Ad monetization has become a very steady and sustainable business model for publishers looking to make supplemental or primary income from their platform. Much of the time, this income is passive, making it that much more of an appealing venture.
When we talk about ad monetization, we’re referring to generating revenue through what the ad tech world calls “digital assets.” These digital assets are websites, blogs, and apps — all of which advertisers use to continuously target their audiences to attract and retain loyal customers or clients.
You probably have many questions if you’re new to the ad publishing world. In this article, we will answer those questions by telling you everything you need to know about ad monetization, how it works, and how to get started.
What Is Ad Monetization?
The quick and simple definition of ad monetization is inserting ads into specific spaces throughout the various digital assets (which, as previously mentioned, refer to websites, apps, and blogs). The goal is to make these ads visible to incoming visitors and users and collect a certain amount of revenue per advertiser from each ad.
Of course, depending on the digital asset you’re using, there are different standards for ad placement and what counts as a view or user engagement. As a publisher, your responsibility isn’t just to ensure that ads are placed accordingly.
This means creating a seamless and functional platform that offers value to users. The same goes for running a website. It’s not as simple as creating a website and posting content on a common theme. That content must be valuable to users, and the website must cater to the user experience (UX) while implementing search engine optimization (SEO) best practices to ensure your site can easily be found. Of course, that’s a topic for another day.
The bottom line: ad monetization requires placing ads in spaces where they’ll be seen effectively to earn revenue from advertisers. To ensure a higher revenue stream, your digital asset must cater to the UX and garner plenty of user traffic.
Advertisements as a Primary Income
When discussing advertisements as a primary income, we’re talking about a category of digital assets that cater solely to earning an income based on publishing ads. For instance, a website dedicated to providing editorial content to its visitors to place ads would be an example of a digital asset that caters to a primary income.
It should be noted that creating a website full of editorial content to generate ad revenue should settle on a specific niche. For example, a website dedicated to reviewing beauty products will attract a particular demographic, as well as specific advertisers, targeting said demographic.
If you create a website without a specific area of focus, you won’t garner much interest from potential visitors because they’ll be confused about what you offer. This would also make advertiser targeting less precise because they wouldn’t be able to hone in on a specific demographic for all users of your site.
Advertisements as a Supplemental Income
When we talk about advertisements as supplemental income, the category of digital assets we’re referring to typically belongs to specific businesses. These digital assets, such as websites and apps, support the business and its functions. The advertisements are used to provide additional income next to their products or services.
Some examples of this would include an eCommerce website that sells certain products, an app that charges for purchases or a subscription for use, or even a restaurant that uses an app to allow for easier ordering and reservation making.
More on Ad Monetization Via Apps
Ad monetization is pretty clear in its definition. However, what’s seldom expanded upon is app monetization using advertisements. When we talk about app monetization, we’re referring to the free apps that developers create and use ads to generate revenue from said free apps.
App monetization (using ads) comes in two forms:
For many free apps, ad monetization is a primary source of revenue. While the app itself may be free, not all of its features are free, which leaves the potential for a subscription or additional one-time payments to unlock certain features. This is referred to as in-app purchases (IAPs).
It’s a popular method among game developers, offering certain free games while advertising for extra content or more game features such as resources, lives, etc. Unlike other forms of ad monetization, these ads come specifically from the app developer to encourage users to make IAPs.
The second method of ad monetization is one that you’re likely more familiar with. In-app advertisements (IAAs) expose the app’s users to third-party advertisements. Therefore, monetization depends on the ad networks that link to the developers and app businesses on behalf of the advertisers — which caters directly to the supply and demand of ad inventory.
Using in-app advertisements is significantly easier and much less expensive for acquiring new users because this also refers to the use of free apps. Additionally, IAAs allow apps to monetize every user, not just the small population of those willing to pay for the extra features.
Remember that when using the IAA method, you’ll need to ensure that the ads being served are relevant to the specific audience using the app. You’ll also need to ensure that the ads are being served in formats that minimize user disruption so it doesn’t negatively impact user experience.
Types of Deals for Publishers
When it comes to the buying and selling ad space, everything today is mostly automated. Programmatic advertising has completely changed how advertisers and publishers buy into digital ad space, as it’s a much quicker and more efficient way of purchasing this ad space compared to waterfall bidding. It’s also a better solution for effectively displaying ads to the intended audiences.
Programmatic advertising utilizes multiple technologies (i.e., SSPs, DSPs, ad exchanges, ad servers, etc.) to deliver ads seamlessly and contextually. However, ad buying and selling still maintain human involvement. For example, in direct ad sales, personal interaction (via those who work for ad agencies) is needed to conduct negotiations.
Let’s expand on programmatic advertising and direct sales.
As mentioned above, programmatic advertising revolves around automation within the ad bidding ecosystem. It’s also an umbrella term for four specific types of auctions:
1. Open Auctions
Open Auctions (also referred to as open marketplaces) are arguably the most traditional method used within the programmatic auction ecosystem. Officially, “open auction” is the term used for real-time bidding where all the players in said ecosystem can participate simultaneously.
This means publishers can offer their ad inventories in the participating ad exchange networks with a minimum cost per thousand impressions (CPM – cost per mille) price attached. Advertisers can then bid on the available inventory, ensuring the highest bids win.
2. Private Auctions
Private auctions are programmatic auctions in which publishers can limit the participants. In other words, they get to choose which advertisers can see and bid on their inventory, and the primary players involved include the publisher and their selected advertisers, demand-side platforms (DSPs), networks, and agencies.
These private deals offer a certain level of exclusivity, as they prioritize publisher and advertiser relationships. They also allow the selected group of advertisers to bid on the available (usually premium) inventory before it’s made available to the open marketplace. Private auctions also allow publishers to set a minimum effective cost per thousand (eCPM).
3. Preferred Deals
Preferred deals refer to the type of programmatic auctions that allow publishers to sell their premium inventories at a fixed eCPM cost to a selected group of advertisers — directly. This means the auction atmosphere is limited, and advertisers can bid in real-time at either the fixed eCPM price or above. However, advertisers are only allowed to bid once, which means once their bid is placed, they won’t be eligible to bid again on the same impression in an open auction.
Preferred deals give publishers with much more control over the environment as well as their revenue. This type of programmatic auction also benefits advertisers by allowing them access to more exclusive inventory with straightforward pricing and a sustainable volume of ad impressions.
4. Programmatic Guaranteed
Programmatic guaranteed (also referred to as programmatic direct) is a non-auction method characterized by pricing agreements in large columns. In this scenario, publishers and advertisers deal directly to agree on the pricing, which allows publishers to regulate their inventory prices while also allowing advertisers to buy more premium inventory directly.
Direct sale refers to the process of negotiations with publishers/advertisers and completing the communication by agreeing on a price and volume of ad inventory.
Agencies typically use this process, as it requires much more time and money than other auction deals. Additionally, impressions are sold to specific clients who want their ads seen in specific contexts on websites, platforms, and apps and are willing to pay higher prices for the guaranteed placement of their advertisements.
Direct sales also call for ad inventory to be sold off at a fixed CPM rate determined during negotiation. This is precisely what guarantees the inventory for the clients while also guaranteeing a level of predictability, as the paid exchange is predetermined, as is the ad delivery. Overall, the primary benefit of direct sales for publishers is the ability to garner much higher CPMs than usual.
What Is the Programmatic Advertising Ecosystem Made Up Of?
Throughout this article, we’ve mentioned all the “players” within the programmatic advertising ecosystem. By players, we mean the participants within a given auction.
Here’s the breakdown of who you can expect to participate in a programmatic auction at any time.
Supply-Side Platforms (SSPs)
SSPs are programmatic monetization platforms publishers utilize to sell their advertising spots across their digital assets. More specifically, SSPs connect with ad exchanges and demand-side platforms to enable advertisers to bid on various inventories.
SSPs enable publishers to manage all of their automated ad sales and associated processes, such as selling ad space, ad optimizing, analyzing ad campaigns, and creating the best ads for their monetization strategies. One of the greatest benefits of using an SSP is that it cuts out the middlemen, such as sales managers, for negotiations because they link directly to the ad exchanges and automatically evaluate the ad space for sale. The ad space is then auctioned off to the highest bidder, garnering the best possible price.
Demand-Side Platforms (DSPs)
DSPs are programmatic monetization platforms that companies, ad networks, and even agencies use to buy ad space from publishers and ad exchanges. DSPs help advertisers by prioritizing their requirements based on their target audiences and pricing, as well as their overall campaign goals. They also automatically assess the available ad inventory to ensure it meets the specified criteria to ensure optimal ad spaces that are also cost-efficient.
Ad servers are platforms on which advertisers host their creative assets. These creative assets include banner ads, native ads, videos, etc. They also cater to data storage to ensure the distribution of these creatives can be carried out within milliseconds once an impression is sold.
This allows advertisers to use ad servers to track and measure the performance of their ads via reporting and ad management tools. Ad servers also benefit publishers, allowing them to connect to multiple demand partners, monitor their ad campaigns, and set priorities for ad delivery.
An ad network, short for advertising network, is a platform or service that connects advertisers and publishers in order to facilitate the buying and selling of advertising space. It acts as an intermediary between advertisers wanting to display their ads and publishers with available ad inventory on their websites, mobile apps, or other digital platforms.
The primary function of an ad network is to aggregate ad inventory from multiple publishers and offer it to advertisers, making it easier for them to reach a broader audience across various websites or applications. Ad networks provide tools and technology to manage ad campaigns, target specific audiences, and track the performance of ads.
An ad exchange is a digital marketplace that enables the buying and selling of online advertising inventory in a real-time auction-based environment. It acts as a platform where publishers can offer their available ad space, and advertisers can bid on that inventory to display their ads. Ad exchanges provide a transparent and efficient marketplace for the automated buying and selling of digital advertising.
Agency Trading Desks (ATDs)
An agency trading desk is a specialized unit within an advertising or media buying agency focusing on programmatic advertising and media buying. It operates as a central hub or platform where advertisers can access and manage their programmatic advertising campaigns across various ad exchanges, demand-side platforms (DSPs), and other digital advertising sources.
The primary role of an agency trading desk is to leverage technology and data to execute programmatic advertising strategies on behalf of their clients.
Data Management Platforms (DMPs)
A data management platform (DMP) is a technology platform that collects, stores, organizes, and analyzes large amounts of data from various sources to create unified and actionable audience profiles. It gives marketers and advertisers a centralized system for managing and leveraging data to enhance their targeting, personalization, and campaign optimization efforts.
Getting Started with Ad Monetization
Now that you know how ad monetization works and what’s involved, you’re probably ready to see what you need to do to get started.
The first step in ad monetization is to build a website or app with a specific audience in mind. As mentioned earlier in this article, you’ll need to cater to the user experience. So, make sure whatever content you’re putting out is attractive and valuable to potential visitors and users.
Next, you’ll want to determine which ad tech tools will be most useful. We suggest starting with the basics — signing up with a major ad server like Google AdSense. It’s a good idea to start with AdSense if you’re a newbie and working up to Google Ad Manager. These incredibly intuitive tools offer plenty of support to allow you to follow step-by-step instructions to learn your way around the ad tech world.
As you grow in your ad publishing endeavors, the next step would be to find ways to optimize your ad stack to increase your ad revenue. The best way to do this is by working with an ad monetization solution like Freestar. Get started today to see how we can help you and your site!