The history of advertising technology. How did the first banner look like? How did the ad tech ecosystem grow so complex over last 20+ years? Why cookies are used in advertising? Where is the ad tech industry heading? This presentation gives a brief overview of the key events in the ad tech industry history that lead us to the point where we are today.

1. The history of Advertising Technology
Clearcode B&B event
8th May 2015
Maciej Zawadziński

2. WHAT IS AD TECH?

3. What is ad tech?
• Software solutions for online advertising:
• delivery, targeting & control,
• data collection and decision making,
• measurement and analytics,
• ad delivery across different channels: Web, Mobile,
Video/TV, Online Radio, IoT, VR etc.

4. What is ad tech?
• What’s so exciting about ad tech?
• Reach: ad delivery to 3+ bln internet users,
• Scale: tera-, peta-, zeta-… of data,
• Performance & High-availability,
• Data science: making smart decision based on the data,
• Google, Yahoo, AOL, Oracle, Facebook, Twitter and other
tech giants - they all rely on ad tech!

5. 1993

6. The first banner ad
• New concept - special sections on the site to display banners
• Oct 27, 1993
• Publisher: hotwired.com (Wired Magazine)
• Advertiser: AT&T
• CTR 44% (sic!)

7. The first
landing page

8. It was very simple!
• Advertiser had a direct relationship with the Publisher,
• HTML placement (468x60 pixels) with GIF format image.

9. 1994

10. Cookies
• Lou Montulli and John Giannandrea invent cookies while
working at Netscape Communications,
• Use case - “a way of distinguishing online shoppers”,
• Implemented in Netscape and Mosaic browsers,
• Cookies become inseparable element of ad tech in the
following years that enable advertisers to track users’
behaviour online.

11. Web browsers 94’ - 09’

12. 1995

13. JavaScript
• Invented at Netscape Communications,
• Shipped in Netscape 2.0 released in September 1995,
• Introduced pop ups & pop unders to online advertising.
• Similarly to cookies, JavaScript is widely adopted by the
advertising technology in the following years.

14. WebConnect
• World’s first ad network (in 1995 they syndicated 160 sites),
• Placed ads on network of sites that signed up,
• Pricing based on the website audience profile (Site Price Index),
• Introduced “frequency capping” to prevent “banner fatigue” as
well as banner rotation,
• In ’96 advertiser’s panel with statistics of the campaign:
impressions, clicks, responses/sales (conversions) - developed
in CGI/Pearl.

15. WebConnect’s ICS system

16. Ad network
• Advertiser can buy more inventory from many Publishers
through an intermediary and centralize the reporting for
the campaign.
• Advertiser buys a “package” of impressions and pay in
CPM model.

17. 1996

18. DoubleClick
• an ad network,
• an ad server for publishers’ direct sales,
• measures impressions, clicks, spent, ROI etc.
• CPM pricing model,
• used cookies which tracked user’s history in order to serve ads
relevant to them,
• its competition, WebConnect opted out of using cookies
because “it violates the users’ privacy”.

19. DoubleClick website ‘97

20. Ad server
Ad server
Publisher’s
website
Ad network
Direct deal
Browser/
User
• Direct deals - inventory sold by the Publisher’s sales team,
• Ad networks - fill the remaining inventory (but for some
Publishers this become the only or the largest rev stream).

21. 1997

22. Privacy & cookies
• Cookies were discussed in two U.S. Federal Trade
Commission hearings,
• RFC 2109 specification released - HTTP State
Management Mechanism (Cookies)
• third-party cookies were either not allowed at all, or at
least not enabled by default
• recommendation NOT FOLLOWED by Netscape and IE

23. RFC 2109

24. 1998-2000
aka
Dot Com Bubble

25. Popup/Popunder explosion
• intention - increase revenue from advertising while banner ads
effectiveness (measured in CTRs) decreases,
• major browsers add popup blocking functionality from early 2000s, IE
adds this functionality in 2004.

26. PPC advertising
• Bill Gross at Overture (earlier Goto.com) invented PPM model (Paid
Placement Model),
• Today it is called PPC (Pay Per Click),
• Introduced auction model for advertisers - the higher your bid, the
higher your listing,
• CPCs in ’98 - up to $1/click.
• Overture monetized large portals such as Altavista, MSN and Yahoo,
• In 2003 the company was acquired by Yahoo!

28. The Dot Com Bust
• startups spend substantial amounts on advertising until bubble bust,
• many startups go out of the business, including ad tech companies,
• other ad tech companies had to scale back, DoubleClick and Overture survive.

29. 2000-2005

30. AdWords
• launched in 2000,
• used CPM pricing model up to 2002,
• introduced CPC pricing in 2002 - Google focused not only
on the highest bid, but also on relevance.
• As of 2013, 85% of Google’s revenue are from AdWords,
• CPCs go as high as $200/click.

32. AdSense
• Applied Semantics - created AdSense contextual
advertising technology in 2002,
• Acquired by Google in April 2003,
• Google launches AdSense network, enabling publishers to
monetize their content with PPC ads.

33. Original AdSense press release

34. AdSense in mid 2004

35. Ad networks & piggybacking
Publisher
Ad network 1
load
an
ad
no
ad
-­‐
fallback
to
ad
network
2
no
ad
-­‐
fallback
to
ad
network
3
Ad network 2
Ad network 3
• Early-mid 2000s:
• piggybacking becomes commonly
used to fill remnant inventory,
• endless redirects cause some ads
not to load at all,
• ad networks’ struggle with “liquidity”
problem - their inventory is either
under-filled (not enough campaigns)
or over-filled (too many campaigns)

36. 2005

37. Early “ad exchanges” launch
• AdECN, RightMedia, AdBrite, ADSDAQ
• For ad networks to address “liquidity” problem,
• Every impression is matched against campaigns in the
system,
• Highest bidder win (no real-time bidding protocol yet),
• Members - mainly ad networks,
• “Exchange” charges a flat transaction fee for every impression

38. Early “ad exchanges”
Publisher
Ad network 1
load
an
ad
Ad exchange
no
campaign
-­‐
send
to
exchange
Advertiser
Ad network 1
not
enough
inventory
-­‐
get
from
exchange
(50%)
Ad exchange
insertion
order
(campaign)
Publisher
own
inventory
(50%)
under-filledover-filled
manual / API campaign targeting
i.e. US traffic from MacOS on tech sites
301 redirect / one-way
return
an
ad

42. 2006

43. Mobile ad networks
• AdMob - text links on featured phones,
• soon followed by other players,
• this was before smartphones era - first iPhone released a
year later, in 2007.

45. 2007

46. Facebook Advertising
• Facebook introduces “Facebook Ads”, “Facebook Insights”
and “Beacon”,
• Beacon relies on a code installed on third party partner
websites that collects the information about user activity
and broadcasts to the user feed (by default!),
• Beacon raised a lot of privacy controversy and was shut
down in 2009 after class-action lawsuit (Facebook paid
$9.5M fine)

47. Facebook Beacon

49. 3 key acquisitions
• AdECN by Microsoft
• MS switched from AdECN to AppNexus for its real-time
bidding needs 3 years after acquiring it
• RightMedia by Yahoo!
• DoubleClick by Google

50. DSPs founded
• DataXu
• Invite Media
• BrandScreen
• MediaMath
• AdBuyer.com

51. 2008-today

52. Rise of RTB APIs

53. RTB APIs
Publisher
Advertiser
DSP 2
Ad exchange 2
insertion
order
(campaign)
< 100 ms
Ad exchange 1
SSP/ad network
DSP 3DSP 1
load
ad return
ad
$1.10 $1.15
$1.15

54. More inventory sources traded in RTB
• Display banners,
• Native advertising,
• Video and advertising,
• Digital radio and Digital TV advertising,
• …

57. Advertiser's budget
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Media Agency Trading Desk DSP 3rd Party Data
Ad Exchange Ad Network/SSP Publisher

59. U.S. ad spend by quarter

60. RTB spend

61. Future

62. Future
• RTB evolution - new instruments futures, forwards etc.
(like in finance),
• IoT - Internet of Things, VR - Virtual Reality,
• Need for more transparency, privacy and openness!
• Let’s be a part of it ;-)

63. Questions?
Maciej Zawadziński
maciej@clearcode.cc @zawadzinski