the history of advertising technology

The history of Advertising TechnologyClearcode B&B event

8th May 2015

Maciej Zawadziński

WHAT IS AD TECH?

What is ad tech?

• Software solutions for online advertising:

• delivery, targeting & control,

• data collection and decision making,

• measurement and analytics,

• ad delivery across different channels: Web, Mobile, Video/TV, Online Radio, IoT, VR etc.

What is ad tech?

• What’s so exciting about ad tech?

• Reach: ad delivery to 3+ bln internet users,

• Scale: tera-, peta-, zeta-… of data,

• Performance & High-availability,

• Data science: making smart decision based on the data,

• Google, Yahoo, AOL, Oracle, Facebook, Twitter and other tech giants - they all rely on ad tech!

1993

The first banner ad

• New concept - special sections on the site to display banners

• Oct 27, 1993

• Publisher: hotwired.com (Wired Magazine)

• Advertiser: AT&T

• CTR 44% (sic!)

The first landing page

It was very simple!

• Advertiser had a direct relationship with the Publisher,

• HTML placement (468x60 pixels) with GIF format image.

1994

Cookies

• Lou Montulli and John Giannandrea invent cookies while working at Netscape Communications,

• Use case - “a way of distinguishing online shoppers”,

• Implemented in Netscape and Mosaic browsers,

• Cookies become inseparable element of ad tech in the following years that enable advertisers to track users’ behaviour online.

Web browsers 94’ - 09’

1995

JavaScript

• Invented at Netscape Communications,

• Shipped in Netscape 2.0 released in September 1995,

• Introduced pop ups & pop unders to online advertising.

• Similarly to cookies, JavaScript is widely adopted by the advertising technology in the following years.

WebConnect

• World’s first ad network (in 1995 they syndicated 160 sites),

• Placed ads on network of sites that signed up,

• Pricing based on the website audience profile (Site Price Index),

• Introduced “frequency capping” to prevent “banner fatigue” as well as banner rotation,

• In ’96 advertiser’s panel with statistics of the campaign: impressions, clicks, responses/sales (conversions) - developed in CGI/Pearl.

WebConnect’s ICS system

Ad network

• Advertiser can buy more inventory from many Publishers through an intermediary and centralize the reporting for the campaign.

• Advertiser buys a “package” of impressions and pay in CPM model.

1996

DoubleClick

• an ad network,

• an ad server for publishers’ direct sales,

• measures impressions, clicks, spent, ROI etc.

• CPM pricing model,

• used cookies which tracked user’s history in order to serve ads relevant to them,

• its competition, WebConnect opted out of using cookies because “it violates the users’ privacy”.

DoubleClick website ‘97

Ad server

Ad serverPublisher’s website

Ad network

Direct deal

Browser/User

• Direct deals - inventory sold by the Publisher’s sales team,

• Ad networks - fill the remaining inventory (but for some Publishers this become the only or the largest rev stream).

1997

Privacy & cookies

• Cookies were discussed in two U.S. Federal Trade Commission hearings,

• RFC 2109 specification released - HTTP State Management Mechanism (Cookies)

• third-party cookies were either not allowed at all, or at least not enabled by default

• recommendation NOT FOLLOWED by Netscape and IE

RFC 2109

1998-2000 aka

Dot Com Bubble

Popup/Popunder explosion

• intention - increase revenue from advertising while banner ads effectiveness (measured in CTRs) decreases,

• major browsers add popup blocking functionality from early 2000s, IE adds this functionality in 2004.

PPC advertising

• Bill Gross at Overture (earlier Goto.com) invented PPM model (Paid Placement Model),

• Today it is called PPC (Pay Per Click),

• Introduced auction model for advertisers - the higher your bid, the higher your listing,

• CPCs in ’98 - up to $1/click.

• Overture monetized large portals such as Altavista, MSN and Yahoo,

• In 2003 the company was acquired by Yahoo!

The Dot Com Bust

• startups spend substantial amounts on advertising until bubble bust,

• many startups go out of the business, including ad tech companies,

• other ad tech companies had to scale back, DoubleClick and Overture survive.

2000-2005

AdWords

• launched in 2000,

• used CPM pricing model up to 2002,

• introduced CPC pricing in 2002 - Google focused not only on the highest bid, but also on relevance.

• As of 2013, 85% of Google’s revenue are from AdWords,

• CPCs go as high as $200/click.

AdSense

• Applied Semantics - created AdSense contextual advertising technology in 2002,

• Acquired by Google in April 2003,

• Google launches AdSense network, enabling publishers to monetize their content with PPC ads.

Original AdSense press release

AdSense in mid 2004

Ad networks & piggybacking

Publisher

Ad network 1

load  an  ad

no  ad  -­‐  fallback  to    ad  network  2

no  ad  -­‐  fallback  to    ad  network  3

Ad network 2

Ad network 3

• Early-mid 2000s:

• piggybacking becomes commonly used to fill remnant inventory,

• endless redirects cause some ads not to load at all,

• ad networks’ struggle with “liquidity” problem - their inventory is either under-filled (not enough campaigns) or over-filled (too many campaigns)

2005

Early “ad exchanges” launch

• AdECN, RightMedia, AdBrite, ADSDAQ

• For ad networks to address “liquidity” problem,

• Every impression is matched against campaigns in the system,

• Highest bidder win (no real-time bidding protocol yet),

• Members - mainly ad networks,

• “Exchange” charges a flat transaction fee for every impression

Early “ad exchanges”

Publisher

Ad network 1

load  an  ad

Ad exchange

no  campaign  -­‐  send    to  exchange

Advertiser

Ad network 1not  enough  inventory  -­‐    get  from  exchange  (50%)

Ad exchange

insertion  order  (campaign)

Publisher

own  inventory  (50%)

under-filledover-filled

manual / API campaign targeting i.e. US traffic from MacOS on tech sites

301 redirect / one-way

return  an  ad

2006

Mobile ad networks

• AdMob - text links on featured phones,

• soon followed by other players,

• this was before smartphones era - first iPhone released a year later, in 2007.

2007

Facebook Advertising

• Facebook introduces “Facebook Ads”, “Facebook Insights” and “Beacon”,

• Beacon relies on a code installed on third party partner websites that collects the information about user activity and broadcasts to the user feed (by default!),

• Beacon raised a lot of privacy controversy and was shut down in 2009 after class-action lawsuit (Facebook paid $9.5M fine)

Facebook Beacon

3 key acquisitions

• AdECN by Microsoft

• MS switched from AdECN to AppNexus for its real-time bidding needs 3 years after acquiring it

• RightMedia by Yahoo!

• DoubleClick by Google

DSPs founded

• DataXu

• Invite Media

• BrandScreen

• MediaMath

• AdBuyer.com

2008-today

Rise of RTB APIs

RTB APIs

Publisher

Advertiser

DSP 2

Ad exchange 2

insertion  order  (campaign)

< 100 ms

Ad exchange 1

SSP/ad network

DSP 3DSP 1

load  ad return  ad

$1.10 $1.15

$1.15

More inventory sources traded in RTB

• Display banners,

• Native advertising,

• Video and advertising,

• Digital radio and Digital TV advertising,

• …

Advertiser's budget

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Media Agency Trading Desk DSP 3rd Party DataAd Exchange Ad Network/SSP Publisher

U.S. ad spend by quarter

RTB spend

Future

Future

• RTB evolution - new instruments futures, forwards etc. (like in finance),

• IoT - Internet of Things, VR - Virtual Reality,

• Need for more transparency, privacy and openness!

• Let’s be a part of it ;-)

Questions?

Maciej Zawadziński maciej@clearcode.cc @zawadzinski