Six Things to Consider before Committing Your Ad Business to Google

According to a 2022 eMarketer report, Google Ad Manager 360 (GAM360) and its free version Google Ad Manager (GAM) are used by more than 69% of publishers in the U.S. and 63% worldwide, making it by far the most dominant player in digital ad management. When considering a solution for their ad inventory, most publishers initially choose this third-party ad server and management platform from Google, trusting that its near-monopolistic influence in ad supply and demand will quickly lead to a consistent ad revenue stream, which it may.

But publishers seeking to future-proof their advertising business and build long-term value should:

• Recognize the limitations associated with entrusting their ad business to Google; and
• Have a first-party ad server and management solution in place to gain best advantage in the highly unsettled and dynamic nature of the digital ad ecosystem.

A first-party ad server solution gives publishers full control and ownership of their data, which is key to better understanding their audiences, making informed targeting decisions, modifying their advertising business strategies, and building competitive advantages.

For publishers using or considering GAM360, here are six things to know: 

1.   Data Ownership, Control

In the ever-evolving landscape of digital advertising, having full control and ownership of your data is key to success. Data empowers publishers to make strategic decisions, customize their advertising business strategy and increase revenue; as such, it is essential for publishers to understand the limitations that Google imposes on data management.

GAM360 is a third-party ad server that grants Google control and ownership of a publisher's ad inventory and user data. This includes determining how the data is used and who can access it.

With GAM360, publishers’ data is shared with Google, which then provides it (in an aggregated and anonymized form) to competing publishers, advertisers, and Google’s own media properties. This should raise eyebrows and concerns with publishers:

• A key asset for a publisher is its unique user data. Google sharing this data, even in an aggregated form, diminishes a publisher’s competitive advantage. Other publishers may gain insights from the data, which they can then use to improve their own strategies and offerings, resulting in more competition for the same audience or advertisers.
• GAM360 takes aggregated data from a publisher and makes it available to multiple advertisers; thus, diluting the exclusivity of the publisher’s audience. If a publisher has a very specific audience - say, millennials who are interested in luxury fashion - advertisers may be willing to pay a premium to place ads with that publisher. However, when Google takes the data from that publisher, aggregates it with data from other publishers, and then makes it available to multiple advertisers, those advertisers gain insights into that specific audience without needing to advertise directly with the original publisher, so ultimately the publisher's audience is no longer “exclusive” to them. Advertisers can potentially reach that same (or similar) audience through other publishers, based on the insights gleaned from the aggregated data. Those advertisers are then less willing to pay a premium price for advertising space with the original publisher, as they can reach a similar audience elsewhere, consequently diluting the exclusivity and unique value of the publisher's audience.
• Google shares the data it aggregates from publishers with Google Search, YouTube, Waze, and other Google-owned media properties to strengthen those businesses. These are media companies that can be competitors and potentially attract audiences and advertisers away from publishers.

In contrast, and rather than being tied to the policies and infrastructures of third-party platforms like GAM360, publishers with a first-party ad server solution can choose how to store, manage, and use their proprietary data, which provides operational flexibility and the independence to build their own ad business strategies.

Detailed audience insights can help publishers attract advertisers willing to pay premium prices for hyper-targeted ads. Publishers can also use their data to enhance the user experience and optimize ad formats, placements, and frequency, which can boost ad revenue.

Control of their user data gives publishers granular insights and allows them to conduct comprehensive analyses, A/B testing, and other research that can inform their ad business decisions.

In addition, first-party data is also becoming increasingly valuable as third-party cookies are phased out due to privacy concerns. This means that publishers (and advertisers) will be relying on first-party data to target ads and measure the effectiveness of ad campaigns. Full data ownership and control give publishers the intelligence to make the best decisions for their audience, advertisers, and their entire ad business.

2.   Exclusivity

Publishers who utilize GAM360 may be required to sign exclusivity agreements, which can restrict their ability to work with other ad platforms or advertisers.

Consequently, this limits their options for generating revenue and adapting to changes in the advertising industry. Additionally, these agreements may require publishers to prioritize Google over other platforms or direct advertisers, potentially resulting in missed opportunities for higher paying offers and a loss of revenue.

Given Google's dominant position in the digital advertising market, some publishers may feel compelled to sign these agreements to gain access to a vast pool of advertisers. While not all GAM360 users are subject to exclusivity agreements, they are becoming more prevalent and can restrict publishers from working with other ad platforms or advertisers, even if they offer better terms or are a better fit for the publisher's audience.

Additionally, these agreements limit a publisher's flexibility to respond to market opportunities. If a publisher is locked into an exclusivity agreement with Google, their success becomes tightly linked to Google's performance. Any downtime, security issues, or algorithm changes in GAM360 can directly impact the publisher's revenue without alternative options.

Publishers who use a first-party ad server need not enter into exclusivity agreements with Google and should avoid entering into such agreements with any other AdTech vendors. These agreements can limit publishers’ ability to work with other advertisers and partners in the digital ad ecosystem and can have a negative impact on their revenue and profitability.

3.   Pricing Conflicts – Direct vs. Programmatic

When using GAM360, one of the challenges publishers face is managing the competition between direct ad sales and programmatic demand from Google's network. This is due to Google's "dynamic allocation" feature, which enables non-guaranteed demand to compete in real-time with guaranteed demand. Dynamic allocation automatically prioritizes between direct deals sold by the publisher and programmatic demand from Google when filling ad impressions, which can be a way for a publisher to maximize revenue but can also lead to pricing conflicts. Publishers using this GAM360 feature need to constantly monitor and adjust their pricing floors (the minimum price at which they are willing to sell their ad inventory) to attempt to optimize yield. If the floor price is set too high, some ad impressions will go unsold; if it is set too low, the publisher will be leaving potential revenue on the table.

Sometimes the programmatic bids from Google’s network may be more than the prices of direct deals sold, so GAM360’s dynamic allocation will likely fill the ad slot with the higher priced ad placement, which may ultimately hinder the publisher’s ability to fill their direct sold campaign. If programmatic demand is high, this can be a real problem. And while there are settings in GAM360 to control priorities between direct and programmatic, they can be challenging and complex to setup and manage effectively.

Conversely, when a publisher uses a first-party ad server without dynamic allocation, the yield management process is more straightforward. Fixed pricing can be set for different ad products or different segments of the publisher’s audience based on their understanding of the market and their advertisers. Unsold, or remnant ad inventory, can be sold programmatically, and the direct sold campaigns will be completely fulfilled. The publisher is spared the need to constantly adjust pricing floors based on market fluctuations or complex algorithmic predictions. Instead, they can focus on monitoring ad performance and advertiser preferences, using these insights to gradually refine ad pricing strategy.

With a first-party ad server, publishers have more discretion over, and can transparently see where and when their inventory is sold. They can prioritize certain advertisers or networks based on their own (not Google’s) criteria and strategic objectives. They also have better control over the quality of ads that appear on their media properties, to ensure they are “brand-safe” and align with their values and user experience. When they are not forced to rely on GAM360’s dynamic allocation, publishers can build more direct and trustful relationships with advertisers, leading to higher-quality ads, more repeat business, and potentially higher CPMs.

4.   Rely on Google or Yourself

With GAM360, publishers become extremely dependent on Google as their primary ad server and management solution.

As the Greek philosopher Heraclitus said, “Change is the only constant in life.” The digital ad ecosystem certainly demonstrates this, a swirling mix of evolving consumer privacy demands, the coming phase-out of third-party cookies, the explosion of AI, along with a regular stream of tech vendor investments, mergers, and divestments. Reliance on a single tech giant is a particularly risky strategy and the potential implications can be dire when (not if) changes occur in the future.

One such looming change is the potential fallout or resolution of an antitrust lawsuit filed by the U.S. Department of Justice against Google for, among other things, using its monopoly power in the online advertising market to stifle innovation and extract excessive profits from advertisers. In response to this case, there is a possibility that Google would divest its ad serving and management business to open the ad markets to more competition. In such a scenario, there may be a mad dash of publishers reliant on GAM360 to immediately find and switch to an alternate ad server solution.

Amid all the continual and potential changes within the advertising marketplace, first-party ad servers provide publishers with the technology and tools to best navigate the ecosystem, advance direct partnership with advertisers, optimize their business and be self-sufficient without the obvious the risk of sole source commitment. Publishers can customize their advertising operations to suit their unique needs, and they can adjust their ad inventory, formats, targeting strategies, and more to elevate ad performance.

Publishers using first-party servers often have more close and direct relationships with advertisers. This fosters better communication, trust, and long-term partnerships, which ultimately drive revenue. They are also not reliant on external ad platforms, which may change their policies, pricing, or services without notice. This independence can lead to more stable and predictable ad operations.

Publishers can better control their pricing strategies and have the freedom to experiment with different revenue models like private marketplaces or programmatic auctions. As the Roman Emperor Marcus Aurelius said, “Self-reliance, always. And cheerfulness.” The ability for publishers to quickly pivot, adapt and control their ad business destiny brings a feeling of comfort and confidence to their ad operations and revenue staffs.

The self-reliance provided by a first-party ad server equips publishers with the tools and autonomy to optimize their advertising business, navigate market changes, and maximize their revenue.

5.   Limited or Limitless Insights

While publishers can access and analyze data within GAM360, they have limited insights into the performance of their advertisers’ campaigns, which makes it difficult for publishers to optimize ad campaigns and improve their revenue.

The granular data or raw logs are not readily available in GAM360. Publishers can get access to aggregated data, which does not provide the most in-depth insights required for advanced analytics or audience segmentation. This limitation can impact their ability to understand user behavior at a deeper level and tailor their advertising business strategies accordingly. Also, aggregated data can be imprecise, as it is based on a sample of data, so the data a publisher receives from Google may not be representative of the entire population of users.

As mentioned, a first-party ad server solution gives publishers full control and ownership of their data, allowing them to see and work with it in an unaggregated form. This unaggregated data provides publishers with the level of granularity they need to make informed decisions about their advertising business, such as which ad units are performing well, which audiences are clicking on ads, and which devices are being used to view ads. This data is also much more accurate than aggregated data because it is based on the entire population of users, so it is more likely to be representative of the actual performance from the advertising campaigns.

Additionally, depending on the publisher’s first party ad server, this data can be reported in real-time, which allows publishers to better track the performance of their clients’ advertising campaigns and help them to adjust the campaigns as needed.

6.   Fit in the Box, or Think Outside the Box

To retain its dominant position in the digital advertising market, Google counts on publishers to fit into their box - adhering to the conventional advertising standards, specifications and formats required in GAM360. Creativity, customization, and the ability to produce new and innovative advertising products that may enhance user experiences are not part of GAM360, as standardization better scales and drives bigger profits for Google.

First-party ad servers give publishers the freedom and opportunity to think outside of the digital advertising “box,” to create, customize and test new ad products and offerings that are more relevant to their users, improve the customer experience, drive user loyalty, and increase revenue.

Conclusion

Ultimately, the decision for a publisher of whether to commit their ad business to GAM360 and its third-party ad server can depend on how they view data control and ownership, direct and programmatic ad sales strategy, self- versus vendor-reliance, the value of data insights, creating unique user experiences, and other considerations.

Publishers who take the longer-term view of the digital ad ecosystem, wish to set their media properties apart from the rest of the marketplace, and demand to own and control their ad business destiny need to think about investing in a leading-edge first-party ad server solution.