What is ad monetization?
Monetization has become a sustainable business model that helps publishers increase ad placement earnings. To put it another way, it is the process of generating revenue through various digital assets, such as websites, blogs, or apps, by using advertisements.
Most digital assets structure their ad revenue strategy in two ways:
Advertisements as Primary Income
In this category, assets monetize solely off of advertising income and have no other means by which they collect revenue. An example of this would be a content website whose sole purpose is to provide editorial content to viewers.
Advertisements as Additional Income
In this category, digital assets have a separate method of generating revenue that supports their business, and advertising provides additional income on top of that. An example is eCommerce websites that generate revenue from product sales or apps that charge for purchases to add to their existing revenue streams.
How does ad monetization work?
Publishers nowadays are faced with the challenge of finding the right ad format to boost their revenue stream. It is no longer sufficient to just count more ad placements, and it is now necessary to find a wider, more holistic monetization approach. There are quite a few opportunities to help you stay ahead.
What are the main ad types?
1. Interstitials or Takeover Ads
These types of ads are a reliable form of mobile advertising. An interstitial ad displays are the ads within the entire mobile screen and necessitates action. They are usually animated, video-based, or immersive in some way.
Whether the user initiates a click-through or closes the ad, a response is required. The important things are the timing and frequency of interstitial ads, both of which need to be strategic. Ads should not occur too often or at times that don’t agree with the user experience.
2. Banner Ads
This format will be shown to users either at the top or bottom of the screen, or at the sidebar. They are usually static or animated images that have the option to click through to a landing page.
Advertisers use banner ads to show a call to action, or simply to build brand awareness. They can come across as spam from a user perspective and can be seen as irritating and inconvenient.
3. Native Ads
Native ads are the chameleons of in-app advertising. They fit into an app’s interface without interfering with the user experience. In other words, a native advertisement adopts the look and feel of other content on the platform. Facebook ads that appear as user-generated content are a perfect example of this format.
4. Rich Media
Known also as multimedia banners, rich media advertisements integrate a dynamic element of interactivity. They include creative features like an interactive video with dynamic CTAs, parallax scrolling, QR codes, or social media components. This ad format is incredibly flexible and customizable.
5. Video ads
Video ads have recently become some of the most popular (and profitable) types of ad formats for publishers to use. They can be used as video ads within video content, or video ads interspersed in traditional written content.
Video ads that are incorporated into existing video content may start pre-roll, mid-roll, or post-roll, and act as “commercial breaks” to existing video content.
Video ads incorporated into traditional written content are interspersed throughout the content at various points. Such “in-article video” ads are valuable ways for publishers to leverage high-value video advertising.
6. Panel or List Ads
These ads recommend multiple advertisers at once. The main difference between a panel and a list ad is the amount of space provided to each advertisement. Unlike list ads, panels don’t include as many ads and reserve more room for copy. With fewer ads, advertisers have the opportunity to position themselves distinctly from the competition.
What are the main app monetization models?
App monetization is the process where a free app creates revenue. It refers to how app developers take advantage of their user base to make money. App monetization comes in various formats.
1. IAP – in-app purchase
For many free (Freemium) digital assets, ad monetization is the number one source of revenue. The assets are free but give users the possibility to use some premium features with additional payment. This method of monetization is called IAP – in-app purchase – and represents one of the most commonly-used methods of monetizing an app or any other asset.
It’s particularly popular among game developers. Certain video games are free to download, but if one wants to get extra content, like lives or resources, the premium version must be purchased.
2. IAA – in-app advertisements
Another method of ad monetization is IAA – In-App Advertisements. With this type of asset, users are exposed to third-party adverts. Monetization depends on ad networks to link developers and app businesses with advertisers. In this way, supply and demand for ad inventory are connected.
The major benefit of using in-app advertisements instead of other monetization methods is, since it is free, it may be significantly easier and less expensive to acquire users. Also, ad monetization helps apps monetize all users, not just the small fraction who are willing to pay extras.
When using an advertising-based monetization model, it’s imperative to ensure the advertisements are relevant and targeted to a specific user base. There is a comprehensive selection of ad formats available that allow business owners and advertisers to accommodate the user experience in a way that isn’t disruptive. The list below gives an overview of the most common categories of ad units as a brief introduction.
Branding campaign or performance campaign?
Branding and performance campaigns can be an efficient strategy for app monetization. Branding campaigns are usually focused on building a relationship with customers and promoting a positive image of the advertiser.
Branding campaigns do not necessarily push the user towards a purchase or another action but rather aim to create awareness first, which should bring results in the medium to the long-term.
At the same time, a performance campaign aims to actual action and the goal is to make users click on the ad. The click on the ad can trigger the installation of the application on the user’s device.
Bidding types: CPM and CPA Pricing for Publishers
The most commonly used ad monetization bidding models are cost per mile (CPM) and cost per action (CPA) and are based on the campaign’s initial objectives (branding or performance).
1. Cost per mile (CPM)
This type of bidding means paying every one thousand views of the ad (also termed impressions) regardless of whether the user clicks on the ad or not. This type of bidding usually works for branding campaigns and helps to increase the level of brand awareness.
2. Cost per action (CPA)
With this model, publishers are only paid when the user performs a certain action, which could be clicking the ad, installing of an application from the advertisement, or submitting a subscription form; but not for selling a product. If the user’s action is the installation of an app, then we are talking about CPI or cost per install.
3. eCPM
eCPM stands for effective cost per mille. This metric is a method of measuring an ad’s monetization performance based on the revenue earned per 1000 ad impressions. It is used on many platforms that monetize through display ads, including desktop, mobile, in-app, and video. The higher the eCPM, the more publishers earn from their ad units.
Types of deals for publishers
A publisher’s ad inventory is unique, and the process of buying and selling ads is today mostly done in an automated way. Programmatic advertising has changed how advertisers and publishers are buying digital ad space since it can be the more efficient and much faster way of purchasing digital ad space, as well as being able to precisely and effectively display ads to their intended target audiences.
Programmatic advertising uses advanced technology and relies on complex algorithms to deliver advertisements contextually and in a sophisticated way. On the other hand, direct ad sales involve manual human negotiations, usually made by in-house sales teams. Inventory is almost always guaranteed, delivered at a set point and fixed price and typically is dealt with by agencies.
1. Programmatic advertising
There are several different ways inventory can be acquired in the real-time bidding ecosystem. The four main types of auction are Open Auction, Private Auction, Preferred Deal, and Programmatic Guaranteed.
2. Open Auction
Open Auction (open marketplace) is the most traditional form of programmatic auction. It is the official name for real-time bidding where all publishers and advertisers are eligible to participate at the same time. Publishers offer their inventory in an ad exchange at a specific minimum cost per thousand (CPM) price, while advertisers bid for the available inventory. The highest bid wins.
3. Private Auction
A type of auction where publishers limit participation to selected advertisers only, and where a deal is traditionally made directly between a publisher and a selected group of advertisers, demand-side platforms (DSP), networks, and/or agencies.
In other words, this private deal gives an exclusive group of advertisers priority to bid on the inventory before it becomes available in the open marketplace. Publishers have the liberty to set the minimum eCPM, like in the preferred deal scenario, and the highest bid wins.
4. Preferred Deal
A type of programmatic auction where publishers sell their premium inventory at a fixed eCPM price to a selected number of advertisers, while entirely bypassing auctions. Advertisers bid in real-time, either at or above the fixed eCPM price. Once an advertiser bids on an impression inside a preferred deal, they are no longer eligible to bid again on that same impression in the open auction.
Preferred deals provide publishers with a controlled and stable revenue stream through this isolated transaction environment. Meanwhile, the deal gives advertisers access to more exclusive, first-look inventory with stable volume and no surprises on pricing.
5. Programmatic Guaranteed
A non-auction-based method where volumes and pricing are agreed on upfront with publishers. Since the seller and buyer deal directly it is also known as “programmatic direct.” The volumes and price are guaranteed on the buyer’s and seller’s sides, with automation replacing the manual insertion order (IO) process. This type of auction allows the publishers to regulate the price of inventory to buyers. It also gives them the ability to buy more premium inventory directly from the publisher.
6. Direct sale
The process of direct sale is entirely manual and utilizes maximum human effort in terms of satisfying client needs, negotiations, and complete communication. This calls for significant time and money as well as the possibility of human error within the process. The impressions are sold to clients who are willing to have their ads seen in a specific context, such as on a website/platform. Advertisers who care about the placement of their ads are willing to pay a higher price to guarantee such inventory.
In direct sales, ad inventory is sold at a predetermined, fixed CPM rate, which makes direct sales “guaranteed” while also “guaranteeing” inventory for clients. Direct sales are predictable because the paid exchange is known ahead of time and advertisers pay for the certainty that ads are being delivered to specific audiences.
The main benefit of direct sale is customization.
How to boost ad monetization?
Programmatic advertising is the process of buying/selling ad inventory in real-time through automated bidding exchanges. Automated buying and selling of ads can efficiently help launch ad campaigns reasonably quickly, with minimal costs and a minimal workforce, great targeting options and scaling abilities, higher ROI, and cross-device campaign possibilities.
It is consistently replacing the traditional model of digital advertising, which involved human negotiations, manual insertion orders, and requests for proposals (RFPs).
The software takes over the menial tasks previously done by human ad buyers (looking for publishers, negotiating the price, ad placing). Programmatic technology rationalizes the ad-buying process and makes it cheaper by removing human interactions wherever possible.
It allows marketers to spend more time tailoring their targeting and customizing campaigns, and removing redundant ad-buying procedures. It is a data-driven method that replaces inefficient manual practices prone to human error and introduces transparency to the digital marketing ecosystem.
With programmatic monetization, publishers can access demand and get a fair price for their ad spaces, and at the same time advertisers get exactly what they pay for.
Based on comprehensive publishers’ data, programmatic platforms are optimized in real-time, allowing marketers and advertisers to target individual impressions instead of buying blocks of advertising. Auctioning may raise the price of specific placements, but in the long run, it is a more cost-effective strategy for advertisers than direct deals.
Programmatic advertising ecosystem
Programmatic advertising is based upon the whole ecosystem of ad exchanges and digital platforms (e.g. SSP and DSP), connecting publishers and advertisers and easing ad inventory trading.
1. The supply-side platform (SSP)
SSP is a programmatic monetization gateway for publishers to sell advertising spots across their websites, mobile apps, or games through automated auctions. SSP connects to ad exchanges and demand-side platforms, enabling advertisers to bid on ad inventory.
It helps publishers to manage all of the automated ad sales and related processes, like selling the ad space, providing ad optimization, analyzing ad campaigns, and choosing the best type of ad for different monetization strategies.
One of the best features of this solution is removing any mediators, such as sales managers to negotiate any stages of the ad management. Instead, the SSP links to ad exchanges and evaluates the ad space for sale. This space is auctioned to the highest bidder using programmatic advertising, with the most profitable price.
2. A demand-side platform (DSP)
DSP is a platform that enables companies, ad networks, and agencies to buy ad spaces from publishers and ad exchanges. DSP puts the advertiser’s requirements for the audience and price, as well as their campaign goals at the forefront and automatically assesses the available ad inventory, purchasing ad spaces that meet these criteria most cost-effectively.
DSP marketing campaigns can be measured and optimized in real-time.
3. Ad server
A platform where an advertiser hosts their creative assets (video, native ads, banners) as well as storing data about them is an Ad server. It ensures the distribution of the creatives to the ad spots within milliseconds, once the impression is sold. Advertisers can also use this platform for campaign tracking, performance reporting, and ad management. The ad server can help consolidate data when multiple DSPs and publishers are involved.
On the other hand, this platform is also an irreplaceable tool for publishers. It is the ultimate gateway for programmatic monetization of the traffic that allows publishers to set ad units, connect to multiple demand partners, prioritize ad delivery, and monitor campaigns.
4. Ad network
A platform that gathers ad spaces from multiple publishers and websites to bundle together and sell to agencies and advertisers is called an Ad network. It sells impressions to certain audiences, as well as the advertising inventory of a particular website or specific categories of sites.
Ad networks focus on the premium inventory, ad formats, and placements that cannot be acquired through programmatic; such as branding, rich media, and packages of high-quality inventory.
5. Ad exchange
An ad exchange is a virtual marketplace that automatically allows publishers and advertisers to trade advertising spots. Exchanges operate via real-time auction, with advertisers bidding on the available ad inventory from publishers and the dynamics of supply and demand determining the price of an ad. Commonly, exchanges assess ad placements on a cost per thousand impressions (CPM) basis.
Ad exchanges enable buyers to assess the price of sold impressions and provide greater transparency than ad networks.
6. Agency trading desk (ATD)
ATD is a platform that enables advertising agencies to manage the programmatic marketing campaigns of different clients. When brands use a trading desk, they outsource their campaign management to the agency and are unable to access the available inventory directly.
Agency Trading Desks are responsible for analyzing data, researching audiences, measuring key campaign indicators, optimizing strategies, and ad budgets.
7. Data management platform (DMP)
DMP is a software platform that consolidates data on the target audience from multiple sources and channels.
Publishers use DMPs to determine the preferences of their audiences and define which ad content performs better. The result is superior personalization and more relevant ad content, thus increasing viewers’ engagement and conversions.
Programmatic monetization and header bidding
Header bidding is an auction model that has been an enormous breakthrough in the programmatic ecosystem, specifically for ad operations.
It contributes to the ad buying process being more transparent for publishers by giving them more control and allowing them to earn higher revenue from their inventory. For advertisers, header bidding allows access to premium inventory with increased overall visibility of a publisher’s inventory, previously only available through direct sales.
We go into more detail about header bidding in our “What is header bidding and does it enable publishers to earn more?” post.
Header bidding is an advanced programmatic technique where publishers can offer their inventory to multiple ad exchanges at the same time before making calls to their ad servers.
It is a set of real-time bidding (RTB), which is a mechanism for buying and selling ad impressions through an auction, similar to the stock exchange. The process is referred to as real-time since it starts as soon as a user loads a webpage and finishes within milliseconds as the ad is delivered once the page is loaded.
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