Global Market Outlook on Ad Server Industry
- Due to the evolution and growth of most ad serving companies’ geographical footprint, its now possible for marketers to obtain near global coverage with fewer suppliers
- Additionally, the goal for many marketers is to seek more control and reduce costs, which can account for more than 10 percent of net digital media spend in some cases, depending on format, with video costing significantly more
- The WFA and Ebiquity survey found that the most common way for advertisers to work with ad servers, such as Atlas, DoubleClick, Sizmek, Adform, and DCM, was for the relationship or contract to be owned and operated by media agencies, an arrangement found in 70 percent of cases
- Ad serving can be charged for various ways, but fixed CPM is most commonly used by almost 40 percent of advertisers, while 25 percent have a variable CPM payment model and a further 11 percent using a percentage of net media spend
- However, such arrangements can lead to a loss of control and visibility on pricing as well as challenges in data access and reporting. Some 30 percent of advertisers now have a direct relationship with an ad server, but allow the agency to operate this. A further 13 percent now own and operate the relationship themselves (figures add up to more than 100 percent because brands can use multiple models even in the same market)
Cost-Saving Opportunities and Negotiation Levers
Flat rate fee
Ad server buyers, who have a fixed target of impressions, can realize cost savings by sourcing ad server on a flat rate fee. This helps them in paying the flat fee agreed upon based on the unique number of impressions passing through the platform.
Longer contract duration
Owing to the importance of ad server in the digital marketing space, having a long-term contract with the ad server vendor, would help the buyer to save costs over having multiple short-term contracts.
Sourcing in stack
Ad server supply base offers multiple interrelated services. Buyers source multiple services in stack from the same vendor and can negotiate at a better price than sourcing multiple services at a higher price from different vendors.
Ad server is a region-agnostic service. Therefore, sourcing ad server at a global level from the same vendor would help the client in negotiating with the vendor for an attractive price.
Trends that Impact the Ad Server Ecosystem
- Header bidding is an advanced programmatic buying method, in which publishers offer their inventory to multiple ad exchanges simultaneously before making calls to their ad servers.
- The idea behind header bidding is to let multiple demand sources bid on the same inventory at the same time, enabling publishers to increase their yield and revenue more than the standard waterfall method.
- Most content-recommendation platforms are currently in a competition to see who will offer the best native video ad solution. Click-through rate and user engagement from recommended content are significantly higher compared to standard banner units. Still, there are quite a few hurdles to overcome, especially related to which ad server will support this ad format as well as the actual uploading of creative for native campaigns, before advertisers can use it properly.
- Branding and performance usually live in two different spheres, though recently it has seen a gradual shift towards more scalable business models in video, such as CPV/CPCV (cost per completed view) and CPE (cost per engagement). The main challenge will be finding the relevant ad server that supports such activity as well as the ability to scale. This change will still require a significant shift in mind and current business practices for many branding advertisers, but eventually it will be much more effective for them in the long run.