
Google Acquires AdMeld For $400 Million - jasonlbaptiste
http://techcrunch.com/2011/06/09/google-acquires-admeld-for-400-million/
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jeremyrwelch
This is a big move, very smart for Google.

Also, anyone else notice that the hackernews community seems to either a) not
understand or b) not care as much about the ad tech world?

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pagefruit
Would anyone mind explaining what the difference between all these ad
companies is? In my mind, ad companies are kind of like finance companies, in
that they all have the same goals (beating the stock market/displaying optimal
ads), and differ mostly in their exact algorithms and technology. (Compare
this to "standard" tech companies, where it goes the other way around: their
products are very different (e.g., Twitter is not Facebook), though their
technologies don't really differ that much from each other.)

Is this accurate?

~~~
earl
So, broadly, the biggest divide in the online advertising world is search
advertising vs display advertising, and search sounds exactly like what it is
-- search is generally the ads next to searches on GYB. Search is bigger than
display by revenues [1], and much more concentrated. The other nice benefit of
search is that it corresponds much better to intent -- when you search for
hotels in Palm Springs, you're most likely in the market for a hotel in Palm
Springs, etc. The other thing search has going for it is it's easy and
quantifiable -- you can sign into google adwords with nothing more than your
credit card, type up some text ads, and be running quantifiable campaigns the
next day.

The display advertising world is structured differently. Display ads are
obviously those pictures you see plastered all over the sites you visit.
There's less raw intent so individual impressions earn a lot less money --
typically the amounts are measured as cpm, cost per mille, ie cost per 1k
impressions. It's also important to understand the structure of the market a
bit -- in the beginning (90s), people pretty naively bought ad impressions in
units of 1k. Performance was often evaluated based on ctr or click through
rates. Ads were often sold on the basis of quantifiability -- you could, for
the first time, measure how many ads were seen (in the sense that a user
loaded the page), who clicked, how often, where he or she went, etc. As search
advertising evolved, I think a lot of the people chasing quantifiable
advertising moved to that, while display became more about branding. This,
btw, is the value of facebook -- brand advertisers want to be able to
precisely target age, gender, income, and other demographics; on facebook,
users freely and generally accurately share this information.

The display ecosystem has a bunch of moving pieces. If you look at jbooth's
link [2], you'll see:

Agencies -- these are the (7?) big advertising agencies that most large
accounts go through. Companies like Toyota, GM, General Mills, etc, will give
these companies 10s to 100s of millions of dollars to run ad campaigns on
their behalf. The ad agencies weren't really capable of managing digital
campaigns. That is, when ad agencies came about, your media outlets were maybe
10 national TV networks, radio stations, local newspapers, and a couple
national magazines. The media buying process was pretty simple -- the agencies
would send out an RFP that said eg we want manly men in their 40s who buy
outdoorsy cologne and the aforementioned publishers would respond and say how
their audience matched that profile. Compare this to the online world -- there
are thousands of premier publishers such as the NYT, ESPN, online magazine
versions, etc. Trafficking ads is an order of magnitude more work -- buy what,
where, on which site, when, with what creatives, etc. So the agencies built or
bought companies that have the capability to build digital media, traffic
campaigns, etc. Eg Vivaki is Publicis, b3 is WPP, etc.

Ad Exchanges -- these are remnant ad sources. Basically, there is premier and
remnant inventory. Premier inventory is something like display ads on high
quality reporting on ESPN or ads on articles on ars technica. These are often
sold by in house salespeople in a process remarkably similar to how everything
used to work, though people mostly email pdfs instead of sending faxes. Every
ad impression that isn't sold as premier is referred to as remnant, and these
remnant impressions are offered to ad exchanges such as Right Media -- rmx,
owned by Yahoo -- in exchange for a cut. So the way this works is I can buy,
with some rules, 1MM impressions on rmx and rmx will put these impressions on
their publishers such as ESPN in ad impressions that ESPN didn't sell. These
impressions go for an order of magnitude less money than premier. RMX is one
of the more technically sophisticated. The benefit for publishers is they get
some money for inventory they didn't fill. Just to be clear, a good ecpm for
premier might be $20-$40 and a good ecpm for remnant might be $3-$5.

DSP -- demand side platform -- well, there isn't necessarily a common
definition of DSP. I'd say they are more technically advanced ad exchanges
that are starting to blur the lines between remnant and premier ads. They also
help you manage line items and creative and everything else. The other thing
DSPs do is they help advertisers that aren't big enough to go to one of the
big 7 agencies. This might be advertisers spending $10 - $50k / month, like
your local Toyota dealership instead of the national dealer chain, etc.

Ad Servers -- these help publishers. See eg OpenX, DoubleClick Dart, etc.
Particularly for larger publishers, coordinating all these ad purchases is
complicated. Your advertisers want to give you rules, such as user bleaching
rules (only so many impressions to a given user per some amount of time), time
of day, what pages an ad can run on (few people want to run next to naked
folks, etc). They also want to be able to update and optimize their creatives
or even change the creatives or the landing page they go to. Advertisers, or
their agencies, also demand reporting -- how many times was an ad seen. On
what pages did users click on the ad. etc. Within publishers the ad sales or
monetization folks don't want to be releasing the site every time they tweak
ads. Ad servers are internal or external software that manages all this and
can be quite complex.

Data optimization -- this requires some explanation. In the beginning, people
basically bought broad swaths of display ads. The value to optimization is the
more targeted you can make your ad, the more value it has. My favorite example
is espn -- say 10% of their online audience is female. Say you're an
advertiser that wants to sell female sports jerseys, your ctr amongst women is
5%, your conversion rate is 5%, and a conversion is worth $50, your value per
1k impressions is 1000 * .1 * .05 * .05 * 50 = $12.5, so your cpm has to be <
$12.50. However, say I could pick out the women (with some error, obviously),
but say I can enrich the demos so that women are 50% of your impressions.
Suddenly advertising on espn is worth 5 times as much for the advertiser and
hence espn can charge 5 times as much. This is the value of data optimization.
It's performed many ways -- from things as simple as geo targeting, day
parting, to more sophisticated demographic estimation, retargeting, behavioral
retargeting, etc.

Retargeting is a simple idea -- say that I see cookies going to a site like a
bmw forum. I might reasonably intuit that these cookies are interested in bmws
and choose to show bmw display ads to these cookies as they browse the
internet. See eg criteo.

Behavioral retargeting is the next step of retargeting -- retargeting is nice,
but it suffers from a couple flaws. First, it has limited reach, ie there are
only so many cookies that go to a bmw forum. BMW probably wants to reach more
purchasers than just those. Second, it doesn't really help generate intent --
if you're going to a bmw forum, you're probably already pretty interested in
bmws, so that may not be the best person for bmw to advertise to. Behavioral
retargeting means any of a variety of ways of trying to figure out cookies to
advertise to to get broader reach or cheaper acquisitions than retargeting.

The other big movement going on in the display world is the evolution of how
people buy ads. In the early days -- 90s -- people tended to buy online ads in
a high touch process with salespeople. Ad networks started which brought more
buyers and fewer salespeople. Companies like Right Media -- which Yahoo bought
-- started and allowed you to create bidding rules that run on their servers
so advertisers can buy ads. So I can say that I want to, across many websites,
target cookies that have visited a site or set of sites (retargeting), or show
them so many ads per day, etc, and based on a variety of characteristics of a
cookie and the site which that cookie is visiting and the web page they are
viewing, $X is my bid for that cookie. RTB or real time bidding is the new new
-- now, instead of giving limited rules to someone like RMX, you register with
Google (the largest RTB platform) or Yahoo's RTB, and their servers, for each
impression, send you a bid request. Your computers located in a server farm
near their servers are given typically 100ms to respond with a per impression
bid for that cookie on that page and that impression. See [3]. Also, this is
obviously an enormous tech investment. DSPs also help with this; most
companies aren't capable nor is it worthwhile to build this out in house.

As to why Google cares about this: Yahoo used to have a big chunk of the
display advertising market. Google owns search advertising and are looking for
the next big market. They've set their sites on display advertising and are
whooping Yahoo's ass up and down (Yahoo owns RMX). G has the premier RTB
platform, etc. They want to do whatever it takes to help publishers adopt
them. IMO, Y is in trouble.

NB: I work for qc. This is just my uniformed view. HN whiners -- my posts are
not now, have never been, and probably never will be the official opinion of
my employers nor endorsed by any of them. You should not infer anything about
my employers from anything I write. Seriously.

Also apologies for mistakes or rambling.

[1] [http://techcrunch.com/2011/05/27/online-advertising-
revenues...](http://techcrunch.com/2011/05/27/online-advertising-revenues-
up-23-percent-since-q1-2010-reach-7-3-billion/)

[2] [http://www.coolinfographics.com/blog/2010/9/28/the-
display-a...](http://www.coolinfographics.com/blog/2010/9/28/the-display-ad-
tech-landscape.html)

[3] <http://www.businessinsider.com/real-time-bidding-2010-8>

~~~
pagefruit
Awesome, awesome response, thanks! I've tried to understand the ad ecosystem
many times before, but never got it until reading this now.

------
scrollbar
As someone who buys regularly from Admeld and Google, this makes a lot of
sense to me. Admeld's RTB platform is possibly second in size to Google
AdX/GDN. Rolling up all their publishers under the same platform means even
more inventory that Google can control.

This is consolidation in the traditional sense- Google is trying to
commoditize display inventory and end up as the monopoly provider of display
inventory. Interestingly enough, Yahoo! sells a boatload of inventory through
Admeld... I'm curious to see what changes in that relationship, and if Yahoo!
really is going for more of a content strategy while Google goes for the
advertising tech play.

While it was a pretty dumb comment and off topic, the top comment on the TC
article got the gist of it: "this is why android is still laggy and
fragmented, because google cares about ads more than software quality."

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graupel
We're a large publisher that uses AdMeld; they are a good company with very
interesting technology & people. I'm curious to see how this will change their
operation - selfishly, I'd hate to see them just absorbed into Google.

~~~
throw444
Do you have any insight into how their pricing model works, as a technology-
based middle man? Do they take a small chunk of each transaction (Like credit
card fee small, 1-3%), or do they see themselves more like an ad network,
closer to the 20%-30% commission?

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javery
They charge 19% last time I checked.

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throw444
Cool thanks - surprised at how high it is to be honest, considering 100% of
the buy+sell side is pretty much automated

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pitchups
Agreed, 19% seems like a huge chunk indeed for what is essentially an
automated system - the only variable costs being server bandwidth and hosting
costs.

~~~
graupel
FWIW, we pay much less than that.

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r00fus
From a previous HN submission: [http://techcrunch.com/2011/06/05/facebook-
will-surpass-googl...](http://techcrunch.com/2011/06/05/facebook-will-surpass-
google/)

which summarized the IAB breakdown of online advertising revenues:

1) Google pretty much owns the search advertising area which accounts for 45%
of overall revenues.

2) Facebook is making good inroads into display advertising, which accounts
for 25% of overall revenues.

From this we can surmise that this acquisition might be related to fending off
Facebook.

