How networks cheat, lie, and steal

Imagine you have these four buddies - Bob, Sam, Dan, and Joe - who want to help you sell your famous ice sculptures. Every week, you send each of them 5 sculptures to sell; at the end of the month you get a check from each of them and a note.

Bob's note says, "Sold all 5 sculptures. I'm not going to tell you how much I sold them for. Attached is a check for $1250."
Sam's note says, "Sold 3 sculptures for $500 each! Here's your 65% cut - $975."
Dan's note says, "Sold all 5 sculptures. I won't tell you how much I sold them for, but here's your flat fee check for $1000 ($200 each)."
Joe's note says, "Sold 3 sculptures for $500 and the other 2 sculptures for $200. Here's your 65% cut - $1235."

So how much inventory should you send each of your buddies next month? It seems reasonable to calculate how much they sold each sculpture for.  Dan's easy, because he'll pay you $200 no matter what. Joe and Bob both sold all of the sculptures, for around $250 each.  Sam sold the sculptures for the most money ($325) but he didn't sell them all.

Your best bet is to give the inventory to either Joe or Bob. If you give the sculptures to Joe, there's no guarantee he'll make top dollar for every sculpture, but at least you can be confident that you'll know what he sold and you'll get 65%. Bob might pay more, but what happens if your sculptures start selling for more money? Will he share the profits? Without full disclosure, you can't be certain.

So how does this relate to online advertising? Each of these scenarios parallels a major ad network.

Bob is like Google. He'll pay you decent money, but you won't know where it's coming from.

Sam is like FastClick. He'll sell each unit for a lot of money, but he won't sell everything - and worse, he won't tell you what he didn't sell. In fact, he'll act like he's the best, since his average price per unit sold is so high- and a lot of people fall for that.

Dan is like Advertising.com. He'll give you a flat fee, so that you don't have to micromanage him, but he'll take a larger cut in return for taking more risk.

Joe is a transparent rev-share network. He'll do his best for you, and he'll tell you what he's selling - and what he's not.

I have real-world examples of each of these from conversations I've had with publishers about how they're divvying up their inventory. When I've explained how FastClick hides its true effective CPM, they've been so mad that they've pulled tags. I think that's a good thing - it's time to punish the companies that won't be honest about how they're selling your product.

(but what about daisychaining? good question - I'll address this in an upcoming post)

Comments

[Serena Brown]

What about daisychaining?