Video Ad Tech 101

Video Ad Tech 101

If you're new to the video ad technology space, getting your head around all of the various concepts and industry players can be quite a challenge.  In this post, I'll lay out a foundation of understanding, broken down by the essential roles and technologies.

Who is a Publisher?

Anyone who owns a website with ads on it is a Publisher.  Publishers create and provide content.  Typically, they are websites with large amounts of traffic.  Publishers strive to create high quality content that will keep visitors engaged.  Higher quality content attracts higher quality traffic (audience), which in turn attracts Advertisers that are willing to pay a higher amount to have their brand messaging be shown to that audience.

What are Agencies?

Usually, when you hear someone say "Agency" they are referring to a "Media Agency."  A Media Agency is hired by the Advertiser to act on their behalf to manage their advertising budget and make sure it is spent in the most effective way possible.

There is also the "Creative Agency."  A Creative Agency does the work of creating the advertisement itself.  Creative Agencies help Advertisers come up with the concept for their ads, and sometime are involved with video production.   Usually, a Creative Agency is not involved with the actual delivery of the ads, so for our purposes whenever you hear "agency" you should think "media agency."

The Advertiser

The Advertiser is any company (e.g. Coca Cola) with products or services to sell that has enough money for a marketing budget for advertising.  Most Advertisers choose to outsource the work of digital advertising to their Media Agency.  When someone says "advertiser" they are often times referring to both the Advertiser and the Media Agency collectively.

The Media Agency

The Media Agency is made up of account teams, where each account is a different Advertiser.  An account team is made up of media planners, buyers and account managers.  It is common for the Media Agency to be the one to contract with technology providers including third-party technology providers (e.g. an Ad Server, DSP, or DMP).  These agreements vary considerably between region and country. 

Media Agencies also contract with Publishers to outline payment terms.  The payment terms are usually confirmed in writing before each advertising campaign via the "Insertion Order" (IO).  The Insertion Order is a document that details the amount of media inventory desired and under what conditions an ad should be shown.

Agency Holding Groups

The largest advertising Agencies sit under holding groups which may be comprised of creative agencies, PR agencies, and media agencies.  The agencies are split into separate companies to be able to serve the interests of customers (brands) that may be competitors with each other.  A holding group could be comprised of many media agencies.

Ad Servers

An Ad Server is a web-based application that allows you to store and manage your ad campaigns.  It is important to understand that there are two types of ad servers.  "3rd-Party Ad Servers" are used by the Advertiser/Agency.  The 3rd-Party Ad Server is used to host and manage ad assets and collect reporting data.  The second type is called a "Publisher Ad Server".  The Publisher Ad Server is optimized for the needs of the Publisher.

In the scenario where the Advertiser buys directly from the Publisher, the Publisher would take the Advertiser's "ad tag" (a URL that points to a specific ad or campaign in the 3rd-Party Ad Server), and enter it into the Publisher Ad Server.  They would also enter all of the delivery conditions as outlined in the Insertion Order.  Examples of conditions include time windows, frequency capping (limiting the number of times a user will see the same ad), and targeting parameters such as the user's geographic location, or demographic profile.  When a visitor matches all of the delivery criteria, the Publisher Ad Server will deliver the appropriate ad tag. 

Display vs. Video

When 3rd Party Ad Servers and Publisher Ad Servers were first built, they originally only handled images, text, and interactive banners.  This is called a Display ad server.  There are some companies that build ad servers purpose built for video, and is sometimes referred to as a Video Ad Server (e.g. FreeWheel, LiveRail, and VideoPlaza).  As time progressed, many display ad servers (such as Google's DoubleClick ad server) bolted on video capabilities.

Advertisers and Agencies

The Advertiser's marketing team puts together an overall marketing strategy.  Part of that strategy includes a budget for digital advertising, with a goal of getting the best return for their money.  They determine an optimal "reach and frequency."  Reach is the number of people you touch, and frequency  is the number of times they hear your message.  The Advertiser wants their digital ads to hit their target audience with a brand message that they will remember.

In order to select a Media Agency to work with, an Advertiser will put out an RFP .  The RFP outlines the Advertiser's marketing objectives and asks the Agencies to propose their best strategy to meet those objectives.  The term for these partnerships is usually for two or three years at a time.  An Agency is selected, and they may or may not bring with them recommendations on new technology and workflows.  The Agency then sets to work planning campaigns, buying ad space, and regularly making reports to the Advertiser.

The  Media Planner

The Agency employs a "Media Planner" whose job it is to make sure that the marketing budget is being spent in the most optimal way possible.  The Media Planner is the one who generally decides what Publishers and channels will be the best place to buy inventory from.  The planner uses research tools to assist them in their work, including those provided by Nielsen and ComScore. 

The Traditional Media Buy

Technology has made such an impact on the world of advertising that now when you buy directly from a Publisher it's called a "traditional media buy".  In a traditional media buy, you actually get on the phone to purchase inventory (or perhaps send emails back and forth).  Software can automate the process of buying ad inventory.  This automation is referred to as "programmatic" advertising.  In most cases, a Publisher will sell their premium inventory directly, and sell the unsold/leftover or "remnant inventory" through programmatic channels.

The actual placing of orders between buyers and sellers is done through an "ad exchange."  Publishers make their inventory available by using a web application referred to as an "SSP" or supply-side platform, while the buyers use a "DSP" or demand-side platform.  The inventory is sold auction-style in real-time through something called "RTB" or real-time bidding.  More on that later on.

How Publishers Sell

CPM stands for cost per "mille" (thousand).  Every time a user sees an ad that counts as an impression.  The Publisher sells impressions in blocks of one thousand impressions.  If the Publisher is thought to have a valuable audience, the Advertiser will pay more to reach that audience and thus there will be higher CPM.  The price can vary greatly depending on a number of factors including, the ad format, how prominently it will be shown, etc.

For video, a pre-roll ad is usually priced higher than a mid-roll or post-roll because the user is thought to be more engaged at the beginning.  The content itself is also a factor; a million-dollar production by a major studio will fetch a premium CPM while a user-generated piece of content (e.g. Youtube content) will fetch a lower price.  Another way to sell video is CPV or cost per view.  Instead of charging by impressions, the Publisher charges for the number of completed views of the ad.  The Publisher will have fewer completed views than they will impressions, but they will compensate by selling CPV inventory at a higher price-point.  Publishers are often looking for different ways to package up their inventory or make it available in different ways to suit the needs of their buyers.  It's common for Publishers to bundle video inventory along with display inventory.

When a direct, traditional sale is made the completed IO (insertion order) is processed by a Publisher ad operations team who use a “Publisher Ad Server” to load ads and ad tags onto the Publisher website.  The Advertiser’s tags are stored in the Publisher Ad Server.  When the player loads, it makes a call to the Publisher Ad Server.  The Publisher Ad server returns an ad tag with the 3rd-party Ad Server tag nested within it.

Sometimes, instead of tags, the Advertiser might ask the Publisher to host the ad creative for them.  This is referred to as a "site-served" ad.  In the OTT space, some broadcasters require their advertisers to use their Publisher Ad server in order to guarantee ad transcoding quality (ensure a great user experience for their audience).

Publisher Ad Operations

When the Publisher's Ad Ops team enters the ad tags into the Publisher Ad Server, they apply delivery settings that were agreed upon in the Insertion Order.  This includes the users's geographic locations where the ad should be shown, ad prioritization, and frequency capping.  The Publisher wants to deliver all of the impressions that they promised to the Advertiser, and the Publisher Ad Server helps them do so as smoothly as possible over the course of the campaign time frame.  Keep in mind that the Publisher likely has many Advertiser customers whose campaigns may be running in parallel.  The worry for the Publisher is that they might "under-deliver" for the Advertiser, or even "over-deliver" resulting in wasted inventory.  Furthermore, if a campaign under or over delivers, it can have a domino effect on upcoming campaigns that were supposed to start after this one finished.  For this reason, Publisher Ad Servers usually include comprehensive analytics and forecasting capabilities to help protect revenues.  At the end of a campaign, the Advertiser and the Publisher compare the reports from their respective Ad Servers.  Often times there are discrepancies in the reporting between the two systems that need to be resolved.  For the most part, the Advertiser pays on the number of impressions they saw in their own reporting.

Video Ad Formats

You've probably experienced an ad playing at the beginning of a piece of content.  This is called the "pre-roll."  Ads in the middle are "mid-roll" and a "post-roll" is an ad at that occurs at the end.  Collectively, video ads are referred to as "In-stream" or "Linear" ads.  There's also "Non-linear in-streaming" ads that are interactive and if the user engages with them they will take the user out of the linear playback experience. 

Since every Publisher has a different video player, the IAB created video ad format standards to ensure that an ad can play on various players.  Three important standards you should know are VAST, VPAID, and VMAP.  All of these formats are essentially XML (text) documents that define a common way for the ad server to return instructions for the video player.

VAST

VAST stands for Video Ad Serving Template.  VAST defines the format of the response from the ad server.  The VAST response provides instructions to the player on how to play the ad; the playback URL for the ad creative, and tracking URLs to send beaconing messages to.  A video player that is "VAST compliant" can interoperate with any conforming ad server.  It's important to understand that the VAST specification standardizes the response from the ad server, not the request URL (a.k.a. "ad tag").  It can be a bit confusing, but when someone says they're using a "VAST tag" what they mean is that the response that comes back from the URL will be in VAST format.  Usually, you'll see some sort of query parameter in the ad tag that denotes the desired response format (e.g. &output=vast)

If you're curious what the VAST XML response looks like, take a look at this example.  This is an example of a VAST 3.0 tag.  There have been a few revisions to the standard.  At time of this writing, requirements for a new VAST 4.x is being ironed out.

VMAP

VMAP stands for Video Multiple Ads Playlist.  VMAP allows the video player to understand at what times along the video timeline ads should be shown.  The IAB website states that "While VAST 3.0 provides some additional controls over the use of video ad inventory (such as support for ad pods), it lacks the ability to define ad breaks or the timing of those ad breaks within the video content entertainment timeline."  So, the VMAP standard does not define an ad response format itself but rather the timing and order.  A VMAP response will contain VAST tags within its response body.

VPAID

VPAID stands for Video Player Ad Interface Definition.  VPAID is similar to VAST, but it allows for interactivity and custom metrics on top of standard metrics.  This ability to include logic to collect custom metrics makes VPAID the de facto choice for programmatic RTB inventory (the reason being that in programmatic RTB the Advertiser does not necessarily know what Publisher they're buying from, and wants to be sure their ad was viewable).

Companion Ads

In-stream ads in a video player can be accompanied by display ads on the same page adjacent to the player.  This is referred to as a "companion ad."  Advertisers like companion ads because it makes bigger brand impact, especially if the companion ad lingers even after the video ad has completed and the content plays on.  Publishers benefit by selling companion ad opportunities for a higher price.

Ad Verification

Advertisers want to make sure that they're getting what they paid for.  Ad Verification refers to the auditing of the delivery of the ads.  One of the most commonly discussed verification metrics among Agencies and Advertisers is Viewability.  Viewability describes how much of the ad is in view for the end user and viewability is measured on viewable impressions.  Ad Verification vendors include companies such as DoubleVerify and Moat.

Advertising Exchanges

The ad technology space is constantly evolving.  In the "traditional buy," the Advertiser or Media Agency would deal directly with the Publisher when they wanted to make a purchase.  In the early days of online advertising, there were entities known as "Ad Networks" which were basically companies that worked with a bunch of Publishers and aggregated their inventory and then sold to the Advertisers on the Publisher's behalf.  Ad Networks were useful to Advertisers because they brought a wide range of inventory together into one place.  However, Ad Networks were eventually made redundant by technology.  Nowadays, Publishers make their inventory available in virtual marketplaces called "Advertising Exchanges" that are not unlike a stock market.  Advertisers can buy the inventory and complete the entire transaction through software without ever having to pick up the phone or send an email.  One of the most popular ad exchanges for video is TubeMogul.

Supply Side Platforms (SSPs) for the Publishers

A Supply-Side Platform or SSP is the web application that a Publisher would use to make their inventory available to an Ad Exchange.  Publishers will package up their inventory, usually by category (e.g. the "sports" section) or if they own multiple websites they might package it by property.  Once the Publisher has labeled their inventory within the SSP, they can then add descriptive information that will be provided to the buyers such as the width and height of the video player and what formats they'll accept.

Demand Side Platforms (DSPs) for the Advertiser

The Advertisers and Agencies will use a DSP to connect to the marketplace.  The person who works at the Advertiser or Agency that makes the purchases using this tool is sometimes referred to as the "trader" or "trading specialist."  Just as the SSP helps the Publisher optimize his inventory to be sold, the DSP helps the buyer make the best use of their advertising budget.  One of the most popular DSPs for video is TubeMogul.

The Second Highest Bid Auction

The Publisher makes their inventory available in one or more Ad Exchanges.  If the inventory matches the criteria set forth in the Advertiser's DSP, the DSP will place a bid for the ad space.  Other Advertisers using DSPs who also want the ad space will place bids as well.  The auction runs for a period of time, while the DSPs bid higher and higher.  At the end of the auction, the winner is the highest bidder, but the auction is cleared at a penny more than the price offered by the second highest bidder.  This lets Advertisers bid aggressively while ensuring that they won't end up overpaying for the inventory.  The Publisher will often times set a floor price which unknown to the bidders in order to ensure that they get a minimum amount for their inventory.

Real Time Bidding (RTB)

The auction begins the the moment that a user presses play on the video player, and the entire auction is completed in milliseconds.  This is why it is called "Real Time Bidding."  Here's a great video that highlights how fascinating this sequence can be:


Private Exchanges

Publishers generally only put their "remnant" or unsold inventory into the open marketplace, while their best inventory is reserved for direct sold methods.  There is a middle ground, however, and that's where Private Exchanges or Private Marketplaces (PMP) come into play.  A Publisher can create a marketplace that is invitation-only.  They will then set up what's called a "First Look" which means that those in the PMP will get a chance to bid on the inventory before it is offered to the wider marketplace.  The Advertisers participating in the PMP may even have pre-negotiated prices for the inventory, but without the commitment to buy.

Data Management Platforms (DMPs)

The Advertiser or Agency will often choose to purchase audience data to help them make better decisions about who to show their ads to (i.e. which ad inventory to bid on and how much).  These audience data providers have datasets about individuals based on either cookie level information or usage of authenticated sites.  The Advertiser can leverage this dataset in real-time during the auction by looking up the identifier in their DMP, or Data Management Platform.  Audience data purchased by the Advertiser is called "3rd-party data" and data they they may have imported from their own site or CRM is called "1st-party data."  Advertisers will pay a higher price for ad inventory that will be shown to a user that fits their targeted demographic.  Just as important (if not more) is the ability to prevent or suppress a purchase for someone what has already seen the ad too many times, or is for one reason or another undesirable to advertise to.

Conclusion

The concepts described above are the foundational elements of video ad delivery.  I'm sure this post will leave a novice with many more questions, so feel free to contact me and stay tuned for future posts.