The online advertising ecosystem

By John Byers

Advertising back in the pre-Internet days was pretty simple.  Ad agencies schmoozed with advertisers (think “Mad Men”), designed ad copy for their clients, and negotiated with publishers to buy ad spots.  But recently, and especially in the last five years, the landscape of online advertising has quietly been transformed.  Most people think of Google and maybe DoubleClick when it comes to new business models, but the reality is that a staggeringly complex ecosystem (graphic by a VC firm) has emerged.

Not only are there hundreds of firms depicted in this figure, but there are probably over a dozen distinct business models, most of them predicated on hard-core computer science.  For example, on top of the ad exchanges are DSPs (demand-side platforms), like Turn, that use blackbox optimization and behavioral and demographic targeting to drive ad buys across exchanges, often using real-time bidders.  Another interesting model is DMPs (data management platforms), like BlueKai, that do massive-scale data analytics and data mining based on historical advertiser performance to optimize campaigns.  These companies are pushing the envelope both with respect to systems design, since the throughput and latency requirements of matching ad slots to users in real-time on such a massive scale is daunting;  as well as in data analytics, where mined datasets are running into tens of TB or more.  Another aspect is a silent erosion of privacy, as some firms are cookie-ing users with attributes like “in-market for a new car”, others are buying impressions based on these cookies (cookie retargeting), and still others are computing joins of separate observations to build large databases of user information.

Once Congress figures out what to do about the debt ceiling, they’ll eventually turn their attention back to online advertising practices, so all of this technology as well as the privacy implications will be back in the news.  Also, research in this area, especially as relates to privacy, is still in the very early stages, so it could be a worthwhile venue to investigate.

(Full disclosure:  the post-er is a director at a “Data Optimization” online advertising company (that is still successfully flying a little too stealthily to be on the ecosystem chart 🙂  )).