How Should Advertising Networks Pay Their Publishers?
Online advertising networks are a resource for publishers to sell ad inventory. The network aggregates online ad space on behalf of publishers. There are three types of advertising networks, each differing by how they purchase advertising.
A publisher can choose to target online ads broadly across an unspecified mix of sites, or more narrowly, to ensure ad placement on appropriate, like-minded, or more productive sites. Costs vary, depending on which type of network is used.
Knowing a few key advertising terms helps to clarify the advantages of each:
Run-of-Network, or RON, refers to placing ads randomly across a network, in less valued portions of sites. It offers broad reach and lowered cost.1
Run-of-Site, or ROS, targets ad placement within a specific site, placing them randomly on unused pages.2
CPM, or cost per thousand impressions.
The three main types of advertising networks are blind, vertical, and targeted.
Blind Networks operate primarily through run-of-network, or RON ad buys. They purchase remnant inventory in bulk, achieving low pricing for publishers.
Vertical Networks aim for higher quality traffic, making run-of-site or ROS buys, that spread advertising within a product category or channel. Cost is based on varying market rates.
Targeted networks come at a higher cost, and rely on specialized targeted ad server technologies. These systems respond mostly to behavioral and contextual factors, gathered from clickstream data, when placing ads.
Cost for ads can be calculated by:
Cost-per-click (CPC) in which the advertiser’s actual rate is determined by the number of times the ad is clicked.
Cost-per-thousand impressions (CPM), in which the number of ads shown is measured, and then charged according to the highest bid (max CPM) you will pay per 1,000 ad views.
Many advertising networks use a global mass payment system to efficiently manage their process for paying their global ad publishers and to handle tax and compliance concerns.