- 07-01-2014: Updated CPM/CPC descriptions
It’s been awhile since I wrote my last blog post. Things have been accelerating greatly after Pioneers Festival happened here in Vienna. Interest in Adefy boomed, and we’ve been working hard to hit our public launch date early next month.
One question I’ve been getting over and over again, is what does Adefy actually do? While it is obvious for those of us familiar with the industry, the inner workings of a mobile advertising network aren’t entirely obvious for others. So, let me explain.
Mobile Ad Networks 101
A mobile advertising network exists for one sole purpose: connecting advertisers to publishers. Advertisers such as Nike, Ford, Nestle, or their media agencies (usually the case) have products they want to tell the whole world about.
To spread the word, they need to get their ads out to as many people as possible. This is where publishers come in; publishers in the mobile advertising world are people/companies that own mobile inventory.
Inventory is made up of available advertising spots in mobile apps. For advertising as we know it, this means available spots for banner ads, interstitials, and video ads. Inventory can be filled by advertisers. If an advertiser has a banner ad they want to show, they need inventory to fill. Simples.
A mobile advertising network connects the dots, by taking advertisements and delivering them to publishers. Mobile app developers integrate an SDK (a collection of code that fetches and renders ads), and can then request ads from the network, to fill inventory.
Was ist mit den Kohlen? (CPC/CPM)
Okay, so, to recap. Advertisers upload their ads to a network, and publishers request ads from that network. What about the money? How do mobile networks pull a profit?
Quite simply; advertisers upload funds to the network to run their campaigns, and the network pays publishers to show the ads, after keeping a small percentage for itself.
There are two main payment models, CPC and CPM. Running a campaign on CPC means the advertiser pays per click (Cost-per-Click), whereas CPM means the advertiser pays per 1000 impressions (Cost-per-Millie. (Yeah. Thousand.)).
CPC is the most common pricing model, as it offers advertisers fine control over their budget. However, with CPC, you will never get more “bang for your buck”, so to speak. If you get 100 clicks, you will pay for all 100.
In contrast, with CPM, ads can outperform their actual price. As an example, let’s say you (as an advertiser) just paid $4 for 1000 impressions. You received 250 clicks (optimistic, I know, but bear with me) from those impressions, but you were expecting only 50. This means you paid $4 for a CTR of 5%, but ended up getting a CTR of 25% (someday).
Why doesn’t everyone use CPM then? Campaigns rarely exhibit such a difference, and most often you end up with a lower CTR than you bargained for.
So, let’s pretend we are a mobile ad network. It probably isn’t the most pleasant thing to be, processing fill requests all day, every day. Still, for the sake of argument, let’s roll with it.
We get a fill request from one of our publishers. The request indicates it’s for a puzzle game being played in Berlin, on a 768x1280 display. This specific publisher only wants ads paying a CPM of at least $4.12.
A tad picky, but as they say, the publisher is always right! We query our database for ads that match the location, category and display size. We get 1500 of them! Must be nice, eh? So, now we have to pick one.
Intermission - RTB and Automatic bidding
This is my favorite part; the RTB! RTB stands for “real-time bidding”, something which sounds exceedingly more complex than it actually is. RTB is the process of essentially running an auction for the inventory to be filled. All the ads are rounded up, they place their bids, and the highest bid gets the spot.
A bid is the amount the advertiser is willing to pay for that specific spot. Either CPC/CPM, depending on the conditions. If the advertiser is using an automatic bidding system, there is one other step; the bid is automatically calculated by the network (or so, that’s how Adefy does it) The calculated bid is chosen to reflect the advertiser’s budget, and is selected in such a way as to maximize potential CTR.
Back in the game - Delivery
So, we have a pending request we need to fill. We run automatic bidding for the ads using it out of those 1500, and arrive at 1500 ads with hungry bids, waiting to be served (see what I did there). Now we perform RTB, which really just means we pick the highest bid, and arrive at a winner.
Awesome! The winner is sent out to the publisher, and we get back to our lunch (or cron jobs). If we can’t find a suitable ad (nothing fits the targeting information, or none of the ads pay enough for the publisher), we send back an empty response, indicating we can’t fill the spot.
At Adefy, we automatically query our backfill partners to see if they can fill the spot. Finally, if they can’t either, we send out the empty request. The rate at which we can deliver ads (instead of empty requests) to fill inventory is called the Fillrate, and networks tend to pride themselves by it.
Adefy - The fat lady hasn’t sung quite yet
For most networks, that is essentially their process. At Adefy, we take things a tad further. Some of our advertisements are templated, so they appear slightly different in each publisher. This allows us to craft truly organic experiences with or advertisements, leading to higher CTRs and in turn average CPC/CPMs.
In order to do this, we need to assemble ads in realtime on our platform. Going back to the scenario we had before, where we are the network, we can’t quite go back to lunch after picking a winner. If that winner uses templating, or worse yet, it’s one of those awesome advertisers that has directly connected their product database to us, we have a bit more work to do.
If it’s the former, we need to grab their template, pull in the publisher info, and generate the perfect ad on the server. Then we generate a manifest, package it up, and send it out. Not quite dolphins and raincoats, but it gets the job done.
If the latter, we need to fire off one more request; We fetch a product from their database, matching the targeting information they promised us when we ran RTB. The advertiser replies with, at a minimum: A product name, price, short description, and an image. Along with branding information from the advertiser, we build a suitable advertisement in realtime, and ship it out as planned.
Overall, it’s quite the exciting process (isn’t it!?!), but one that most sources tend to over complicate. Mobile advertising networks aren’t black magic at all :)
Adefy will be launching publicly in early January, following a new website available later this month. Our platform is awesome, and I’m very excited to see what the future holds for the mobile advertising industry. It is finally time to move away from the traditional Banner and Video ads of yesteryear.