Online Advertising in Internet Business Monetization

This article introduces the product features and presentation methods between contract advertising products and bidding advertising products, and further analyzes the differences between the two. I hope this will be helpful to those who want to understand the form of online advertising products.

Online advertising is divided into four product forms based on targeting technology and transaction form: contract advertising products; bidding advertising products; programmatic trading advertising products; and native advertising products. This article first introduces contract advertising products and bidding advertising products.

1. Contract Advertising Products

There are two ways to sell contract advertising products: advertising space contracts and display volume contracts.

1.1 Advertising Space Contract

Advertising space contracts are the earliest way of selling online advertising. It refers to an agreement between the media and advertisers to deliver the advertiser's ads on certain ad spots within a certain period of time, and the corresponding settlement method is CPT.

Additional benefits of this sales method: using this exclusive advertising in some highly exposed ad spaces can often effectively bring brand impact to users; and long-term exclusive purchases in other banner positions are conducive to forming a "window effect" and shaping ever-increasing brand value and conversion effects.

With the development of audience targeting technology, the execution method of exclusive advertising space sales has also changed. Even if a certain advertising space is entirely placed with one advertiser, audience targeting can allow different audiences to deliver corresponding creatives and achieve better results.

Even when the audiences are indistinguishable, frequency control can be used to progressively display a series of creatives to the same user to achieve better results.

1.2 Display Volume Contract

An impression contract, commonly known as "CPM advertising," refers to an agreed-upon impression volume under certain audience conditions, which is then settled according to a pre-agreed unit impression price.

This type of contract also has another name, which is guaranteed delivery, or GD, where the "guarantee" refers to the agreement on quantity. From the perspective of trading model, the demonstration volume contract is still a relatively traditional trading model.

However, from a technical perspective, the impression contract needs to analyze the attributes of the user and the context, and the server dynamically determines the ad candidates based on these attributes and the ad library.

Compared with advertising space contracts, impression contracts require more technical support, such as traffic forecasting, traffic shaping, online traffic distribution, guaranteed delivery, etc. This article will not go into detail, we will describe it in detail in the next round.

2. Bidding Advertising Products

The main product forms of bidding advertising products are search advertising and advertising networks.

2.1 Search Advertising

Before 2016, search advertising had the largest market share in the entire online advertising market. Search advertising is a typical bidding advertising product. Its characteristic is that advertisers compete in an auction-style for the advertising display opportunity of a certain target (here is a keyword), and occupy several positions for the advertising display in turn according to the results of the competition.

The difference from the display volume contract is: first, the quantity guarantee no longer exists, and advertisers need to adjust the balance between effect and quantity on their own; second, the price agreement is also removed, and each advertiser can adjust the bid for each keyword at any time.

Search advertising is an advertising product that targets audiences based on contextual query terms and is sold through bidding and settled on a CPC basis.

The display areas for search ad creatives are generally divided into three parts: north, east, and south.

• All positions in the north and east regions constitute the position set of the same keyword auction. The positions are sorted as {north1, north2,···, east1, east2,···} during bidding, which is basically arranged according to the click-through rate of each position.
• For advertisements in the South Region, different search engines have different product processing methods. Some directly copy advertisements in the North Region, while others directly copy the first few advertisements in the East Region.

The search advertising product forms are:

• Text links usually have words such as "Advertisement" or "Promotional Link" added to the background color and corners to distinguish them from natural results. Based on the text link, the advertiser's logo, main content link, contact number and other content are added. Practice has proved that these will improve the direct effect and brand value of advertising.
• Weakly relevant ads, the advertiser’s brand promotional creative and similar recommendations are displayed on the right side of the search engine.
• Native display, in product-oriented information searches, when providing structured content results, mix in commercial results and sort them in a unified manner. If you search for mooncakes below, you can directly purchase products mixed with mooncakes. This type of advertising can also be called "direct product advertising."

There are two key factors to consider when determining whether an advertisement can enter the North Zone: one is whether the advertisement is relevant enough; the other is whether the RPM (Revenue Per Mile) of the advertisement is sufficient.

The former is to ensure user experience, and the latter is to make efficient use of placements. The East District can add some generalized content with lower relevance requirements within a reasonable and explainable range. The list and sorting of this part can be operated according to the logic of bidding advertising, which can provide search engines with some advertisements that are slightly away from decision-making and aim to reach potential users. For example, when searching for BMW, users of BMW may not necessarily know about Land Rover, but after seeing it here, they may click to learn more and become interested in it. Of course, such products should never be displayed in the North District, as that would cause users to question the relevance of the results.

2.2 Advertising Network

For display advertising, the contract-based sales method will inevitably not be able to consume all inventory. We call the advertising traffic that is not sold through contracts the residual traffic. The product function of the advertising network is to aggregate the remaining traffic of various media in batches and sell it to advertisers according to the traffic segmentation method of population or context tags.

The bidding advertising network has the following key product features:

1. The advertising network decides which advertiser to assign each impression based on eCPM.
2. Because advertising is sold by population, advertising networks downplay the concepts of media and advertising space. Due to the downplaying of the concept of media, it is difficult to obtain advertising space with high brand premium in advertising networks, and it is generally not suitable for advertisers' brand needs.
3. From a business perspective, advertisers no longer need to meet brand exclusivity requirements, and multiple brands can participate in bidding for the same group of people at the same time. Furthermore, in terms of finance, the method of requiring advertisers to recharge first greatly improves the cash flow situation of the advertising network operators.

There are different settlement methods for advertising networks, such as CPM, CPC and CPS, but the most mainstream method is CPC. Some advertising networks will also open their advertising libraries to some of their partners for them to choose from. This operating model of the advertising network can be called an affiliate model, such as Taobao Alliance.

There are two different business directions for actual advertising networks. One is to widely accept various advertising inventories and provide services to advertisers of all categories, which is called a horizontal advertising network. The other is to specifically serve a certain type of advertiser, such as e-commerce, games, etc., and look for relevant media resources to build a network, which is called a vertical advertising network.

3. Comparison between bidding advertising and contract advertising

From the perspective of the supply side or the advertising market, the comparison between contract advertising and bidding advertising can be compared to the difference between a planned economy and a market economy. In the case of contract advertising, the media must ensure quantity and quality. In the case of bidding advertising, the market is only responsible for setting bidding and charging rules, and the guarantee of advertiser quantity is achieved through market competition.

From the demand side, the contract advertising purchasing method lacks transparency for advertisers, and they cannot be sure that the media will actually place such a large amount of advertising. However, the purchase method of pre-booking guaranteed quantity contracts is more meaningful for advertising campaigns with strong brand characteristics. In bidding advertising, suppliers no longer promise advertisers the amount of advertising they want to deliver, and the transaction logic changes from a structure that first ensures quantity to a structure that first ensures unit cost.

Author: Speechless

Source: Speechless