“Why do ads have to be so annoying?” – Understanding the advertising market

During our virtual surfing sessions, we have all bumped into annoying ads. Some of them pop up from nowhere, pushing down the content of the website and thus causing you to accidentally click on it. Next thing you know, you are being redirected to the website of some uninteresting face cream. I bet it happened to you very many times, resulting in severe rage explosions. This kind of annoyance is a banner ad called leaderboard. Amongst the most hated ones, we also find the pop-ups, floating and expanding ads.

Credits: Pascale PirateChickan

In 2009 Michael Gundlach invented AdBlock, an ad blocking extension which allows customers to surf the web without being bothered by ads. It’s a great invention, but yet not all sites allow it. Forbes, for instance, asks you to disable your Adblock in order to access their content. So you have two choices: you either visit another magazine or you endure the annoyance and the chances to accidentally click on that slow loading Audi ad. However, the question is: why does it have to be this annoying?

Why does it happen this precise way?

The first reason that pops into your mind is that they want you to click on the ad. This is a really good intuition. There exist several types of advertising contracts, but the most popular ones are Cost Per Mile views (CPM) and Cost Per Click (CPC). In the first case you pay a certain amount, let’s say 5 euros, per thousand views, while in the second you pay per every click. In this case, every time you click on the ad, the website earns a little penny. It would thus seem natural to delay the ad in order for you to click on it by mistake.

This line of reasoning is very logical, yet wrong. The reason why the banner ad shows up a tiny fraction of a second later than the rest of the content has nothing to do with CPC. So why is that? In order to answer this question, we need to deep dive into the ads market.

How are ads sold?

Cocacola-5cents-1900 edit1.jpg
Credits: Wikimedia Commons

Back in the days, if Coca-Cola wanted to launch an advertising campaign on the NYT, all their marketing manager had to do was call the Times. They would discuss size, duration, and cost of the campaign and come to an agreement. Easy peasy.

In the World Wide Web, however, things are not that simple. Coca-Cola and the NYT don’t interact anymore but rely upon mediators dealing their goods. Now let’s go one step back: what do they have to offer? Coca-Cola offers an advertising campaign and thus money, while the Times offers advertising space. It’s like two perfectly matching puzzle pieces, they complete each other. Nevertheless, they do not meet at Starbucks to discuss the details, but rather rely upon mediating servers. Coca-Cola relies upon a Demand Side Platform (DSP), a server helping them to satisfy their demand for advertising space, that is to place their ads on the market. The Times, on the other hand, seeks help from a Supply Side Platform (SSP), a platform enabling publishers to sell their advertising inventory, namely their ad slots. DSPs and SSPs communicate in a specific virtual space, the Ad Exchange.

Let me use a metaphor to explain how this virtual madness really works. Let’s imagine that you are a 12-year-old boy in need for socks. Since you are a boy, you do not buy your own socks. Instead, you rely on a mediator: your mother. She is your DSP, as she wants to fulfill your Demand for socks. She goes to the market to shop for you and the other male family members. There she meets John, a socks vendor.

John does not sell goods of his own production, but rather sells socks from different Suppliers. He is an SSP and thus the mediator between the suppliers and the market. All this happens on the marked square. Of course, at the market, there are several moms shopping for socks, as well as several retailers, but John is your mother’s trusted dealer.

The advertising market works in the exact same manner, simply the other way around. When you load the NYT web page, the website sends a signal to the SSP, communicating that it has one or more ad slots available. The SSP virtually meets various DSPs in the Ad Exchange, where an auction is held for all the available slots. DSPs, representing various clients (e.g. Coca-Cola), make a bidding. The winner of the auction gets to be displayed on the NYT page loaded on your laptop. This process is called Real Time Bidding because the auction takes place in the exact moment in which you are loading the page, i.e. it happens in real time.

It sounds a bit crazy, I know. As you load a web page, an online auction is held somewhere in a virtual market square to sell its ad slots. The reason why the ad takes a little longer to display is that the website must wait for the winner of the auction to be declared. Only then you’ll know if you’ll be annoyed by Coca-Cola, Audi or H&M. At least now you know at whom to vent your fury.

-Luisa Seguin

Featured image: Mr Fix it

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