Online Advertising

Joe has an ice cream parlor in Kendall square Cambridge. Business is doing great .But Joe is an ambitious guy. He wants to increase his sales. He believes that students at Harvard really do know about his specialty ice creams. If only they knew about his specialty ice creams. If only they knew, they would come in big numbers and spend big bucks. So Joe starts thinking of the best way to spread the word.  As he was pondering his friend Jill, strolls by and asks, “What’s up dude? What are you thinking about Joe?” Joe replied, “I need to create some buzz about the ice cream parlor. Not many people out at Harvard know about our specialty ice cream. How do I do it”?   

Jill : Why not an online advertisement. The kids over at Harvard are perennially hooked on to the internet. I am sure we can reach out many more ice cream lovers.

 Joe : How do we do it ? All I know is to make ice creams. I don’t know all this online stuff.

 Jill : It is not very complicated. First you need to understand the message you are planning to convey. A marketing agency then translates your message into a creative online advertisement. After that, since There are millions of websites out there, you need to figure out the best place to display the ad. You see, all the websites have space where they can publish ads. You will get the best bang for the buck if you publish the ad in a site that is visited most often by your target audience - Harvard kids. Next you need to estimate how much it costs for you to put the ad.

Joe: Wait , Hold it. How do I do that?

Jill: A few years back you had to hire a media buyer to help you with this task. Luckily for you do not need to break your head over it today. You go to the advertising agency like Merkele; they come up with the creative message. The agencies trading desk then uses a Demand Side Platform (DSP) like Data Xu to aggregate demand across all the users. The demand side platform then bids in real time over an exchange for online real estate (known as inventory).

A supply side platform aggregates all the online advertising real estate / inventory and puts it out in the exchange. The exchanges are similar to Nasdaq. In online world they are Double click, Facebook exchange etc. Let us say the algorithm in DSP bids 0.1 cent per click for a banner ad in yahoo homepage. Based on rates quoted by yahoo in the exchange we win the bid. Then we get the right to rent the space for a fixed period of time.

Joe : It seems pretty similar to buying stocks isn’t it ?

Jill : That’s it . You are a pro now! Go ahead and build your business.