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  1. #1
    SitePoint Zealot Venix's Avatar
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    Are ad networks too greedy?

    I have been thinking about this for some time now, and I find it really strange that most ad and affiliate networks can take as much a 50% cut.

    I think most ad/affiliate networks need to take a closer look and revalue their position in the industry. Because when I take a closer look there is not one of my networks that can justify taking a 50% revenu share for their job. Let's say you make 10 000$ months from different types of networks. While 10K is a good sum of money, you are actually generating 20K of value.

    And though the networks play a part in your network business, and I am not saying they are not doing a great great job. But 10K a month for hosting your ads and sending out a check??? (edit: they do more of course but you get the point (compared to the value created by the website team...) )

    I'd say that any network taking more than a 20% cut are ripping off both webmasters and advertisers. The problem today is that so many of the big networks are running on a business model that is based on a 50% cut, and it would be painfull for them to move over to a 20% cut model. But it will happen, sooner or later the publishers and advertisers will realise what is going on and things will change (edit: to put it more nicely, over time the market will force them to take a smaller cut of the money flow. If you think not, please post why you think so)
    Last edited by Venix; May 15, 2005 at 06:05.

  2. #2
    SitePoint Wizard silver trophy someonewhois's Avatar
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    Yeah, they're greedy. What a crazy business model - making money.

  3. #3
    Non-Member fryman's Avatar
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    Who takes a 50% cut??

  4. #4
    The Mind's I ® silver trophy Dark Tranquility's Avatar
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    Quote Originally Posted by someonewhois
    Yeah, they're greedy. What a crazy business model - making money.
    I totally agree ! some show more greed than other but they are all greedy !

  5. #5
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    But 10K a month for hosting your ads and sending out a check???
    As someone who works for a network, I can tell you that a network provides more value than simply ad hosting and check processing. I'm also a publisher of my own sites, so I definitely understand your point and see how it feels like a network doesn't do all that much.

    However, since I do publish sites I also know that I wouldn't have the time or contacts to be able to secure, negotiate, and manage advertising deals with large quantities of advertisers, or big advertisers that advertise on ad networks. Not to mention invoicing them, following up on making them pay, managing all the creatives, etc. Most individiual publishers could never get their feet in the door with large advertisers. Even very large sites with full time ad salespeople struggle to get ad deals with large companies. Networks have the volume to justify the advertising buys from these large companies.

    There's also the technology aspect. The technology used to optimize, target, and control all the advertising isn't simplistic (at least for some networks). It takes serious development both from an employee and time standpoint. There's also lots of technology cost involved in servers, load balancing equipment, redundant systems, huge bandwidth usage, etc.

    Of course, the choice is in the hands of the publisher. If they feel like they'd rather sell ads on their own, they have the right to do that, nobody is forcing them to work with ad networks. If you feel that the percentage you're earning as a publisher isn't fair, talk about it with the ad networks you use. Then it's up to the network to decide whether working with you is worth giving you a better revenue share.
    Pat McCarthy
    Director of Business Development -Right Media
    RMX Direct Blog

  6. #6
    SitePoint Wizard masm50's Avatar
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    I basically agree with Pat on this

    Whilst 50% is a bit much, as if you think about it, the networks would earn nothing without the sites, while the sites could still earn something without the networks, I think 30 - 40% is about right.

    In fact, I'm sure that if you got an advertiser yourself (if you ran a major site), and then got a good network to pitch to them properly, then invoice them and serve the ad, the network would probably be happy to only take 10 - 15% - or this certainly was the case with a few networks a couple of years ago. The big cost to the network is the man power finding the advertisers, not the technical side of operations.

    Just my 2p,

    Tim

  7. #7
    SitePoint Zealot Venix's Avatar
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    Quote Originally Posted by RightMedia
    As someone who works for a network, I can tell you that a network provides more value than simply ad hosting and check processing.

    Of course, and I like working with networks and I know many do a great job. But I just can't see how so many networks can justify the cut they are taking from being the middel man. If you look at how much time and money webmasters invest into their site each month , and it is the webmaster who are creating the core value, I just don't see how networks taking as much as 50% can be a balanced partnership?

    Of course I choose to work with networks myself, but that dosen't mean I am 100% happy with how things work today. I am quite sure that in a few years it will be much more common for networks to take a 20% cut

  8. #8
    SitePoint Guru
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    I'd say 50% is a bit much as well

    Quote Originally Posted by fryman
    Who takes a 50% cut??
    I think MaxOnline does when I was running them, don't remember if it's even was 45% ?

    Another point here, you might get an ad network that doesn't have chains, i.e. does not resell from other networks, so with such ad company 50% would be the same as if you joined another smaller ad network that resells from bigger guys and have let's say 60%-65%. So it's all depends. But MaxOnline is a big company, that's the ones that ripping off publishers with their 45-50% cut in my opinion plus have default serving fees.

    I'd suggest to find advertisers yourself, I did this month and it works much better.

    Also, I can mention that InterClick has 65% share and I think they don't resell, that's just rare to find nowadays.

  9. #9
    SitePoint Evangelist
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    I dont think that 20% is feasible. I mean, FC posted a net profit of 0.9m on revenues of $19.6m last quarter. it seems they are working on quite slim margins at a 35% cut (which I think is a fair %)..

    for me, it all comes down to who pays me the most for my inventory. if someone is taking a 50% cut, but their sales force is able to sell for $2 CPM, ill go with them over the 35% cut @ $1.40...(of course, depending on their stability and record!)

  10. #10
    SitePoint Zealot
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    burst is also taking 50%....

  11. #11
    SitePoint Zealot Digitalman's Avatar
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    Let’s say in a few years it will be 80% for the publisher and 20% for the ad networks.
    Does this mean the publisher gets 30% more or will the advertiser pay 30% less.

    If the ad network gives you 50% but gets 200% more from the advertiser than you would. It's ok for them to take 50%.
    Some ad networks pay you 80% but I used them and don't make more from it than with an ad network that gives me only 50%

    It's not about the % you get it's about the $
    Ask yourself how’s the greedy one? Maybe you the publisher is the greedy one.

    BTW I'm a publisher too.

  12. #12
    SitePoint Wizard OnlineGuide's Avatar
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    Yes, in one way or another, all networks are greedy. They are in business to make money and to grow business. This is what they do. They take the headache out of running after advertisers for payment and ad serving.
    The Online Guide

  13. #13
    Non-Member Andy Forsberg's Avatar
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    Quote Originally Posted by N_F_S
    Also, I can mention that InterClick has 65% share and I think they don't resell, that's just rare to find nowadays.
    By 65% share you mean, the publisher gets that 65% and InterClick gets 35%. I'm just clarifying because that sounded rather confusing. I've recently gotten an online internship with InterClick for the summer. They're a quality company and I look forward to helping them grow as much as possible.

    I was recently accepted by Vibrant Media and they pay their publishers only 40%! I hope their sales team is good enough so that it doesn't matter the percentage is that small. Only time and testing will tell.

  14. #14
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    I don't see it as a flawed model, they have the overhead, do the marketing, etc...

    Plus they eat refunds, chargebacks, etc.. and they need to make a profit. The internet isn't free, and if they have real salespeople (and the big networks do of course) they have to pay them commissions as well.

  15. #15
    SitePoint Zealot
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    vibrand pays only 40%????????????????/ seiBe!!!1

  16. #16
    SitePoint Zealot howardroark`'s Avatar
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    It's business. Everyone, like you and me, are out there to make as much money we can. Fifty percent is ok, considering that there is no alternative, YET. Without them, here is what happens to our extra web space: nothing

  17. #17
    SitePoint Guru
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    Quote Originally Posted by Andy Forsberg
    By 65% share you mean, the publisher gets that 65% and InterClick gets 35%. I'm just clarifying because that sounded rather confusing. I've recently gotten an online internship with InterClick for the summer. They're a quality company and I look forward to helping them grow as much as possible.

    I was recently accepted by Vibrant Media and they pay their publishers only 40%! I hope their sales team is good enough so that it doesn't matter the percentage is that small. Only time and testing will tell.
    65% to publisher, 35% - gets interclick

    It's business. Everyone, like you and me, are out there to make as much money we can. Fifty percent is ok, considering that there is no alternative, YET. Without them, here is what happens to our extra web space: nothing
    Sure you will waste your web space I'm not sitting, plenty of other ways to use it.

  18. #18
    SitePoint Zealot Venix's Avatar
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    Quote Originally Posted by Digitalman
    Ask yourself how’s the greedy one? Maybe you the publisher is the greedy one.

    BTW I'm a publisher too.

    Greedy for questioning a 50% cut? If you read between the lines you will see that this discussion is really not about greed, but about if the industry would be better off as a whole with networks taking a smaller cut. This would give the webmasters more money to hire people to work for their site where the real value is made, and the advertisers could get more ads for their money.

    I know theory is a lot easier than practice, but I really do think that there is perfectly possible to build up a large ad network which runs on smaller cut model, and uses this to its advantage. It might not happen tomorrow, but I beleive sooner or later someone will see that this could be a winning formula even for the ad networks.

  19. #19
    SitePoint Evangelist
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    Some Ad company offer pay per click system management hence it manage software like Adwatcher which enable and allows you to track all of your campaigns from one place.

    It tracks clicks, sales and actions and you have to pay per click only for your advertisement.

  20. #20
    SitePoint Wizard
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    Quote Originally Posted by howardroark`
    It's business. Everyone, like you and me, are out there to make as much money we can. Fifty percent is ok, considering that there is no alternative, YET. Without them, here is what happens to our extra web space: nothing
    i could not say it better myself!

  21. #21
    SitePoint Addict photoshopfreak's Avatar
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    Ad networks do take too much...

    This one says it pays out 70% i might try them http://casalemedia.com/Publishers/...

  22. #22
    Makin' It Happen bgray's Avatar
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    In the end this entire issue is simply economics.

    1) Obviously if you are using an ad network that takes a 50% cut you have decided that this is the best option available for your ad space. Perhaps you could make more doing it yourself but you have likely weighed the opportunity cost of you extra time and effort to do so and have chosen the ad network.

    2) As ad networks continue to pop up I think you will eventually see a shift to a publishers market. Competition will ensue among the networks and as that happens commission/cut rates will get smaller.
    I run an insurance company directory at InsuranceCompanies.net

  23. #23
    SitePoint Zealot Venix's Avatar
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    Quote Originally Posted by bgray
    In the end this entire issue is simply economics.

    1) Obviously if you are using an ad network that takes a 50% cut you have decided that this is the best option available for your ad space. Perhaps you could make more doing it yourself but you have likely weighed the opportunity cost of you extra time and effort to do so and have chosen the ad network.

    2) As ad networks continue to pop up I think you will eventually see a shift to a publishers market. Competition will ensue among the networks and as that happens commission/cut rates will get smaller.
    I totally agree. That is exactly what I am talking about. The economics of the web business will start pushing things this way. Why? Because that is closer to the optimal solution. In economics gravity will alway win in the end.

  24. #24
    Gone!
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    Question is, are you going to run with a network who take a 25% cut and who consistently generate you an eCPM of $1, or an ad network who take a 50% cut and generate you a consistent $1.25?

  25. #25
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    Well, let's take a look at $1 of revenue from ad sales.

    What do you do to generate it?
    - Provide traffic.

    What does an ad agency do to generate it?
    - Secure a client
    - Negotiate pricing
    - Provide support
    - Manage creatives
    - Serve ads
    - Provide stat tracking
    - Collect A/R
    - Risk Management
    - Absorb Postage/EFT Costs
    - Accounting
    - Legal

    The list goes on and on.

    Basically, with all the infrastructure and expense that the ad agency takes on relative to what a web publisher takes on I think the fact that they pay 50% is generous.


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