Today’s column is written by Danny Khatib, co-founder and CEO at Granite Media.
One of the most powerful aspects of the cloud platform is the innovation created by the unbundling of component services. There is a full menu of options for every hardware and software component, and companies can mix and match to achieve their desired configuration, trading off service and cost for each component. No more monolithic apps.
For the web stack, a company can rent elastic hardware from a primary service like Amazon Web Services or Google Cloud, plug in content delivery network services from a different vendor, install basic application monitoring from yet another vendor, and the list goes on. A company can also run its independent data stack in parallel – storing logs at one provider, using one of many data pipeline services, pushing data to a separate structured data warehouse while selecting a decoupled, best-in-class visualization tool to make sense of it all.
Changing any of these decisions at any layer has super-low friction and only requires one or two developers or operations employees to manage it all. Now that is disruption.
The ad stack of the future will be cloud-based, component-driven, functionally independent from parallel web and data stacks and will have every component decoupled and rebundled at the customer’s discretion. Importantly, almost all layers of the existing ad stack will be reconceived as operational infrastructure, not as access to demand or supply.
The Basic Layer
Buyers and sellers will each run their own ad servers, and access to the general RTB bidstream between them will be a single component service for each party, which will often be managed by the cloud provider hosting the server. A server will be swappable without affecting access to the bidstream.
The bidstream itself will be a commodity delivery service, similar to basic web traffic – table stakes for cloud providers or component providers, with no charge other than the cloud resources used to manage the bidstream. The major cost decision point for both sellers and buyers will be the desired maximum queries per second to be supported by the server. If publishers want to manage more bids per second, they will have to pay for the resources to manage them, not for the value of the bids. Just imagine a content delivery network charging more for articles or users that monetize – well, no, thank you.
Gone will be the days where publishers run 10 bidstreams in parallel, because there will no longer be a need to do so. Publishers will manage demand through one component pipe that doesn’t affect other layers of the stack, and they will pay a cloud usage fee to manage it. Publishers will get a single unified auction, and buyers won’t have to solve for deduplication anymore.
The Service Layer
Around this basic layer, component services will flourish. A publisher’s server could run one of several available auction engines that house the priority and decisioning rules to select a winning bid. It will enable intelligent bid filtering services to manage bidstream cost, and also many different internal monitoring services for bidstreams, ad serving reports, custom metrics and so on. A separate cookie-matching service will be easy to plug in, as will a creative diagnostics service to help detect pesky redirects and creatives that hurt user engagement.
The buyer’s server will run in a similar fashion, with campaign management as a component. Server logs will be pushed to a parallel data stack for offline analysis by yet another service. The client SDK to fetch ads from the server will be a separate component, probably just open-source software. It’s not tied to a particular server, and it’s most definitely not tied to a particular demand source.
The Transaction Layer
Best-of-breed components will be designed to tackle secure stream connections, identity verification, transaction confirmation and financial settlement.
In the offline world, a seller can choose to accept Visa, MasterCard or American Express, and the buyer decides which to use. Similarly, a seller’s server will be able to disclose what transaction, verification and settlement providers are supported, and buyers can respond with which service to choose, such as a preference for Moat or Integral Ad Science and how they prefer to pay.
The buyer will get to choose from a pre-approved list of vendors supported by the seller, then the seller’s server will render the code and pixels required for third-party verification for a particular impression.
Financial settlement might be bundled with transaction confirmation or offered as a separate service. Any services that don’t involve the handling of money should charge based on resources used for a given number of transactions. Any service that involves financial settlement can charge a percentage of revenue since there is financial risk to be managed, and money is the underlying resource used. Again, this is all functionally independent of access to demand, supply or any other layer in the stack.
Instead of using ads.txt, publishers will manage a name server to verify identify and defend against fraud, similar to how domain name server resolution works.
The Data Layer
Ad networks will reshape themselves as data providers that plug into buyers’ and sellers’ servers but don’t reroute the bidstream. Deals and unique data can be managed by inserting rules and attributes into both servers so a bid request can be signed with additional deal ID attributes before it is sent to a particular buyer’s server, which has been configured to look for it.
There will be no more reselling problems because the bidstream integrity is preserved. Networks and other data providers can try several different business models, such as charging on transactions or revenue, depending on the unique insights they provide.
As we move away from monolithic apps in the ad stack toward cloud-based component services, buyers and sellers will absolutely win. For the ad tech ecosystem, there are large implications for who might be the long-term winners and losers and how consolidation will play out, but we’ll leave those predictions for a future column.