The true price of Ad Exchanges

Date: August 1, 2013 Published by

Ad Exchange Transparency

First of all, let me give a brief explanation about ad exchanges. An ad exchange is an online marketing platform that connects advertisers and publishers through an auction system. An advertiser creates an ad with a budget (i.e through Google Adwords). After that, the ad exchange serves the ad to a targeted publisher. Following that, every time an Internet user clicks on the advertiser’s ad, which is placed on a targeted publisher website, the advertiser pays a quantity called cost-per-click (CPC) to the ad exchange. Finally, the ad exchange share a portion of the revenue, which is call revenue share ratio (RSR) to the publisher. For more information about this process, read our post about How online advertising works?. Some example of ad exchanges are: DoubleClick(Google), Right Media, Adlegant, etc.

Publishers and advertisers has been trying to figure out  what’s the real price of using an ad exchange. The RSR defines the cost of using an ad exchange and it is usually unknown for either advertisers and publishers. After lots of effort from Google’s publishers and advertisers to know the RSR, Google published the Adsense revenue share. This post is the only place  where Google gives the RSR. Therefore, every time an Internet user clicks on an ad, Google pays 68% of the CPC to the publisher and they keep a 32%. Therefore the RSR is 68%.

In the case of Googles’ search partners*, they pay a 50% and they keep another 50%. Therefore the RSR is 50%.

* a search partner is another search engine such as: yahoo, bing, etc.

In my opinion, I think it is not very transparent to disclose such important information in a post from 2010. It should be in the very front page because customers should know what’s the real price of the service before start using it.

There are other ad exchanges out there such as: Right Media by Yahoo, OpenX, etc. It has been impossible to find the RSR.. OpenX has published a post about How revenue share works?. However they do not say at any moment what’s their RSR.

Why the RSR is important for advertisers and publishers?

Let’s show an example: An advertiser creates a campaign with a £1000 budget. The RSR of a particular ad exchange is 35%. It means that the ad exchange is going to pay to targeted publishers a 65% of the budget, which it is £650. They are going to keep £350 for the management. It means that the real budget for that campaign is £650 instead of £1000.

Advertisers and publisher should know what’s the real cost of using an Ad Exchange. In Adlegant, we are transparent from the very beginning and we disclose the RSR in the front-page. Therefore advertisers know how much they are paying to us for using Adlegant and publishers know how much we share with them.

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Have a nice day 🙂