Daisy chains are used by publishers to manage remnant inventory. Daisy chaining is the process of redirecting ad calls among network partners in an effort to monetize a publisher’s entire pool of ad inventory. Daisy chaining is de rigueur, even accepted as ‘best practice.’ When you dig deeper you find some big issues.
Daisy chaining started like this:

1. Publisher uses DART to deliver their advertiser direct campaigns to their users, but 40% of their inventory goes unsold. DART doesn’t manage remnant inventory well (still doesn’t) so….
2. Publisher strikes a deal with Network (NW) where NW gives them a flat CPM (say $3) for 300×250s. The deal is struck based on NW reporting (not DART) and publisher starts sending NW ad calls.
3. Based on the $3 CPM, NW can only take about 60% of the ads (it’s a number game – NW has x salespeople bringing in y campaigns with z budgets – sometimes there are mismatches). Several years ago, if there was no paying ad, NW simply didn’t serve one, didn’t report what they didn’t serve and discrepancies between the publisher’s counts and NW’s reports were big. Publishers got wise and started to question the networks. Then, NW gave the publishers an option - ‘give me a redirect and I can send the ad call back to you when I don’t have an ad or I’ll send it on to another network.’

And with that other networks followed suit and the daisy chain was born.

This is how it’s been for several years. When you dig deeper though, you find some big issues. I’ll use an example to highlight a few issues.

1. Publisher sends 1,000,000 ad calls to Network 1
2. Network 1 receives/counts 972,405 of the ad calls
3. Network 1 delivers 663,436 paying ads
4. Network 1 redirects 308,969 ad calls to Network 2
5. Network 2 receives/counts 268,495 of the ad calls
6. Network 2 delivers 123,549 paying ads
7. Network 2 redirects 144,946 ad calls to Netowork 3
8. Network 3 receives 121,202 of the ad calls
9. Network 3 delivers 72,149 paying ads
10. Network 3 redirects 49,053 to Google Adsense which the Publisher sticks on the end of the daisy chain because they say they fill 100% of inventory with the AdSense blind rev share deal where they don’t tell you the gross revenue your site generated.

Now, let’s do some math. Through the redirects between parties, there are discrepancies. Of the original 1mm ad calls sent by the publisher, 91,813 ad calls were ‘lost’ between ad servers. Roughly 10% of the ad calls disappear and didn’t generate any money. Not good!

Like passing sand between you and a friend when you shake hands, you’re going to lose some ad calls when different technologies try to talk to each other. Another reason is latency. Bandwidth issues with any of the networks slows the ad calls down and ad calls drop.

A related problem with latency is decreased user interaction. A marketer has about three seconds to make an impact on a user. If the ad call is redirected multiple times and an ad is delayed from fully serving, the marketer lost the opportunity. Since most of the advertisers that buy from networks are ROI focused advertisers, latency affects ROI and the advertiser’s ability to pay higher rates. Ever wonder why so many of the ads that run are so distracting? Ads that are distracting for the purpose of being distracting are, in part, a result of ads not always delivering quickly. They are the marketer’s online Hail Mary to get the user to respond.

Aside from the discrepancy and latency issues, there’s a bigger issue.

Each network acts as an economic market marker. They have advertisers with demand and publishers with supply. If a publisher gives a network an ad call without a sense of what the other networks will pay for that specific ad call, the network has no real competition for the ad call and the publisher could be generating less revenue than they could be. Sure, publishers determine position in their daisy chain by the aggregate eCPM a network will pay, but not on an ad call by ad call basis.

In my above example, there are cases where Network 3 could have paid more than Network 1 for an ad call (maybe they have an amazing travel deal for Hawaii for anyone in CA and are willing to pay way higher for CA inventory), but they never got to ‘see’ the ad call. Network 1 paid them $1.75 eCPM for an ad call that Network 3 would have paid $3.50 eCPM. Do you think this could happen a lot? Well, it does.

Six months ago, when Right Media looked at the traffic across the Right Media Exchange (RMX), which has 60 networks, and approximately 13,000 publishers and advertisers, the RMX traffic was roughly 70 billion impressions with 40 billion unduplicated impressions. Unduplicated impressions are impressions served from advertiser to publisher directly through the publisher’s network. The remaining 30 billion impressions served from one network’s advertiser to another network’s publisher.

Since the RMX is an auction exchange, this means a different network’s advertiser was willing to pay more than the network that had the publisher. When networks had an equal opportunity to show their own advertiser or show another network’s advertiser, 40% of ad calls were diverted to another network. Since most networks work with publishers on a rev share basis, a network shouldn’t care whether it serves its advertiser or serves another network’s advertiser as long as yield is maximized.

Time and again, we see publishers severely under-monetize their ad inventory using daisy chains. Daisy chains have satisfied the initial hunger for monetizing inventory, but for larger publishers daisy chains have proven to be very inefficient.

Publishers can and should continue to work with networks that bring relationships and value to the publisher, but publishers must begin to reassess their remnant strategy and how they make their inventory available to buyers. For large publishers, it’s virtually impossible that one network can take every ad call and maximize eCPM and revenue. Having access to more buyers, both networks and advertisers direct, is a necessity to ensure all impressions are monetize and the highest yield possible is generated.

Right Media is offering new ideas and the PMX for publishers to create a holistic remnant strategy. Through a publisher media exchange, publishers can attack the yield management opportunity in a new way. In a real time auction exchange, PMX gives all buyers of a publisher’s inventory equal and direct access. Through this open auction for impressions, latency and discrepancies are reduced significantly. All buyers have an equal opportunity to bid on the ad call at the same time rather than passing it from one network to another to another. This simple change can reduce discrepancies and latency dramatically. More importantly, competition among more buyers drives higher yield as all buyers ‘see’ the ad call and bid separately.

This entry was posted on Tuesday, October 31st, 2006 at 11:36 am and is filed under About Right Media. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.