Introduction To Marketing Technology Course

The Ad Game

Srikanth Bangalore

Today, we are going to play a game to understand the motivations of different participants in advertising.

To serve an ad, we need the actual webpage where the Ad will be shown. We need an agent to describe this space and submit a request for the ad. This agent is called “Publisher”.

To server an ad, we need the ad itself, and an agent to describe the ad, and the kind of space in which this should be shown. This agent is called “Advertiser”.

The Advertiser pays money to show the ads. The Publisher receives money to show the ads. This transaction is facilitated by Marketplace. There are of course thousands of publishers and thousands of advertisers. So, there is an automated auction.

In this game, you are the Marketplace. The ad-spaces are “words”. The advertisers will pay if their ad is shown. There are 3 advertisers – BLUE, PURPLE and GREEN. When an advertiser’s “ad is shown” for the word, you add their color to the word. There are three publishers – Beatles, Eagles and Queen.

They all have the same input:

  • Beatles: We all live in a yellow submarine.
  • Eagles: Welcome to the hotel california
  • Queen: I want to ride my bicycle, I want to ride my bike.

SCENARIO 1: COST PER IMPRESSION – 1 cent per impression for all advertisers

  • Beatles: We all live in a yellow submarine.
  • Eagles: Welcome to the hotel california
  • Queen: I want to ride my bicycle, I want to ride my bike.

TRANSACTION:

  • BLUE paid 8 cents, PURPLE paid 8 cents, GREEN paid 8 cents.
  • Beatles received 7 cents, Eagles received 5 cents, Queen received 12 cents.

SCENARIO 2: COST PER IMPRESSION – 1 cent per impression for BLUE and PURPLE, 2 cents per impression for GREEN.

  • Beatles: We all live in a yellow submarine.
  • Eagles: Welcome to the hotel california
  • Queen: I want to ride my bicycle, I want to ride my bike.

TRANSACTION:

  • BLUE paid 0 cents, PURPLE paid 0 cents, GREEN paid 24 cents.
  • Beatles received 7 cents, Eagles received 5 cents, Queen received 12 cents.

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Now, BLUE takes a look at its audience and identifies that short words are its sweet spot. So, it comes up with a strategy – it will pay 4 cents per impression, but it wants to bid only on 1, 2 or 3 letter words.

Similarly, PURPLE identifies its sweet spot as long words – words longer than 7 letters. And it is willing to pay 4 cents for those.

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SCENARIO 3: COST PER IMPRESSION

BUYING STRATEGY –

  • BLUE: 4 cents per impression on 1,2 or 3 letter words
  • PURPLE: 4 cents per impression on words longer than 7 letters
  • GREEN: 2 cents per impression for GREEN.

OUTPUT

  • Beatles: We all live in a yellow submarine.
  • Eagles: Welcome to the hotel california
  • Queen: I want to ride my bicycle, I want to ride my bike.

TRANSACTION:

  • BLUE paid 48 cents for 12 impressions, PURPLE paid 8 cents for 2 impressions, GREEN paid 20 cents for 10 impressions.
  • Beatles received 24 cents, Eagles received 16 cents, Queen received 36 cents.

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BLUE is unhappy with spending 48 cents for 12 impressions, because, it turns out, only the words with ‘h’ in them actually led to clicks. So, BLUE is interested in a cost per click model. It will pay only on clicks. Of course, the marketplace will charge a lot more, because it is taking a risk. If an impression does not lead to a click, no money changes hand.

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SCENARIO 4: MIXED: BOTH COST PER IMPRESSION AND COST PER CLICK

BUYING STRATEGY –

  • BLUE: 24 cents per click
  • PURPLE: 4 cents per impression on words longer than 7 letters
  • GREEN: 2 cents per impression for GREEN.

OUTPUT

  • Beatles (10% click through estimate): We all live in a yellow submarine.
  • Eagles (5% click through estimate): Welcome to the hotel california
  • Queen: I want to ride my bicycle, I want to ride my bike.

TRANSACTION:

  • BLUE paid 0 cents for 6 impressions and zero clicks, PURPLE paid 8 cents for 2 impressions, GREEN paid 32 cents for 16 impressions.
  • Beatles received 4 cents, Eagles received 12 cents, Queen received 24 cents.

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BLUE is unhappy, so, it doubles its Cost Per Click to 48 cents per click.

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SCENARIO 5: MIXED: BOTH COST PER IMPRESSION AND COST PER CLICK

BUYING STRATEGY –

  • BLUE: 48 cents per click
  • PURPLE: 4 cents per impression on words longer than 7 letters
  • GREEN: 2 cents per impression for GREEN.

OUTPUT

  • Beatles (10% click through estimate): We all live in a yellow submarine.
  • Eagles (5% click through estimate): Welcome to the hotel california
  • Queen (10% click through estimate): I want to ride my bicycle, I want to ride my bike.

TRANSACTION:

  • BLUE paid 96 cents for 23 impressions and two clicks, PURPLE paid 4 cents for 1 impression, GREEN paid 0 cents for 0 impressions.
  • Beatles received 0 cents, Eagles received 96 cents, Queen received 0 cents.

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CONCLUSION

This explains why a real time feedback is important for optimum ad-buying.

 

 

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