The history of Advertising Technology

Clearcode 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 network

Browser/ Publisher’s
Ad server
User website
Direct deal

• 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
• Early-mid 2000s: Publisher

load  an  ad

• piggybacking becomes commonly
used to fill remnant inventory, Ad network 1
no  ad  -­‐  fallback  to    
ad  network  2
• endless redirects cause some ads
not to load at all, Ad network 2
no  ad  -­‐  fallback  to    
ad  network  3
• ad networks’ struggle with “liquidity”
Ad network 3
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”

over-filled under-filled

Advertiser Publisher

insertion  order  (campaign) return  an  ad load  an  ad

Ad network 1 Ad network 1
not  enough  inventory  -­‐     no  campaign  -­‐  send    
own  inventory  (50%) get  from  exchange  (50%) to  exchange

Publisher Ad exchange Ad exchange

manual / API campaign targeting 301 redirect / one-way

i.e. US traffic from MacOS on tech sites
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
Advertiser

insertion  order  (campaign)

DSP 1 DSP 2 DSP 3

$1.10 $1.15

Ad exchange 1 Ad exchange 2

$1.15

SSP/ad network

load  ad return  ad < 100 ms

Publisher
 More inventory sources traded in RTB

• Display banners,

• Native advertising,

• Video and advertising,

• Digital radio and Digital TV advertising,

• …
 Media Agency Trading Desk DSP 3rd Party Data
Ad Exchange Ad Network/SSP Publisher

Advertiser's budget

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