How internet ads work | Hacker News Reader

How internet ads work

michelenasti.com

135 pointsmusikele44 comments

`How internet ads work` Most of the things in this article are just bluntly wrong. Like a "deal"(2) is not an "order"(1) - there are completely unrelated concepts. An order is a collection of line items.

fyi: Academy for ads explains exactly what this blog post is trying to explain.(3)

(disclaimer: I used to work on DFP/Google Ad Manager)

1: https://support.google.com/admanager/answer/82235

2: https://support.google.com/admanager/answer/7630763

3: https://landing.google.com/academyforads

Thanks for contributing. As I wrote, I'm not expert in GAM. The point of the article is to explain the process.

None of these three links offer the same concise summary that the article provides.

I don't care if minute details aren't correct. I just wanted an overview (key word being overview) of how the entire process of internet ads work and OP delivered.

Thanks OP.

I would love to hear a complete response to the things you think are wrong in this article. The order/deal incorrectness is just semantics, and not all that useful.

I found the article's description of how header bidding operates useful. What's inaccurate about it? In particular, why does the header bidding library solicit bids from everyone except GAM, then ask GAM for final bid? Seems like contacting all of them would be the way to go -- or is GAM registering the ad impression for other networks as well? If so, that's really interesting! It means google has insight into the entire ad placement market, even when they don't have anything to do with the network.

The publisher chooses the order in the waterfall for header bidding. Due to its nature Header Bidding is serial in the page and only a limited number of partners can bid on the page (4-5) and are called sequentially. Header bidding was created to increase competition for premium inventory beyond Google, so naturally Google ends up being used as remnant inventory in these cases because it’s always able to fill inventory, but not necessarily at the highest price and it’s thus placed last often but it really depends.

Also recently Google has shifted the auctions to unified pricing which means 1st price basically and a single floor for them to make their prices more competitive in header bidding, so this might have had effects on Google’s position in the waterfall as well given what the publisher want to accomplish.

Generally speaking the article is overall fine, there are some historical inaccuracies of sorts and innovations aren’t explained well, for example Google didn’t just start to track people because they figured, but because behavioral targeting retained customers of all sized as opposed to just the bigger ones that do brand awareness campaigns, and that was due to measurable superior performance.

> because behavioral targeting retained customers of all sized as opposed to just the bigger ones that do brand awareness campaigns, and that was due to measurable superior performance

Could you elaborate a bit more, particularly on the point about customer size? Are you referring to the fact that smaller companies couldn't run larger geo surveys to understand how their advertising impacted revenue?

This is fascinating stuff, thank you for sharing!

It's nothing too crazy, simply that for brand awareness campaigns to work, or even collect the market research data that you are talking about you need to spend significant money for a decent period of time. Something that smaller companies tend to not have while they are focusing on starting predictable growth and product market fit more than scale. Smaller companies will invest in marketing that has some guarantees of performance like retargeting, email or search rather than brand.

"The price is usually given in CPM (cost per mille - cost per thousand impressions), so if an ad has a cpm of 10$, one single impression is worth 0.01$ ! (The average cpm, at the time of writing, is around 1$ if you were asking)."

This is the fundamental core of why journalism never made the jump from newspapers to the internet, and why we have the absolute cesspool of clickbait and seo-chum of a 'news media' that we do now.

Its got nothing to do with ethical standards or cultural shifts or the reporters/writers/editors not wanting to do much much better. Rather, at less than a penny per pageview, the only possible way to pay even a single salary is a plummeting free-fall down to the lowest common denominator and the basest of instincts. That is why facebook was able to make a biz model of it and every other site can't.

($45,000/year salary + 33% biz-overhead) / ($1 CPM x 5 ads per page) = 12 million pageviews per month.

You cannot get 12M pageviews per month in any local city, much less the ~100M it would take to have a small staff and an editor. Hence, all the local journalists are gone.

This is exactly why lower tier local newspaper "publications" started splitting already short articles into 3-5 pages, and why 10-item lists require 11 or 12 pageviews to read where pages 4 and 9 are just an ad.

For context, to get 12 million pageviews for a local newspaper website, if you're in a small metro of ~250k people with 5% readership, that means every single reader would need to generate nearly 1,000 pageviews a month each. Even at 2 pageviews per article, that's approaching 20 articles a day M-F.

What I don't understand is this -- when an article is split into 5 pages, sure there are 5x more ads loaded. But wouldn't they be worth 5x less money per impression, due to overloading the user? Maybe it's a nonlinear scaling -- 5x the ads is 4x the value. Or is it because these are "branding"* ads, and so nobody really measures the ROI on them?

* vs direct response

How would "overloading the user" be quantified when buying the ads, though? Sure maybe you could calculate ROI from the ads like you mentioned, or track some other engagement metric, but by then you've already paid for the ads.

It's a recurring purchase, not a one-time thing. So each month/quarter/year, there's a decision whether to continue investing in each channel. (These decisions are often not made well, but that's another issue.)

Does it even make sense to advertise online? I know that sounds like a dumb question but despite being told that ads DO work on me I don't think I've ever bought a single thing online because of an ad.

If I want to advertise my product or service I'm afraid it will just be me dropping a couple thow for ads that no one will ever click on. Maybe then the ad company would blame me for not having a compelling enough ad and I'll have just thrown away my money. I wish advertising were more formulaic so I had a better idea of how much I'll get out given how much I put in.

Alternatively, maybe online advertising can work if you think outside the box. But I have serious concerns about buying $2000 worth of customers from Facebook.

You don’t have to buy it online, just raising awareness or influencing an offline purchase are also goals for online advertisements.

Across large groups it can approach being more formulaic where FB et al. will show you predicted # of conversions based on your inputs before you start a campaign. Of course you are trusting their estimation process then.

Those ads aren't meant to make you buy something. They work in a more subtle way by shaping culture. It's a little difficult to explain what the purpose of that is and how it benefits the company. I recommend trying to read up on it, as it's pretty interesting, but will easily take you a few hours.

So if they are a macro tool does it make sense for me to use them when hocking my widgets?

They don't necessarily have to work on you, they just have to work in general. HN itself is a bit of a bubble, for anyone on here it is likely they want to intentionally avoid internet ads more than the average person.

I work in ads for the airline space, I'm on the engineering side so I can't give great financial numbers offhand, but we usually do trial runs on just subsets of routes an airline offers, and for every customer so far the increased revenue on those routes heavily outweighed the new ad spend. Of course you can make bad ads, just like you're saying. We have departments dedicated to that though, I myself couldn't tell you too much about making a good ad that a few SEO blog posts wouldn't cover better.

But it can be formulaic to a degree. If you're an airline, give us some of your metrics and we can get a pretty good estimate of your ad performance at different levels. Got a SaaS product, video game, new snack? We're useless, but there's likely some company of analysts out there who have you covered.

I'm sure it's extremely variable by market though. Air travel has huuuge volume and lots of customers from every tech-proficiency level. I often get YouTube ads for B2B SaaS services and other extremely targeted business things, and I wonder who is signing a 20mm contract that started from a YouTube ad?? Maybe some other commenter will tell me it works though.

Edit: Actually, I signed up for Robert C Martin's (Uncle Bob) new software training video site recently because his youtube ads were so silly. It helps that I knew his name long before though, and I've yet to pay for one of the non-free ones.

Im planning on advertising for a network security gadget I invented. You said you're "useless" in other domains. That's not good news for little old me who is going to try and make the ads himself.

I've heard about testing ads for your various demographics before you go all in on an advertising campaign. But it sounds like there is even more to it.

Why do you feel like you would be useless in another domain? Surely you would do better than some geek off the street.

"I wonder who is signing a 20mm contract that started from a YouTube ad??"

This is just a super common misconception among engineers that advertising is a very linear thing. Most ads are not direct response. Most of the time they're just trying to keep at the top of mind for specific groups of folks. So yeah you aren't going to just run out and buy a 20 million dollar piece of software because of a Youtube ad, but when it comes time to buy a solution in that space I bet you'll consider that product. When you think about the scale that this works at (It costs maybe a penny a view or $10 per thousand people reached) you really only need to hit 1 person at the right time across many millions upon millions of impressions to make it worth while. That's all. Many people just don't appreciate the scale of advertising and think it's more sniper rifle rather than carpet bombing especially for large B2B purchases.

Does a sniper rifle ever work? It sounds like ads aren't a good choice for an upstart with a new product (which is what I hope to be). Are there advertising channels better suited to people like myself?

It can work it's just harder. If you're looking to advertise and you have a limited budget I would suggest Google search ads. Honestly though with limited budget you're likely better suited to doing some combination of PR + SEO + Content marketing and using the cash you would have spent on ads to enhance those efforts. Once you've got your funnel figured out then you can expand into paid advertising.

Reddit advertising is pretty close to a "sniper rifle" (you target based on subreddits). It's cheap to get going and very respectful of the privacy and tracking of users.

I think it's not used more by big-co's because it's relatively a small audience.

I actually have one of the top of all time posts on r/redditads (their advertiser support subreddit) and have done a number of how to guides for Reddit ads. I'm a big fan, but honestly most larger companies don't use it yet because 1. They don't have a very sophisticated platform. It's a ton of work to do simple tasks and the analytics etc aren't particularly insightful.Media buyers and PPC specialists time is at a premium already so it's hard to justify adding in yet another platform that doesn't scale super well. 2. Reddit users are pretty hostile to ads still. 3. The traffic quality is a bit all over. Very high bounce, very high instance of ublock etc. so tracking is hard. That said the CPC is super cheap so it works out overall but some people get freaked out about the traffic.

Like I said I really like it but they have a ways to go to attract more mainstream users.

It does work. Despite the anti advertising rhetoric of Hacker News users advertising can and does grow many brands very quickly and profitably. I think you've hit on some reasons in your post why though many people fail at advertising. They want it to be a linear sort of thing when in reality it mirrors more of a exponential success or failure sort of model (not unlike startups) instead. Your creative and audience have to match and your offer has to be extremely compelling to get someone cold. It's also notable that direct response advertising, which many people conflate with the overall ads ecosystem is a actually a very small piece of the pie as it were. Most larger brands are fine losing money on a first interaction or sale because they have a good handle on CLTV. That said this specific article is about things like mobile app ads and website banners. It's actually much easier to succeed in walled garden environments like Facebook etc.

To put the math further in the red, isn't 33% crazy low overhead? The number I've generally heard is 100% overhead to pay for all benefits and support staff.

12M isn't too far out of reach for a medium sized city, but definitely is for a small one.

If 75,000 people in your town read the paper, 5 page loads per day, every morning, that is 7.5MM pageviews per month.

If a few articles get read by people one town over, you have a few direct ad deals with local businesses, or your cpm is slightly above average, then you can make money.

Most local websites don't sell ads on the open market with cpm pricing, but do direct deals with local companies that cost something like $5,000/mo.

sorry but that 75k and that 5 are at least 2x too optimistic.

also, direct sales deals require direct sales people who then expect direct deposited bonuses. its kindof like the tyranny of the rocket equation, you can't afford sales people because they would have to take 95% of the revenue they generated just to pay their own (meager regional medium city ad sales) salary.

That’s an average price and mostly driven down by lack of data on users browsing the site and the mix of campaigns that bought, given retargeting campaigns can easily pay averages in the $5-10 CPM ranges depending on the campaign and users and data density. So the bad persistence of cookies is what largely drives this price to be low. Obviously anyone can choose how to take that.

How do cookies make your site better, and how do I decline them?

I clicked the Learn more link and got a privacy policy in what looks like Italian (?). That kinda limits the audience, but a quick skimming makes me suspect that your experience is 'improved' by having the data about your interaction with that website sent to Google for analysis.

It seems like the classic reaction to the GDPR - add a stupid cookie banner and it'll be fine. Truth is, it's not compliant.

If you want to be compliant you need to ask for consent before loading any of the creepy/stalky shit like Google Analytics and Facebook Like buttons.

Unless you're gonna do it properly you might as well not bother at all as you're still in breach of the regulations no matter what.

So how do we go about hammering sites for their poor compliance? We can sit here and shake our heads, but unless there is a lever to make them behave this poor behavior will continue.

Hi there. Thanks for pointing that out. My blog is usually read only by a bunch of nerds and when I put the first cookie banner, GDPR was not even a thing. I've added one that is compliant with the spec. Hope it's fine.

Hi. I clicked "I DO NOT ACCEPT" and it took me to https://europa.eu/. Then I clicked back, and it didn't show the banner anymore.

There are still 4 cookies set, including "euconsent" (set to some weird value), and "__cfduid" which I assume is some kind of unique identifier.

I don't know if you're serious about implementing GDPR compliance, but this isn't.

"__cfduid" is added by Cloudflare, and as far as I know, it can't be disabled.

__cfduid should be cloudflare for CDN...

cfdruid is a technical cookie and is exempt under GDPR.

I'm going to go out on a limb and assume the page itself has ads. Umatrix is reporting blocked requests from the usual culprits: googlesyndication, google-analytics, facebook, consensu.

They allow the site owner to measure traffic patterns in order to know what to improve and whether their actions had any effect at all.

I used to work in the ad industry, and I'm glad to see somebody trying to share and explain the terminology.

But they left out one term: inventory. That's you.

I think this would be better titled how header bidding works. It's a good article on that topic, but leaves out a lot. (Which is fair, Internet Advertising is fairly complex.)

No, that's how they are _served_.

It is _not_ how they work. This is how they work: https://thecorrespondent.com/100/the-new-dot-com-bubble-is-h...

TL;DR. Read it anyway, it's great.

But executive summary: they don't, and nobody cares.

The web is getting so terrible I have started blocking all cookies and javascript by default, as well as running all the usual extensions.

More and more of the web seems to get closed off to me every day with posture, but honestly I'd rather just stop using computers entirely than have everything I do be coopted by surveillance capitalism. I never agreed to any of this crap.

They don't work, they provide no value, and the entire industry is a house of cards waiting to fall.

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