Why are there SO MANY ad networks? How to start YOURS!

Here’s an article that was in the works from July of 2009 that never saw publication.

While people are no longer building ad networks (that game died 5 years ago), understanding how networks behave is critical if you want to make money via optimization (arbitrage between the supply and demand– the publisher and the advertiser).

Tactics like scrubbing don’t work anymore– but the basic principles never change, which is our reason for reviving this article. The game never changes- SEO Consultants become Social Media Gurus who become Content marketing wizards, and so on- like wolves who discard their worn out old sheep skin only to don another.

Why are there SO MANY ad networks? How to start YOURS!

Every day, another ad network launches.  What’s the deal?  Google “ad network” and you’ll see 3.2 BILLION results and see thousands of companies.  AdKnowledge, AdBrite, Adfish, Adsdaq, GetAds, E-ads.  This evening I was driving down the road and saw a sign for “Be Ad“, before I realized it was just a bead store.

Too many ads!

With Facebook shutting down spammy offers, and even wholesale shutting down a couple ad networks, it will be interesting to see who is left that can monetize the inventory that is in free fall pricing, especially at networks such as RockYou, with over 8 billion impressions a month.  It’s no secret that I ran one of the largest Facebook ad networks.

People– there’s cheap inventory on ad networks, if you can find offers that won’t piss off Facebook.  Same is true whether you are buying inventory via self-serve PPC or running your own ad network by gathering up a bunch of Facebook publishers.  You could cloak, but that’s a short-term solution.

Regardless, the ad networks are taking margins of 45-60%. 
If you’re a publisher, you’re likely also aware that you’re being ripped off blind.

Thus, if you want to start your own ad network, here’s what to do:

  • Put up a site: Call it AwesomeFacebookAds.com, SuperDopeAdNetwork.com, MyFirstNameMedia.com, or something like that.  Make sure you have the word “ad” or “media” in the name.  Have a wordpress front-end with images of hundred dollar bills, Ferrari’s, and hot models– that will attract attention.  These Facebook pubs are kids and such advertising will appeal to them.
  • Set up your ad server: Use OpenAds (now called OpenX, used to be called phpadsnew), or Google Ad Manager (yeah, Google’s offering is pretty slick).  If you have a few Gs, then license LinkTrust, which will allow you to scrub your affiliates– else do DirectTrack, where you can manually scrub (remove leads, for noobs that don’t know what scrubbing is).
  • Start recruiting pubs: You don’t have the money to front your network, nor do you actually have unique offers, so blather on about how you have the best payouts, treat pubs right, pay on time, and so forth.  They won’t know any better, especially if you post pictures of yourself in front of cars and houses that you don’t own. So start hitting up the top Facebook pubs– you can install their app and friend them.  Easy!
  • Run the traffic through your domain: Not a tracking domain, but the site you set up in step 1.  That will pump up your Alexa rating and perhaps even your HitWise and Comscore rankings.
  • Set up a progressive scrub: Initially, you need to make publishers happy, so take only 5-10%.  After a week or two, while they’re not paying attention, start dialing it up to 20%, 30%, and higher.  You might even get to 70 or 80%– I was able to with a lot of folks. If they notice, then give them one of these convenient excuses:
    • Your traffic just doesn’t back out
    • We should try some fresh offers– your ads are burning out
    • The Advertiser doesn’t like your traffic
    • Maybe there’s something wrong with your tracking
    • I’ll look into that and get back to you (and, of course, you don’t)
  • Use your excess money to promote the network: Even if you don’t have the cash, by paying your publishers slowly, you can effectively finance your operations through what is called a “reverse float”.  In other words, you’re getting paid by your advertisers (or ad network) before you pay out your affiliates.  Get a black card, which has double duty of earning you points and impressing the chicks.  If you’re running at 60%+ margins like most networks, you’ll be ballin‘ in no time.

I was only partially kidding here, as the examples I’ve listed here are taken from real experience.

And I will admit that we had our own Facebook advertising network, for which there was no scrub.  Honestly, the barriers to entry were so low that anyone could have started their own ad network.

But as the competition increased and both advertisers and publishers got smarter, you can be assured the profits were competed down to nothing.

By the way, if you want to learn more about Internet Marketing, I’d encourage you to sign up for MariMetrics.

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Dennis Yu

About the Author

Dennis Yu

Dennis Yu is the Chief Executive Officer of BlitzMetrics, a digital marketing company that partners with schools to train young adults. Dennis’s program centers around mentorship, helping students grow their expertise to manage social campaigns for enterprise clients like the Golden State Warriors, Nike, and Rosetta Stone.

He’s an internationally recognized lecturer in Facebook Marketing and has spoken in 17 countries, spanning 5 continents, including keynotes at L2E, Gultaggen, and Marketo Summit. Dennis has been featured in The Wall Street Journal, New York Times, LA Times, National Public Radio, TechCrunch, CNN, Fox News, and CBS Evening News.

He’s a regular contributor for Adweek’s SocialTimes column and has published in Social Media Examiner, Social Media Club, Tweak Your Biz, B2C, Social Fresh, and Heyo. He held leadership positions at Yahoo! and American Airlines and studied Finance and Economics at Southern Methodist University as well as the London School of Economics. He ran collegiate cross-country at SMU and has competed in over 20 marathons including a 70-mile ultramarathon.

Besides being a Facebook data and ad geek, you can find him eating chicken wings or playing Ultimate Frisbee in a city near you.

You can contact him at dennis@blitzmetrics.com