coverage compared to the 2G GSM.
    So, my vote goes to GSM this time.

  3. #3 by bonita on August 10th, 2010

    -Value Addes Services (VAS) as a percentage of total revenues generated would be the most common one

    -New account wins for VAS

    -VAS sold in a specific time period (such as during a promotional event)

    -usage rates for various specified VAS – number of accounts utilizing televoting, for example)

  4. #4 by nacao on August 10th, 2010

    @takebackus or road projects, cancer research, Red Cross funding, PBS funding, funding the arts, education, lets see how many of them survive when in order to save the spotted owl we will have to cut medicare, food stamps, FHA, HUD, FAA, FDA, VA or any one more of the other programs that people care about

  5. #5 by ak_theone on August 10th, 2010

    YOu have to learn the culture. People want to be a part of a social group. They want to get a feeling of belonging. They want to be encouraged that what they are doing is good and proper and they are accepted by that group for doing it. In the jungles of South America, they jump off platforms with vines around their ankles. Other places they walk over hot coals. Once they do this they get some form of reward, like a wife or a gourd of beer.

    People are seeking that reward of beer or sex and if you can create a system to give that to them…they will come by the drove.

  6. #6 by rocket on August 10th, 2010

  7. #7 by rails on August 10th, 2010

    @getnick77 I guess in conclusion, govt is and has for a long time been out of control, the original income tax was only supposed to be 3% of wages of people making a high wage for the time to pay for the civil war. Our govt has never scaled back on anything it just seems to add to itself. My question is and has been for any candidate is what are you gonna cut? How are you gonna reduce govt agencies, duplication of programs, regulation in general I think we need a constitutional amendment.

  8. #8 by truth on August 10th, 2010

    @takebackus When Edison invented the light bulb many people said it would blind young children. Entire church congregations were told not to use them. If that were to happen in todays world the EPA would put a hundred rats in small cages with light bulbs burning 24 hours a day for a year and if 4 or 5 of them became blind light bulbs would be outlawed and we all would still be using candles and lanterns of course the candle and lantern lobby would be happy.

  9. #9 by is it me? on August 11th, 2010

    MMS
    SMS
    GPRS + EDGE
    Fax&Data Transfer (different then GPRS)
    Internet Access
    Web Portal (if available) Vodafone Live alike…

  10. #10 by jpro on August 12th, 2010

    @takebackus But that wouldn’t happen today, we have inspectors inspecting pork for trichinosis but all pork is required to be frozen for 2 weeks before being delivered to market to kill any trichinosis, in law enforcement we have DEA,FBI, ATF, US Marshalls, Secret Service and more, heck in my state we have a dept of children and families and a child welfare agency, why? The 14th amendment has been abused and so has the commerce clause.

  11. #11 by earthlink on August 12th, 2010

    @takebackus Our elected officials are more concerned with campaign contributions from special interest groups such as environmental groups to win their next election than doing whats good for the country. In North Dakota right now there is a lake flooding towns (Devils Lake) hundreds have lost homes whole towns have been swallowed because there is a microbe in the lake that the feds don’t want released into a nearby river that without human intervention the lake would naturally drain into.

  12. #12 by psychic on August 12th, 2010

    @takebackus The amendment would be if the govt wants to start any new program or regulation it has to cut an existing program or regulation by the cost or impact of the regulation or program plus 10%. Any lobbying organization proposing a new program or regulation must also propose a cut to a program or regulation plus 10% before it can be considered. Lets see how many of these organizations get donations when they propose saving the whales or polar bears while cutting social security.

  13. #13 by Andi F on August 13th, 2010

    Refers to actual physical locations

  14. #14 by urbantool on August 13th, 2010

    @takebackus And the congressmen would be happy for all the contributions to their campaigns from the candle and lantern lobby to get them reelected and the congressmen that have major candle and lantern manufacturing plants in their districts could go back to their constituents and tell them how they saved the industry. I hope you read this from the comments page it’ll make more sense.

  15. #15 by Global Millionaire on August 13th, 2010

    Go to MLMU.com They are the Markting Geniuses and they have a bunch of free tips about how to convince people to do what you looking for! I'm still hoping that you will think I'm brilliant and all that, but just let me know if you found this link helpful

  16. #16 by corpo on August 13th, 2010

    @takebackus I could list hundreds more, don’t get me started about the water in Kalifornia, if we stay on this path we will all someday be working for the govt telling people what they can’t do and will be paid by the privileged few that contributed enough money so they can do something. Instead of innovating and creating new products and services we will all just wait for the govt to tell us what we can and can’t do.

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