Decoding Performance Marketing

Krishna Kidao #

Having spent a considerable period of my career in mobile marketing and performance marketing, I wanted to pen my thoughts on their essential elements for a layman to understand what it is and why there is a buzz around it.

What is Performance Marketing?

Differing from the traditional way of advertising, where spends are made upfront and do not rely upon the ad’s success, performance marketing is a boon because the brand pays only for every successful conversion that is tracked. Brands have tilted towards performance marketing which has disrupted the traditional value-proposition of advertising and now allows for real-time monitoring of ROI by tracking every single dollar spent.

The Parties Involved

● Advertiser: Quite self explanatory, this is the brand/client who will spend money on a campaign and want conversions in order to increase and measure ROI.

● Publisher: The source for traffic/inventory, responsible for the ad being placed. It is the publisher who ultimately gets paid for showing an advertiser’s ads and driving customers to fill a form or make a transaction.

● Ad-network: These are networks that accumulate remnant inventory of publishers in order to sell it to advertisers. Typically, they work on an arbitrage model, buying inventory at low prices and then reselling them for a margin. Ads are placed on a publisher’s site by an ad-network’s server via code that calls the ad. The advertiser tracks conversion by placing tracking pixels given by the ad-network on the conversion pages (like Submit button or Thank you page) once a customer completes a transaction.

● Ad-Affiliates: Affiliates can be bloggers or coupon sites which promote a brand and its products in exchange for a commission on sales or completed transactions. There are three main types of affiliate ads: pay-per-click, pay-per-lead, and pay-per-sale.

● Ad-Exchanges: These are technology platforms which facilitate buying and selling of inventories on Real Time Bidding or RTB protocol . Ad exchanges are connected with thousands of publishers who hook up their unsold inventory for advertisers and ad-networks to bid and buy. This enables reduced administrative overheads on buying and selling.

Programmatic and Ad Networks

Programmatic is the biggest buzzword in the digital ad space today. It is projected to become the major money-spinner in the digital space by 2018. Many have tried jumping into this bandwagon without even understanding what it is, so here’s what you need to know in a nutshell:

Programmatic automates the process of where ads are placed using RTB and Artificial Intelligence (AI), allowing it to hit the right audience at the right time to drive highly efficient leads which in turn leads to conversion.

Programmatic improves efficiency in:

● buying ads
● ad-targeting

The Evolution of the Ad-Exchange

Publishers are still faced with the looming problem of large unsold inventory being sold at cheap prices; this was otherwise being sold at a premium. The situation is vitiated by a lack of transparency and flexibility with advertisers.

A plethora of new-age advertisers and brands, increasingly conscious of where their ads were being targeted, began to demand more from their campaigns and wanted to target specific audience profiles. This strengthened the case for behavioural targeting which, combined with unsold inventory management, gave birth to Ad-Exchanges.

How did Ad-Exchanges change the performance marketing business?

For Publishers:

● all unsold inventories could now be hooked on Ad-exchanges
● intermediaries between publishers and advertisers were reduced
● better inventory optimisation so pubs knew who was buying what
● all inventories were now sold on RTB; market, demand, and competition led to dynamic pricing
● more advertisers and pub content now reaching out to a wider audience

For Advertisers:

● highly-focused and targeted campaigns
● standardisation with uniform ad sizes, simplifying the buying and selling process
● real-time reporting
● negotiated buyouts on impressions/conversions

Demand Side Platform (DSP)

DSP is a technology used by advertisers (direct, ad-networks or exchanges) to automate the buying of best possible ad inventories from multiple publishers.

DSPs facilitate filtering of audience segments by age, location, gender, etc., and also, basis the inventory type (mobile, video, display, etc.), make it faster and more efficient because of automation and thus resulting in greater ROI.

Eg: Appnexus, Doubleclick, Tubemogul, Pocketmath, etc.

Supply Side Platform (SSP)

SSPs are the exact opposite to DSPs and are used by publishers to sell their inventory on display, mobile, and videos ads. DSPs automate the selling of inventories for publishers and define the right pricing for a particular ad-model, based on the demand from advertisers or ad networks that are aggregated by a DSP.

Eg: Ironsource, Pubmatic, Rubicon project, Exoclick, etc.

Revenue Models

The Digital Advertising Ecosystem

    (Image Source: The Media Trader)

Krish Kidao is our Head of Sales India and APAC. With a bachelor’s degree in economics and a master’s in international business, Krish is keen on exploring and expanding sales into newer markets.