This post was written by Arnaud Sahut, Head of Ad-Networks.
It’s not always the best option to be number one, and this can especially apply in online advertising.
Today, it has never been more possible as an advertiser to find a customer base for your product or service, no matter how niche. However, the sheer size of the web, with millions of different sites of every kind website can make it difficult to target the ideal customer.
But help is at hand with RTB platforms (also called Ad-Networks) whose job it is to parse these millions of sites and ensure that the advertiser’s ad can appear on countless relevant sites without the advertiser having to negotiate with each one to buy ad space. These platforms are the most popular method of connecting a website owner with advertising space to sell with an advertiser who would like to target their site’s visitors with relevant products or services.
Targeting on Ad-Networks
Most Ad networks are blinded networks, meaning that the advertiser cannot see what sites they are running on. So in order to make sure their ad is being shown to the right people, they need to target their ad via various criteria such as keywords and demographics which are directly related to the targeted website content and audience.
In the style of a financial trader you can buy the ad space that the website publisher wants to sell on the Ad Network via an auction. You can bid on the keyword/domain name which is related to the website’s content (and therefore related to the audience you want to get).
However you are not alone on the internet and the competition can be rude. Depending on the ad network/vertical/targeting variable there can be hundreds of bidders competing for limited display space/time. That’s why you need to compete with other advertisers who sometimes have a much higher budget than you. You have a limited budget and, of course, you want to have the highest return on investment from the money spent.
Batman and Robin
Here is where Robin will beat Batman:
Batman a rich guy, who has all the highest cost weaponry on his bat belt, is confident in his high budget and will bid the highest price in order to be the first in the market and be sure to get the attention targeted customer on his ad 100% of the time. You, as Robin, have to make do with less flashy weaponry and brute strength than Batman. So what do you do? You will take the time to run the necessary analyses and bid the necessary price in order to be the second behind Batman who is already too far away anyway.
This can mean that, Batman will spend a lot to reach a customer that you will probably reach too since you are the 2nd. While Batman, with his big budget, will have his ad displayed a lot more often to the target customers, this may simply be overkill. Robin, on the other hand, will reach the customer base exactly enough to make his ad count and if done correctly with impactful ad copy, will emerge with similar conversions to Batman with a lot less money spent.
Results: Batman will spend $100 to convert the average customer whereas Robin will spend $10.
Although Batman is the number one in the bidding battle he has lost the war for ROI (Return On Investment) to Robin’s superior strategy.
This example shows one of the main concerns about online advertising operation:
It is important not always be the first but be at the ideal position by finding the right balance between budget and rank: where you will make the most money.