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Online Marketplace Ad Programs: Build or Buy?
By Jason Pratt
Monday, 17th May 2021
 

Online marketplace operators are waking up to the potential that native sponsored listing ad programs offer for their overall profitability.

Consequently, many have launched or plan to launch their own programs, and so they face the classic “build vs buy” decision that technology companies must often confront.

On the surface, it seems that running your own sponsored listing programs is a no-brainer, but there are many factors that go into making a program successful that aren’t always obvious at the start.

Behind the Scenes of a Sponsored Listings Program

To run a successful sponsored listings program (or any native ad program), you will need a number of capabilities and assets, all of which must come together in order to reach a profitable scale. If any one of these fails or is subpar, it will prevent your program from scaling, which is why there are so few successful, large, self-serve ads programs in the world.

Outside of the big three (Google, Facebook, and Amazon), there are just a handful of large marketplace ad programs — even though there are literally thousands of successful online marketplaces around the world.

Here’s what your program will need, at a minimum:

  • An ad serving and campaign management technology (which includes a very low-latency auction system, real-time impression and click tracking at large scale, bid and bid modifier technology, and much more)
  • Technical support teams, tools, and processes
  • Ad operations teams to support your larger advertisers and the program as a whole;
  • A solid financial ledger system complete with audit, credit, and attribution tools
  • Program management and design teams that understand ad systems and can create features that advertisers will benefit from and use
  • Marketing and sales plans and teams to sell the program to potential advertisers

It is a common mistake to focus only on the first item: the ad stack. Ambitious engineers may convince management that an ad stack will drive a huge volume of ad dollars at low cost and that it can be built on its own.

The first part is true; it’s possible to build an ad stack (though, it is not as easy as it looks). However, the second part isn’t even close to true. The most successful ad programs in the world, Google, Facebook, and Amazon, have huge teams of people whose sole focus is not just building the technology, but maintaining it, and subsequently, improving upon it to keep up with tech improvements.

If the company doesn’t provide the rest of the necessary functions to grow a program (especially support, sales, marketing, and program design), the most likely outcome is that while the stack itself may work, the program will fail to attract any serious interest or ad spend and will sit lonely on the shelf.

Much like the marketplace itself, the technology that runs the program is only one sliver of what it takes to be successful.

Treat the Ad Program Like a Standalone Company

Ads are a 24/7, real-time, cost-incurring and tracking operation. Your program will be generating traffic and spending advertisers’ money from the first minute of every New Year’s Day to midnight on New Year’s Eve. This means you need a stack that has world-class uptime, monitoring, failover, replication, and backup. Since you’ll be the one taking the ad dollars, you will need to be able to conclusively track them and show what results they have generated. You also need tools for doing things like makegoods and credits when those inevitably arise.

That’s the ad serving backend in a nutshell, but there’s more. You also need a user-friendly interface for registering and managing accounts, setting up new campaigns, managing bids and budgets, reporting on and optimizing performance, adjusting parameters, such as bid modifiers, campaign start and end dates, targeting options, and so forth. The more robust your platform UI is, the more users will like and trust it, and the better your program will scale. The number of details you have to consider can be daunting:

  • Do you allow multi-user access to one ad account, and if so, who’s allowed to do what?
  • Do you need one UI or two (one for basic users, one for agencies and advanced/large advertisers, for example)?
  • Does your industry benefit from co-op marketing, and will you somehow allow for it in your program?

Increasingly, application programming interfaces (APIs) are a must-have in ads programs. Buyers use demand-side platforms, reporting/BI tools, and other technologies to buy media in 2021, and the larger they get, the greater the need. You’ll want to offer them APIs for pulling data into their BI, for pushing campaign and bid updates, and the like. This all needs to be very dependable, highly available, and reliable, as APIs tend to get hit daily or many times throughout every day, and must respond quickly and accurately. Even the largest tech companies sometimes struggle here.

But that’s just a high-level summary of the basic stack you’ll need to get an ads program off the ground. Of course, the devil is always in the details, and once you go live, you’ll find that there is always a high-priority list of features your advertisers are telling you they need in order to invest more budget into your program. Welcome to the adtech world! There are literally thousands of companies focusing on ways to improve and enable adtech every single day, and once you build your own tech, you become another competitor in the space.

Don’t Rush Into It!

Make sure that as you’re embarking on the decision to launch an ads program, you’re giving it the full organizational commitment necessary not just to make it technically “live,” but to build and support something that advertisers will spend their hard-earned money on. When you launched your marketplace, you didn’t set out to overtake Amazon on opening day, so don’t try to replicate their ads program overnight.

Think about the whole picture: consider what you’ll need to succeed in ads, not just the technology. Alongside your tech plans, build your plans for marketing, support, operations, finance, and sales. You can only be successful if all of these elements align.

There are many decisions to make when it comes to monetizing an online marketplace. Learn more about how sponsored listings can help you drive additional revenue and growth in our latest guide for marketplaces.

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