An informal guide to Ad Tech: Part 1

May 2015 /

Ad Tech is an infinitely complex industry that may be hard to understand. Learn from the perspective of someone who has spent many years on the ground.

I have spent a considerable amount of time in ad tech as an entrepreneur. When I first started looking at ad tech, I found it to be prohibitively complex for the human mind to grasp. However, once I started to understand the landscape and intuit my way through the industry and its history, things made sense. In the process, I ended up developing a strong understanding of the industry I think might be worth sharing.

The ad tech industry is quite young, relatively of course and largely developed over the course of the last 25 years. It all started with simple banner ads on web portals and now has evolved into a $100Bn+ market globally. The macro factor driving this growth was simply shifting media consumption. As eyeballs started moving away from magazines, televisions, and newspapers toward desktop computers, advertisers followed them right there and gave rise to the digital advertising industry.

Content publishers, like AOL, MSN, and Yahoo controlled a huge portion of online consumers and as a result started building sales teams to sell advertising spots on their website. The currency of choice in advertising is CPM or cost-per-mille, which, in english, means the cost of showing an ad a thousand times (not to a thousand people, just a thousand times). Each medium had its benchmark CPMs, the most expensive of which was television (and it still is). Online advertising was sold on a CPM basis to advertisers to direct traffic to the advertiser’s website. This was a fantastic stream of revenue for content publishers who could use these dollars to pay for the bills and continue producing great content to capture more consumer attention.

As more consumers started shifting their media habits and consuming more content online, the number of websites and the amount of content on the internet exploded creating a virtuous cycle of digital media consumption growth. Through the 1990s several major players emerged including Yahoo, AOL, DoubleClick who helped shape the ad tech industry as we know it today.

I think this is a good start to the ad tech series. I’ll continue compiling my thoughts together and work on the next piece detailing the evolution of content publishers.

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