Is it time to upgrade your advertising business?

Michael Ostrovsky, Co-Founder and Chief Scientist

March 29, 2023
4 mins
Auction Based Ads
Marketplace Monetization
Industry Insights

The history of internet advertising goes back to the famous banner ad by AT&T, placed on the website portal in October 1994, which simply said: “Have you ever clicked your mouse right HERE?”, with an arrow pointing to the words “YOU WILL”. The ad had a now unimaginable 44% click-through rate, and took the website visitor to the AT&T website dedicated to their “You will” campaign promoting their telecommunication services.  

In the nearly three decades that have followed since then, banner ads have become ubiquitous. Your company may even have them on its own website, in one of two ways (or perhaps both). 

The first one is essentially the same process as the one that led to the AT&T-Hotwired ad: advertisers or their marketing agencies directly communicated with your company’s salespeople, negotiated the price, the duration of the contract, the placement of the ad, and some metrics like the total number of impressions, and subsequently the ad campaign was launched. 

The second one is relying on a third party “sell-side platform” to fill up the dedicated ad slots using their own inventory of advertisers.

Unfortunately, both approaches have serious limitations. Relying on a third-party platform means giving up control over the types of ads your customers will see, and the online destinations where these ads may lead them - perhaps even directly to your competitors! It requires you and your users to share all kinds of data with the platform. The relevance of these ads is often poor - typical click-through rates on such ads are miniscule fractions of one percent - a far cry from AT&T’s 44% CTR that was driven by novelty and curiosity. And to add insult to injury, the third-party platforms are opaque and take an exorbitant cut of ad revenues. 

Selling your own ads in the “old-fashioned” way

Negotiating ad campaigns directly, the “old-fashioned” way, avoids many of these pitfalls, but comes with its own set of challenges. One immediate challenge is pricing. Set the price too low, and you will have many frustrated advertisers who are left without any available inventory - and you will regret leaving money on the table and selling out your inventory too cheaply. Set the price too high, and you will end up with a low fill rate and a lot of unsold inventory. 

Moreover, the complexity of setting prices escalates rapidly when you think of everything that affects the value of an ad property. You may need to figure out the prices for various locations on your property (homepage may be more expensive than a particular category, and a banner at the top of the page may be worth more than one at the bottom), various time periods (weekends vs. weekends, summer vs. winter, big sale days vs. regular ones, etc.), various geographical locations of the users, and so on. And the “correct” prices may change dynamically with market conditions, requiring constant updating and fine-tuning. 

We have seen some companies with this “old-fashioned” way of doing advertising struggle with massive Excel spreadsheets and whole teams dedicated to calculating them, only to end up with prices that are too low in some parts of the business (leading to frustrated advertisers and money left on the table) and too high in others (leading to unsold inventory and thus wasted revenue opportunity). 

Another challenge with the “old-fashioned” way of running the ad business on your property is that it is hard and expensive to scale. It requires a large and dedicated sales force that needs to grow in proportion to the size of the business. The sales efforts need to be coordinated. Conflicts need to be resolved. Customers will inevitably try to negotiate better deals. In short, it becomes a major operational challenge.

Finally, requiring advertisers to go through the human-powered sales channel makes it less attractive to some of them. An advertiser may want to experiment with advertising. They may unexpectedly have some advertising budget left over and would like to spend it quickly before the end of the month. Or they may want to be able to manage the campaign dynamically, turning it on and off as needed. Having to talk to a sales representative in order to advertise or to make any quick changes in the campaign may drive away some advertisers. Just like with any kind of shopping - sometimes you do want help from the salesperson, but in many cases, you want to be able to browse the options and make your purchasing decision on your own, provided these options are presented to you in a convenient and easy to understand format. 

Upgrade, transform, and scale your ad business

So if you find yourself in this situation – your website or mobile application has a promising advertising business, but you are struggling to scale it, to manage it, to find the right prices, to ensure that the fill rate is close to 1 yet without underpricing your ads, to make it easy for advertisers to use on their own and to experiment with advertising on your property – what can you do? 

This is where Topsort’s auction-based advertising solution comes to the rescue. There are many key features that make our solution particularly attractive as an “upgrade” to your existing ad solution. First, by design, our solution is incredibly easy for advertisers to use, both sophisticated ones and complete beginners. They can launch and manage large ad campaigns, and can also experiment with pilot campaigns for just a handful of products (or even just one), for as long or as short a time period as they want. The user interface makes both campaign management and reporting simple and intuitive. And our “autobidding” feature makes it possible for advertisers to launch highly successful campaigns in just a few minutes. 

Second, auction-based pricing automatically adjusts to market conditions - when there is more demand, ad prices go up, and when there is less, they go down. The fill rate can be consistently close to one on all ad slots, without underpricing the ads. 

Third, the solution scales naturally - since it is so easy for advertisers to launch and manage their campaigns, there is less of a need to recruit and manage a large sales force. 

Fourth, our engine tracks ad engagement and ensures that only the relevant ones are shown to the users, increasing the effectiveness of ad campaigns and promoting user trust. And you have full control over who is allowed to advertise on the platform - no need to rely on third-party providers who will bring “mystery” advertisers. You retain full control of the whole system. 

Fifth, Topsort’s ad system can both replace your current one, incorporating the existing campaigns, and co-exist with it if you prefer to still manage some parts using the “old-fashioned” way. 

Sixth, it is designed from scratch to be easy for a marketplace or retailer to integrate and manage - we’ve built our products with developers in mind.

Finally, Topsort does not rely on any sensitive user data or third-party cookies, fully preserving user privacy and immune to the privacy challenges and debates facing many other companies in the ad ecosystem. 

Topsort will work with you every step of the way to make sure your ad business reaches to its true potential. We also help you onboard advertisers into your self-service ad platform and attract new ones.

We helped marketplaces move from fixed-price advertising businesses to auction-based without losing any ad investments. We have seen up to 7x boost in ad spend only 4 weeks after switching to Topsort-powered auction-based ads.

Want to learn more? Have further questions? Please contact us, and we would be delighted to get back to you and help upgrade your advertising solution.

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