5 min read

Why Subscription Services Should Embrace Ads

Sarah Wheeler
Sarah Wheeler
Updated on
May 31, 2022

Ad tech can be confusing. As we write our Kevel articles, we often discover contradictory definitions around the web, in part because most ad tech literature is written for advertisers and marketers. It can be confusing for someone on the sell-side (aka publishers) - for whom terms like “ad server” and “retargeting” can have widely different meanings.

This article aims to fix that by providing a resource catered for publishers to learn more about ad tech and relevant industry terms.

Table of Contents:

  1. What is ad tech?
  2. Why do advertisers buy ads?
  3. What are the key advertising metrics?
  4. How do advertisers buy?
  5. How do other publishers price their ads?
  6. What type of custom native ad am I building?
  7. How do ad platforms target?
  8. What's third-party tracking?
  9. What is Ad Operations?
  10. What is RTB?
  11. Ad tech terms for publishers

What is ad tech?

Ad tech stands for 'advertising technology’ and refers to using technology to buy and sell digital ads.

Why do advertisers buy ads?

There are a two main reasons:

  1. Brand Awareness - They care about reaching the right audience with the right message in the right place. Targeting, relevance, and high-quality ads are therefore important to them. While they'll likely track clicks and conversions, they usually base success on being able to deliver a set number of impressions over a certain time period.
  2. Direct Response - Also known as "performance marketing", these advertisers care about measurable results - such as cost-per-click or cost-per-action (a downstream conversion). To cater to them, many ad platforms - such as Google's AdWords - offer pricing models where advertisers pay for clicks or conversions, not for impressions.

What are the key advertising metrics?

While no advertiser is exactly alike, they often have similar goals. After all, they are giving you money and expect something in return. Metrics they most care about are:

Name Description
Clicks Number of clicks on the ad. These clicks can go anywhere - a lead generation form, website, product page, eBook, etc.
Conversions (Actions) Number of post-click actions (such as making a purchase, filling out a form, etc.
Impressions When an ad is displayed on the site/app.
Viewable Impressions Technical term for number of impressions where at least half of the ad was shown for at least two seconds.
Video Views How many times a video ad was viewed. Sometimes broken down by how much the user completed, like 25%, 50%, 75%, and 100%.
Cost-per-action (CPA) or cost-per-conversion Total cost (ad spend) divided by actions/conversions.
Cost-per-click (CPC) Total cost (ad spend) divided by clicks.
Cost-per-mille (CPM) Total cost (ad spend) divided by thousand impressions. 1M impressions at $1K spend would be a CPM of $1.00.
Click-through-rate (CTR) Clicks divided by impressions - aka the rate that people click on the ad after seeing it.
Conversion Rate (CR) Conversions divided by clicks - aka the rate that people undergo a desired action after clicking.

How do advertisers buy?

Advertisers generally buy in one of three ways:

  • Through ad networks/demand side partners, who provide turnkey access to lots of inventory (places to show ads). While the client may appear on hundreds of different sites, they only interface with one partner, rather than having to organize hundreds of direct deals.
  • Through direct deals negotiated directly with publishers, who provide special placements, custom ad units, additional targeting, etc.
  • Through self-serve portals, such as those offered by Facebook, Adwords, and others.

Numbers 1 and 2 usually involve Insertion Orders, which are contracts that stipulate metrics such as length of the campaign (or "flight"), amount to be paid, how many clicks/impressions the advertiser gets, etc.

Number 3 usually offers a pay-as-you-go option with your credit card.

Larger brands will also usually buy through ad agencies, who will be the ones who decide where and how to buy. Large media agencies include names like Starcom, Carat, OMD, Mediacom, and many more.

How do other publishers price their ads?

The most common pricing methods are CPM, CPC, and CPA (see above).

From a publisher standpoint, CPM is the safest route and most common way that direct deals are sold. As you hopefully know how many impressions your site/app gets, you can be confident on being able to deliver a certain impression number over a certain amount of time.

Cost-per-click (CPC) is riskier for publishers, since it introduces an unknown factor: click-through-rates. If you show an advertiser's ads and nobody clicks on them, you make nothing. Many large ad platforms such as Google's AdWords employ this, though, because it appeals to long-tail performance-focused advertisers.

Cost-per-action (CPA) is less common, but loved by direct response advertisers. Here, advertisers pay only for some conversion event, such as a purchase or app download. This is even riskier for publishers, since not only are there CTR concerns, but you have to think about conversion rates too. Even if 100% of people click, if 0% of them convert, you make nothing.

What type of custom native ad am I building?

With native advertising - it really is up to you! However, there are certain terms (native and non-native) that you may hear from advertisers more often, which you may or may not want to build into your platform.

For a breakdown of standard ad size units as defined by the IAB (Interactive Advertising Bureau), see here.

Name Description
Companion Ads Ads from the same advertiser that appear in tandem. Often refers to display ads that appear alongside a video ad, such as on YouTube.
Dynamic Ads Catch-all term for ads that change depending on the viewer. For instance, showing rain gear to people living where it's currently raining.
Full-Screen Takeover An ad that takes over the entire screen (most relevant on mobile).
In-Feed/In-Stream Ads Ads that appear within the flow of content, such as Facebook's mobile in-feed ad unit.
Promoted/Sponsored Posts Native ads - often on social networking sites - that look and feel like organic posts. Think Twitter, Pinterest, Facebook, etc.
Recommendation Widgets The rectangular 'around the web' content ads you often see on media/news sites.
Cost-per-mille (CPM) Total cost (ad spend) divided by thousand impressions. 1M impressions at $1K spend would be a CPM of $1.00.
Responsive Ads Ads that automatically change size based on screen/browser size.
Session Takeover Showing the same user the same ad (or ads from the same advertiser) for their entire browing session.
Sponsored Articles Articles on media/news sites that are sponsored by brands. Done correctly - like H&R Block sponsoring an Onion article on taxes - these are not self-promotional. However, there are also 'advertorials' - ads that promote a product while trying to look like objective editorial pieces.
Sponsored/Promoted Listings Used by eCommerce, marketplaces, and any company that shows "listings". Here, companies/people pay for their organic listing to be artificially high in search results. For instance, Amazon lets vendors pay to have their product be the first listing for a given search term.
Sponsored [Insert Your Product] Any custom native ad unit sponsored by a brand. Tinder has "sponsored profiles"; Allrecipes has "sponsored ingredients"; it's really up to your imagination!
Viewable Ads To counter concerns that some ads are displayed but never seen, some advertisers may ask for "viewable ads". The IAB considers a viewable ad to have 50%+ of its pixels visable for least two seconds.

How do ad platforms target?

Targeting is important to ensure ad relevance and drive better performance metrics. There are many ways that ad platforms incorporate targeting. With Kevel, you can implement all of those listed below.

Name Description Example
Behavioral Target by past behavior If you know a user likes to comment on food-related products, you can target them with food-related ads.
Contextual (Category) Target by page content Show ads related to page content - such as showing Honda ads in a forum related to car repair.
Cross-Device Target people across devices Show an ad to someone when they're on their desktop computer, then the same ad when they're on mobile.
Demographic Target based on user-provided information around age, gender, household income, etc. If you're a social networking site and your users have proffered their job titles, you could let advertisers target CEOs vs. Directors, etc.
Frequency Capping Limit ads based on how many times it's already been shown to a user Prevent ad blindness by showing the same ad only once per day to a given user.
Geotargeting Target by current location Target just Durham, North Carolina with ads for a local restaurant.
Interest (Psychographic) Target by interests and values If a user has expressed an interest in health, you could show them an ad for Advil.
In-Market Target people currently in the market for a specific product Home Depot could show ads on Zillow, knowing those users are in the market for home items.
Keyword (Search/Intent) Show an ad related to what the user just searched for A recipe site could show ads for Kraft cheese only when someone searches for "nacho recipes". This is also what Google AdWords does.
Lookalikes Targeting users who are similar to a specific set of users Facebook lets you upload a list of e-mails and will target people who are similar to those users, using a proprietary modeling algorithm.
Placement/Ad Unit Target based on ad type and location Require ads on the homepage to be video ads, but other pages can have static ads.
Retargeting Targeting someone who has already interacted with your site/app Show a 10% off internal coupon to someone who has placed something in their cart.
Time/Day-Parting Target a user only during certain days or hours Show ads for Applebees only on Friday and Saturday.

What's third-party tracking?

While we all know you aren't lying about the impressions and clicks you drove for your advertiser, THEY don't know it. So, they may ask to add special parameters to the click URL, or an impression pixel to the ad. This lets impartial third parties validate whether that impression or click did occur.

Kevel offers instructions on how to add these.

What is Ad Operations?

Ad Ops is the team that is setting up and managing campaigns. They often speak directly with the advertiser to determine when to start/pause, what to target, etc. Ad Ops can be very different based on what kind of publisher or company you are, how you sell your ads, and how big your team is. Some have multi-member ad-ops teams within their company, while others outsource ad operations, or have a sales team that also handles ad operations.

What is RTB?

RTB (or real-time-bidding) refers to the automated buying and selling of ad inventory in real time.

In OpenRTB (what most people refer to with 'RTB'), a publisher sends an ad impression to a marketplace (as the ad is loading) and hundreds, even thousands, of advertisers bid for it auction-style. The company with the highest bid wins and appears on the page. All this happens in approximately 200ms.

In Private Marketplaces, there's the same flow above, but the advertisers are invite-only (therefore, generally only a handful of advertisers are bidding).

In Programmatic Direct, there's no auction, just guaranteed impressions for a given advertiser, but the buying/selling is done through a RTB platform.

Major players in this space include Rubicon, Index Exchange, Mopub (Twitter), Sharethrough, AppNexus, Google, PubMatic, Nexage, and OpenX.

Ad tech terms for publishers

In addition to the above terms, we’ve compiled this glossary and welcome your additions.

Term Definition
Ad blockers Tools that identify ads and block them from appearing.
Ad capping The automatic stopping of a campaign upon hitting a certain metric - such as preventing the ad from showing if it already hit its cap of 10K impressions/day.
Ad decision engine Tool that chooses which ad to serve at time of request based on creative sizes, ad/flight/campaign targets and goals, channel priorities, and so on.
Ad exchange Technology that enables the buying and selling of ads via real-time bidding.
Ad network Historically, a vendor who facilitates the buying and sell of ads across their network of publishers and advertisers.
Ad pacing Ad pacing refers to the automatic balancing of impressions for an ad in a given time frame in order to ensure it spends its budget evenly over time. For instance, if an advertiser wanted its campaign to spend $10K over a month, you would want to spend on average $333/day - or risk angering your advertiser.
Ad server The tech that enables the storage, selection, and serving of ads.
Advertiser The person or company who provides the creative to be served as an ad.
API Application Programming Interface. Programming method used to interact with software, applications, or tools.
Behavioral tracking Allows advertisers to target specific interest-based segments, such as sports lovers or luxury car buyers.
Booking The dollar amount that has been agreed upon (by advertiser and publisher) in order to serve an ad campaign.
CCPA California Consumer Privacy Act; state law that grants California residents greater control of their personal data.
CMP Consent Management Platform. An advertising tech tool for collecting user consent and passing that data to downstream ad partners.
CMS Content Management System. Designed to serve content that doesn't need to change with each request.
CPA (cost-per-action) Total cost (ad spend) divided by actions/conversions.
CPC (cost-per-click) Total cost (ad spend) divided by clicks.
CPM (cost-per-mille) Total cost (ad spend) divided by a thousand impressions. 1M impressions at $1K spend would be a CPM of $1.00.
CR (conversation rate) Conversions divided by clicks. AKA, the rate that people undergo a desired action after clicking.
CTR (click-through rate) Clicks divided by impressions. AKA, the rate that people click on the ad after seeing it.
Campaign A collection of an advertiser’s ads. Typically campaigns have a common theme - such as device type or specific promotion.
Channel Site(s) with similar content that share the same publisher payout settings.
Clicks Number of clicks on the ad. These clicks can go anywhere - a lead generation form, a website, a product page, an eBook, etc.
Contextual targeting Targeting users based on a site's context/content (eg, running shoes on a running blog).
Conversions/actions Number of post-click actions (such as making a purchase, filling out a form, etc).
Cookies Small text files that are stored on a user's computer for record-keeping purposes.
Creatives Another name for ‘ad’ - refers to the image file that’ll be displayed.
DMP Data management platform. A tool for storing user-level data and using it for ad targeting.
DOOH Digital-out-of-home. Think - digital billboards, car dashboards, etc.
DSP Demand-side platform. These are platforms that work on behalf of advertisers to optimize RTB spend.
Dayparting/Hour-parting Targeting that shows ads only on specific days of the week or hours of the day.
Demographic targeting Targeting users based on user-level demographic data, such as gender, age, and household income.
Do Not Track Do Not Track is a browser setting that enables users to opt-out of being tracked by websites and advertisers that they are not directly engaging with.
Fill rate The percentage of ad requests that get filled. For instance, if you have 1MM monthly impressions, but only enough advertisers to fill 800K of them, you had an 80% fill-rate. Slots that are not filled are either left blank or replaced with an in-house promotion.
First-party data Audience data you collected. For instance, if they register on your site and provide gender, that’s your first-party data. If you purchase data on that user from a data provider, though, that would be considered third-party data.
Forecasting Offers insight into your historical and future selection opportunities across various dimensions, such as sites, ad types, keywords, etc.
Frequency capping Enables you to set the maximum number of times a given advertiser, campaign, flight, or ad can be displayed to any particular user in a particular time period.
GDPR General Data Protection Regulation. European privacy law that regulates, how organizations may obtain, use, and store the personal data of EU residents, and more.
Gated garden Ad platforms that mirror closed platforms (see 'walled gardens) but also find ways to integrate with major DSPs.
Geolocation A technique used to determine a person’s geographical location based on their digital data.
Geotargeting Enables you to target users based on their current location - by country, region, or U.S. metro/DMA code.
Geodistance targeting (geofencing) Uses geometry to target users within a radius of a specific point or address. The geometry involves knowing the latitude and longitude of a user’s current location.
Header bidding A way to send ad requests to multiple exchanges simultaneously rather than in a waterfall.
IAB Interactive Advertising Bureau. The IAB sets the standards for digital advertising, as well as the OpenRTB protocols.
Impressions When an ad is displayed on the site/app.
Intent targeting Targeting based on what a person just did - usually an indication of desire to buy/purchase. For instance, if you show a Nike ad to someone who just did a search for “running shoes”, you are employing search targeting, a form of intent.
Interest targeting Also known as behavioral targeting. Targeting by interest/value (eg marathon runners, retirement planners).
Keyword targeting Targeting specific key terms passed in an ad request - such as a keyword someone just searched for.
Macros A variable you can use to dynamically generate or return data wherever the macro is used.
Native ads Ad units unique to the site, such as promoted posts, sponsored listings, etc.
Open RTB Refers to the majority of “programmatic” - an open marketplace of buyers and sellers.
PMP Private Marketplace. A subset of “programmatic” - where a publisher offers its inventory to a select few buyers, who normally compete for that inventory in real-time.
Pixel Code snippet used to track user data.
Priorities Rules for what set of ads should get priority to be shown. For instance, a major advertiser may have priority over in-house ads.
Programmatic direct A subset of “programmatic” - where a publisher sells inventory to a single buyer through a programmatic channel. Usually this involves a fixed spend/impressions and there is no real-time bidding.
RTB Real-time bidding. An ad exchange gets an ad request, then sends this out to many different bidders, who send back the amount they’ll pay for that slot. The highest bidder wins.
Relevancy score Relevancy score is an ad setting that incorporates some measure of relevance in the Ad Decision Engine. For instance, an ad with a low click-through-rate may be deemed non-relevant and you won’t choose to display it, even if it has a high bid.
Remnant/remainder Historically referred to programmatic ads (or in-house ads) that you would serve when your premium/direct ad campaigns had reached their limit (aka - low value traffic).
Responsive ads Ads that automatically change size based on screen/browser size.
SSAI Server-side ad insertion or server-side ad serving. Refers to dynamically inserting an ad into one’s content via APIs - be it video, audio, DOOH, or web/app.
SSP Supply-side platform. The DSP equivalent for publishers. They help publishers get the most revenue from programmatic channels.
Second-price auctions Second price auctions award an impression to the ad with the highest bid, but records the revenue of the impression not as the ad's bid, but as the second highest ad's bid plus one cent. For instance: if there is a $6 and a $5 bidder, the $6 bidder would pay $5.01.
Secure cookie Cookie that uses a secure (HTTPS) connection.
Session cookie Cookie that expires when you close your browser.
Social Community A social media platform that monetizes primarily with native ads. Includes Facebook, Twitter, Quora, Pinterest, and Reddit.
Sponsored listings An eCommerce-centric ad unit where vendors/sellers pay to have their organic listing(s) promoted in search and browsing results, on the homepage, in e-mails, etc.
Third-party data Data collected by a business or other entity that isn't directly connected to the visitor/customer.
Traditional Publisher A brand that makes its money almost entirely from programmatic ads. Includes well-known media companies, free content producers, free-to-play games, individual bloggers, etc.
UI User interface. It’s the front-end product that users/visitors interact with.
Utility Publisher A brand with a large digital presence and whose revenue is predominantly non-ad-based, such as subscriptions, commissions, purchases, and so on.
Video views How many times a video ad was viewed. Sometimes broken down by how far the user got into it, like 25%, 50%, 75%, and 100% completed.
Viewable impressions Technical term for number of impressions where at least half of the ad was shown for at least 2 seconds - although subjectively there is much debate about what “viewable” actually is.
Walled garden An ad platform where the buying, serving, tracking, and reporting are handled by the publisher; targeting is augmented by proprietary first-party data.
Waterfalls Display rules where you send an ad request to Ad Network #1 - and if they don’t fill it, you send it to Ad Network #2 - and so on. Header Bidding arose to replace waterfalls and send to all bidders at once.

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