February 28, 2017 at 12:30Models for buying ads in traffic arbitration
- Tutorial
- Recovery mode
This is the eighth lesson of the basic course on mobile arbitration , in which you will receive a general set of knowledge about mobile arbitration, fundamental concepts and a set of tools that are necessary for any arbitrator, internet marketer or traffic manager.
Previous lessons:
In this lesson, we’ll discuss models for buying ads in traffic sources.
Let's talk about CPT, CPM, CPC, CPI. We consider in detail the concept of an advertising auction and its algorithms.
Presentation | Text decryption
In order to make the right decisions in attracting traffic, it is important to understand how the processes of purchasing advertising in traffic sources are arranged. We will analyze the main models for the purchase of advertising.
For traffic sources, selling ads is a way to make money. The main task for advertising platforms is to maximize effective CPM (eCPM) , the income from each thousand impressions of an advertisement.
The number of advertising impressions is limited, and the advertising platform seeks to earn the maximum amount of money from advertising inventory. An ad site cannot sell all ad impressions. To understand how many impressions the site actually sells, they use the concept of Fill Rate(the ratio of the actual number of impressions sold to the maximum possible).
Each site seeks to sell all possible advertising impressions and get a Fill Rate of 100%. If she doesn’t sell all possible impressions, the site offers cheaper traffic - in order to earn at least something. The ad network wants, on the one hand, to maximize CPM - the income from each thousand impressions, but on the other hand - to sell all the thousands of impressions that it has in its inventory.
Own advertising platforms also monitor the quality of the content that we place so as not to cause a negative for the user. To evaluate the quality of content, a Quality Score is introduced . The sites sell ads to those with a higher Quality Score.
MyTarget, Google AdWords and Facebook do just that: in addition to the price you pay per thousand impressions, they also take into account the quality of the content. When choosing between two advertisers, the sites look not only at how much they will earn from you, but also at the number of users who will be satisfied with the advertising content, and collectively take into account both factors.
Do not forget about the advertising policy of the sites: advertising of certain categories of goods is not allowed regardless of how much you are willing to pay for impressions.
If advertising platforms are not their own, but foreign ones, for example, Direct Traffic, or Mobile Display, not users may be dissatisfied, but users of those publishers who work with this advertising network. Accordingly, the publisher is dissatisfied with how the advertising network works with him.
Let's go back to advertising sales models. There are 4 models:
Let's talk about each model in more detail.
With this payment model, we redeem a whole fixed time for displaying our banner on the advertising platform. We provide the site with a 100% Fill rate: it sells to us all the impressions it has for a certain period of time. The platform sells impressions to us cheaper, since we buy them in bulk. In this case, the CPT purchase is cheaper than the CPM model. It’s more profitable for an advertiser to sell all impressions at once.
When working on CPT, we also get the risks that CPM or CPC will be expensive. We don’t know what kind of platform it is, how often the banner will be shown to users, will it bother them or not. It’s hard to test: you need to subscribe to certain volumes, and only after that we will receive CPM and understand whether it is profitable or not profitable to place ads on the site. The second minus: it is not always possible to quickly make changes, and sometimes it is completely impossible. If we place a banner for a week, during the week we cannot make changes and test various hypotheses, which banner works better or worse.
Another format for buying ads is the CPM model, when we pay for impressions. The advantage of this advertising format is that our goals are fully consistent with the goals of advertising platforms: traffic sources sell what they want to sell. It doesn’t matter to the sites what kind of results the impressions bring, whether they turn into clicks or are converted into orders. Traffic sources are guaranteed to receive the price that we offer. Due to this, the promotion of the advertisement is more stable and predictable. If this format pays off, working with it is easier than with CPC or CPI. You can always calculate the cost of a click that you get. Regardless of whether we buy using CPM or CPC, we can always take impressions, see how many clicks we received, divide one into another, and calculate how much the click cost us.
There is a formula for eCPC (effective CPC): eCPC = CPM / CTR / 10
Looking at the formula, we conclude: the higher our CTR, the cheaper our CPC will be.
For example:
If we pay 1000 rubles for 1000 impressions, and the banner CTR is 1%, then clicks cost us 100 rubles each.
If we pay the same 1000 rubles for 1000 impressions, and our clickthrough rate is 2%, then impressions will cost us 50 rubles each.
Accordingly, at the same price for the number of impressions, we get clicks 2 times cheaper. Hence the conclusion: the higher the CTR of the banner, the cheaper we get clicks. It’s more profitable for us to make banners with a higher CTR.
CPM works better on low-cost traffic: when paying by CPC there is a minimum bid that the site wants to receive per click. When traffic is cheap, having a high CTR, we can get clicks lower than this bar. We won’t go through CPC, because there is a minimum border. Also, when working on CPC, it is worth remembering such a concept as Frequency cap - the frequency of the banner showing to the same user. If we show the same banner to the user several times, the CTR drops, the CPC grows. And there are platforms that allow us to select the Frequency cap and, for example, show each banner only once to the user per day or per week. There are sites that do not allow this, and the cost of CPM depends on it.
The next model for buying ads is CPC. Using this format, we pay per click, cost per click. When working with this ad format, it’s worth remembering that we pay for the clicks that the ad network considers us. There will always be a discrepancy between the clicks that we actually get and the clicks that the ad network has calculated. Part of the clicks falls off until the moment our page loads, part of the clicks comes from users who the advertising network did not count for us, because they were not unique. When calculating cost per click and eCPM, it’s worth using the clicks that you actually received, and not those that the ad network shows you. Discrepancies can be large.
The CPC format is good because you pay for real actions and real users. When buying the CPM format, you may not get a click and don’t understand if your advertising approach worked at all. You cannot test the offer itself. When we buy CPC, we are guaranteed to get a click, in this regard, the format is convenient, because we can calculate and be guaranteed to receive impressions.
Accordingly, if the test requires 1000 clicks, we can buy 1000 clicks, we know how much we will pay per click, we can predict the budget for the tests. With CPM, this is hard to do. Therefore, it’s easier to start the tests with the CPC format, and then, when we already see the CTR, we can calculate how much CPM actually costs us and understand whether it is profitable for us to work on CPM or CPC. When we pay for clicks, we can count in the opposite direction and understand how much each thousand impressions cost us. In this case, it is worthwhile to understand that the site is profitable to sell impressions. We pay for clicks, and the site takes payment from us for every thousand impressions, and the more effective CPM we get, the more profitable the site is to show our ads than other competitors. We recalculate eCPM using the following formula:eCPM = CPC * CTR * 10
We draw conclusions: the higher our CTR, the higher CPM.
With equal cost per click, an advertising site is more profitable to show a banner with a large CTR. If there are two advertisers who pay 1 ruble for 1 click, but one has a CTR of 1% and the other has a 2%, then on a banner with a CTR of 2%, the advertising platform will earn 2 times more.
The reverse is also true: if there is a banner with a clickthrough rate of 2%, but we pay 50 cents per click, then it will appear in the same way as a banner that pays 1 ruble per click, but it has a clickthrough rate of 1%.
By increasing the CTR, we lower the cost of the click for ourselves and get the same number of impressions, or we get more impressions from the traffic source.
We can influence the CTR: draw a creative that will have a larger CTR because users want to click on it. We can choose the right targeting and show creative aimed at a specific audience. For example, on moms from 25 to 35 years old or on men with the name Denis, and show a banner where “Denis” will be written. As a result, the CTR will be higher, we will get clicks cheaper, although we will pay the same amount for CPM. The CPM format on low-cost traffic is often more expensive. Usually there is some kind of threshold, and you simply cannot buy clicks for less than one cent. Although buying on CPM, with a high CTR of 10-15%, you get clicks cheaper.
When working on the CPM format, the sites themselves try to maximize the CTR. They will show the banner to those users who are more likely to click on it. For the same reason: it’s more profitable for sites to show banner ads to users who click, since sites in this case will earn more. On large traffic sources, Facebook, AdWords, MyTarget, special algorithms are included that select the audience and show your banner to those users who are more likely to want to click on it.
This is the advantage of the CPC format over CPM: when we work on CPM, the site is all the same, we already paid for advertising impressions. Accordingly, smart advertising platform algorithms will not work, although they are effective. For example, Facebook knows that we like and comment. If we comment and like posts about cars, then the advertiser, having shown an advertisement about cars to us, will receive a click, and Facebook will earn. We lose this algorithm if we buy ads using the CPM format. If we compare the same ad for CPM and CPC, the CTR falls because the site does not help to make the CTR high.
The latest ad purchase model is the CPI format. Sometimes there is a CPA when we pay for an action. The platform in this case optimizes impressions and clicks in the installation, it has data about users, and it can predict: show ads to users who are more likely to download the application.
Usually this format looks attractive, but in practice it does not work so well. The site is not ready to take risks: there is a chance that it will not be able to optimize impressions and clicks on installs with a good conversion.
If you use the methods of mobile arbitration: the right creatives and targeting, it’s cheaper to make the installation by buying ads in CPC or CPM format.
But the CPI format still works if the site has certain tools. For example, Facebook has a look a like audience. If we provide data about our users: 5,000 people who made purchases last month in our application, Facebook will build an audience that is similar to these 5,000 people, which will allow us to bring cheap CPI. In this case, the CPI format works better than the CPC and CPM formats.
Talk about effective CPM / effective CPC. When you buy an ad, you consider how much the click costs and how much the display costs. It always needs to be done. If you buy CPM, then consider how much a thousand impressions cost. If you buy CPC, then consider how much the click costs. And compare these formats with each other. This allows you to make the right decisions and understand why you are now getting more traffic or less, why your banner is not showing at a high bid.
Regardless of what you buy - clicks or impressions, always count clicks into impressions and impressions into clicks. We know how much money we spent, how many impressions and clicks we received, we can always divide one into another and understand how much a click cost and how much a display cost. Even if we paid only for impressions or only for clicks. This knowledge helps make the right decisions. As already discussed before: when the CTR grows, we get a click cheaper, and it’s more profitable for the site to show our banner if we do not change the bid.
When you place a bet, regardless of which advertising model, remember that you do not have to pay exactly the amount of money you bet. There is an advertising auction. Many advertisers participate in it, and everyone bets on an ad display.
There is competition between you, and the final bid for an impression, click or install will depend on many indicators: the model of an advertising auction, the minimum allowable bids, and competitor bids.
Consider several different types of advertising auctions.
Classic, basic, on which most advertising networks and platforms are built - closed auction of the second price. Imagine all advertisers bidding for impressions. Each advertiser says how much he is willing to pay for a particular user, per impression, or per click. All these bets are collected and sorted: who is willing to pay more, who is less. The advertiser who is willing to pay a large bid wins. He receives the right to display advertising, or click, but at the same time he does not pay his bid, but pays the second bid shown by the advertiser following him.
If we have several places where to show ads in the advertising auction, on the site, the first place is given to the first advertiser, he pays the price of the second advertiser, the second place goes to the second advertiser, and he pays the price of the third, etc. Closed auction of the second price is used on most advertising sites.
Main advantages:
There are also negative points:
It often turns out that you do not need to win the auction, but you need to win second or third place.
Take the Yandex.Direct auction. The optimal strategy is to be in specials. placement. When users enter a search query, advertising results are displayed - three places above. The biggest bet is for the first place in the special. placement, but being in second or third place, you will receive about the same number of impressions, but cheaper.
There are alternatives to this ad auction; the second popular auction is a VCG auction.
There is another feature in this auction - the more clicks you get, the more you pay. This type of auction takes into account that different banners have different CTR and give different number of clicks. An advertising platform receives more money from those advertisers who received more clicks, regardless of which slot they won.
The layout of this auction is not clear to advertisers. If in the previous auction the advertiser paid the bid that the next one placed in the line, then this is not the case. You pay for those clicks that competitors do not receive in the advertising auction if you were not there. It is difficult to understand and explain, and this is the main disadvantage of the auction.
This type of auction provokes advertisers to set true bids. If a click costs 3 rubles, it’s advantageous to bet exactly 3 rubles, you will receive the optimal number of clicks at this rate, and the result will be maximum when the rate is 3 rubles. At a lower bid, for example, 2 rubles, you will either receive less clicks or receive worse quality clicks.
Facebook works according to this model, Yandex started working according to this model. This model is gaining popularity now. It’s difficult to work with, but you need to understand that such an advertising auction exists.
We examined the methods of buying advertising, discussed advertising auctions.
The next lesson will be the final, in which we will talk about the tools that you will need for arbitration: software, books, blogs. We will discuss the expectations and reality that an arbitrageur faces in real life.
You can ask any questions about arbitration in the comments or in our VKontakte group .
Previous lessons:
- What is arbitration?
- Market participants
- Basic metrics and concepts
- Offers and verticals
- Affiliate networks
- Traffic sources
- Conversion and Payout Types
In this lesson, we’ll discuss models for buying ads in traffic sources.
Let's talk about CPT, CPM, CPC, CPI. We consider in detail the concept of an advertising auction and its algorithms.
Presentation | Text decryption
In order to make the right decisions in attracting traffic, it is important to understand how the processes of purchasing advertising in traffic sources are arranged. We will analyze the main models for the purchase of advertising.
For traffic sources, selling ads is a way to make money. The main task for advertising platforms is to maximize effective CPM (eCPM) , the income from each thousand impressions of an advertisement.
The number of advertising impressions is limited, and the advertising platform seeks to earn the maximum amount of money from advertising inventory. An ad site cannot sell all ad impressions. To understand how many impressions the site actually sells, they use the concept of Fill Rate(the ratio of the actual number of impressions sold to the maximum possible).
Each site seeks to sell all possible advertising impressions and get a Fill Rate of 100%. If she doesn’t sell all possible impressions, the site offers cheaper traffic - in order to earn at least something. The ad network wants, on the one hand, to maximize CPM - the income from each thousand impressions, but on the other hand - to sell all the thousands of impressions that it has in its inventory.
Own advertising platforms also monitor the quality of the content that we place so as not to cause a negative for the user. To evaluate the quality of content, a Quality Score is introduced . The sites sell ads to those with a higher Quality Score.
MyTarget, Google AdWords and Facebook do just that: in addition to the price you pay per thousand impressions, they also take into account the quality of the content. When choosing between two advertisers, the sites look not only at how much they will earn from you, but also at the number of users who will be satisfied with the advertising content, and collectively take into account both factors.
Do not forget about the advertising policy of the sites: advertising of certain categories of goods is not allowed regardless of how much you are willing to pay for impressions.
If advertising platforms are not their own, but foreign ones, for example, Direct Traffic, or Mobile Display, not users may be dissatisfied, but users of those publishers who work with this advertising network. Accordingly, the publisher is dissatisfied with how the advertising network works with him.
Advertising Procurement Models
Let's go back to advertising sales models. There are 4 models:
- CPT - we buy a fixed period of time in which our banner will be displayed on the site;
- CPM - buy ad impressions;
- CPC - pay for clicks on an ad;
- CPI / CPA - pay for actions.
Let's talk about each model in more detail.
CPT
With this payment model, we redeem a whole fixed time for displaying our banner on the advertising platform. We provide the site with a 100% Fill rate: it sells to us all the impressions it has for a certain period of time. The platform sells impressions to us cheaper, since we buy them in bulk. In this case, the CPT purchase is cheaper than the CPM model. It’s more profitable for an advertiser to sell all impressions at once.
When working on CPT, we also get the risks that CPM or CPC will be expensive. We don’t know what kind of platform it is, how often the banner will be shown to users, will it bother them or not. It’s hard to test: you need to subscribe to certain volumes, and only after that we will receive CPM and understand whether it is profitable or not profitable to place ads on the site. The second minus: it is not always possible to quickly make changes, and sometimes it is completely impossible. If we place a banner for a week, during the week we cannot make changes and test various hypotheses, which banner works better or worse.
CPM
Another format for buying ads is the CPM model, when we pay for impressions. The advantage of this advertising format is that our goals are fully consistent with the goals of advertising platforms: traffic sources sell what they want to sell. It doesn’t matter to the sites what kind of results the impressions bring, whether they turn into clicks or are converted into orders. Traffic sources are guaranteed to receive the price that we offer. Due to this, the promotion of the advertisement is more stable and predictable. If this format pays off, working with it is easier than with CPC or CPI. You can always calculate the cost of a click that you get. Regardless of whether we buy using CPM or CPC, we can always take impressions, see how many clicks we received, divide one into another, and calculate how much the click cost us.
There is a formula for eCPC (effective CPC): eCPC = CPM / CTR / 10
Looking at the formula, we conclude: the higher our CTR, the cheaper our CPC will be.
For example:
If we pay 1000 rubles for 1000 impressions, and the banner CTR is 1%, then clicks cost us 100 rubles each.
If we pay the same 1000 rubles for 1000 impressions, and our clickthrough rate is 2%, then impressions will cost us 50 rubles each.
Accordingly, at the same price for the number of impressions, we get clicks 2 times cheaper. Hence the conclusion: the higher the CTR of the banner, the cheaper we get clicks. It’s more profitable for us to make banners with a higher CTR.
CPM works better on low-cost traffic: when paying by CPC there is a minimum bid that the site wants to receive per click. When traffic is cheap, having a high CTR, we can get clicks lower than this bar. We won’t go through CPC, because there is a minimum border. Also, when working on CPC, it is worth remembering such a concept as Frequency cap - the frequency of the banner showing to the same user. If we show the same banner to the user several times, the CTR drops, the CPC grows. And there are platforms that allow us to select the Frequency cap and, for example, show each banner only once to the user per day or per week. There are sites that do not allow this, and the cost of CPM depends on it.
CPC
The next model for buying ads is CPC. Using this format, we pay per click, cost per click. When working with this ad format, it’s worth remembering that we pay for the clicks that the ad network considers us. There will always be a discrepancy between the clicks that we actually get and the clicks that the ad network has calculated. Part of the clicks falls off until the moment our page loads, part of the clicks comes from users who the advertising network did not count for us, because they were not unique. When calculating cost per click and eCPM, it’s worth using the clicks that you actually received, and not those that the ad network shows you. Discrepancies can be large.
The CPC format is good because you pay for real actions and real users. When buying the CPM format, you may not get a click and don’t understand if your advertising approach worked at all. You cannot test the offer itself. When we buy CPC, we are guaranteed to get a click, in this regard, the format is convenient, because we can calculate and be guaranteed to receive impressions.
Accordingly, if the test requires 1000 clicks, we can buy 1000 clicks, we know how much we will pay per click, we can predict the budget for the tests. With CPM, this is hard to do. Therefore, it’s easier to start the tests with the CPC format, and then, when we already see the CTR, we can calculate how much CPM actually costs us and understand whether it is profitable for us to work on CPM or CPC. When we pay for clicks, we can count in the opposite direction and understand how much each thousand impressions cost us. In this case, it is worthwhile to understand that the site is profitable to sell impressions. We pay for clicks, and the site takes payment from us for every thousand impressions, and the more effective CPM we get, the more profitable the site is to show our ads than other competitors. We recalculate eCPM using the following formula:eCPM = CPC * CTR * 10
We draw conclusions: the higher our CTR, the higher CPM.
With equal cost per click, an advertising site is more profitable to show a banner with a large CTR. If there are two advertisers who pay 1 ruble for 1 click, but one has a CTR of 1% and the other has a 2%, then on a banner with a CTR of 2%, the advertising platform will earn 2 times more.
The reverse is also true: if there is a banner with a clickthrough rate of 2%, but we pay 50 cents per click, then it will appear in the same way as a banner that pays 1 ruble per click, but it has a clickthrough rate of 1%.
By increasing the CTR, we lower the cost of the click for ourselves and get the same number of impressions, or we get more impressions from the traffic source.
We can influence the CTR: draw a creative that will have a larger CTR because users want to click on it. We can choose the right targeting and show creative aimed at a specific audience. For example, on moms from 25 to 35 years old or on men with the name Denis, and show a banner where “Denis” will be written. As a result, the CTR will be higher, we will get clicks cheaper, although we will pay the same amount for CPM. The CPM format on low-cost traffic is often more expensive. Usually there is some kind of threshold, and you simply cannot buy clicks for less than one cent. Although buying on CPM, with a high CTR of 10-15%, you get clicks cheaper.
When working on the CPM format, the sites themselves try to maximize the CTR. They will show the banner to those users who are more likely to click on it. For the same reason: it’s more profitable for sites to show banner ads to users who click, since sites in this case will earn more. On large traffic sources, Facebook, AdWords, MyTarget, special algorithms are included that select the audience and show your banner to those users who are more likely to want to click on it.
This is the advantage of the CPC format over CPM: when we work on CPM, the site is all the same, we already paid for advertising impressions. Accordingly, smart advertising platform algorithms will not work, although they are effective. For example, Facebook knows that we like and comment. If we comment and like posts about cars, then the advertiser, having shown an advertisement about cars to us, will receive a click, and Facebook will earn. We lose this algorithm if we buy ads using the CPM format. If we compare the same ad for CPM and CPC, the CTR falls because the site does not help to make the CTR high.
CPI
The latest ad purchase model is the CPI format. Sometimes there is a CPA when we pay for an action. The platform in this case optimizes impressions and clicks in the installation, it has data about users, and it can predict: show ads to users who are more likely to download the application.
Usually this format looks attractive, but in practice it does not work so well. The site is not ready to take risks: there is a chance that it will not be able to optimize impressions and clicks on installs with a good conversion.
If you use the methods of mobile arbitration: the right creatives and targeting, it’s cheaper to make the installation by buying ads in CPC or CPM format.
But the CPI format still works if the site has certain tools. For example, Facebook has a look a like audience. If we provide data about our users: 5,000 people who made purchases last month in our application, Facebook will build an audience that is similar to these 5,000 people, which will allow us to bring cheap CPI. In this case, the CPI format works better than the CPC and CPM formats.
Effective CPM / Effective CPC
Talk about effective CPM / effective CPC. When you buy an ad, you consider how much the click costs and how much the display costs. It always needs to be done. If you buy CPM, then consider how much a thousand impressions cost. If you buy CPC, then consider how much the click costs. And compare these formats with each other. This allows you to make the right decisions and understand why you are now getting more traffic or less, why your banner is not showing at a high bid.
Regardless of what you buy - clicks or impressions, always count clicks into impressions and impressions into clicks. We know how much money we spent, how many impressions and clicks we received, we can always divide one into another and understand how much a click cost and how much a display cost. Even if we paid only for impressions or only for clicks. This knowledge helps make the right decisions. As already discussed before: when the CTR grows, we get a click cheaper, and it’s more profitable for the site to show our banner if we do not change the bid.
Advertising auction
When you place a bet, regardless of which advertising model, remember that you do not have to pay exactly the amount of money you bet. There is an advertising auction. Many advertisers participate in it, and everyone bets on an ad display.
There is competition between you, and the final bid for an impression, click or install will depend on many indicators: the model of an advertising auction, the minimum allowable bids, and competitor bids.
Consider several different types of advertising auctions.
Classic, basic, on which most advertising networks and platforms are built - closed auction of the second price. Imagine all advertisers bidding for impressions. Each advertiser says how much he is willing to pay for a particular user, per impression, or per click. All these bets are collected and sorted: who is willing to pay more, who is less. The advertiser who is willing to pay a large bid wins. He receives the right to display advertising, or click, but at the same time he does not pay his bid, but pays the second bid shown by the advertiser following him.
If we have several places where to show ads in the advertising auction, on the site, the first place is given to the first advertiser, he pays the price of the second advertiser, the second place goes to the second advertiser, and he pays the price of the third, etc. Closed auction of the second price is used on most advertising sites.
Main advantages:
- It’s clear for advertisers: why and for what you pay so much.
- It’s easy to enter a quality score and sort advertisers not only by bids, but, for example, by bids multiplied by the quality factor. It is easy to take into account that the show will be given not only to those who are willing to pay more, but also to those whose advertising quality is better.
- Easily calculate your auction position. Going through bids, you understand what bids are participating in the auction, what bid is placed by the second advertiser, what bid is set by the third advertiser.
There are also negative points:
- There is support and overheating of the auction when players begin to raise bids in order to raise your bid and knock you out of the auction.
Advertisers do not set “true prices.” Each advertiser has a true cost-per-click: how much he is willing to pay per click. Closed auction of the second price does not force advertisers to place such bids, it forces them to bid lower. This is a plus for advertisers, a minus for an advertising platform, since it earns less money from advertisers than it could earn. - It does not take into account that there are different ad slots. The site sells several banners in various positions. These banners will have a different CTR, and advertisers will receive a different number of clicks from different banners. This auction does not take into account. As a result, the winner receives the first banner and pays the highest price for it, and the second participant receives the second banner and pays less for it, but at the same time, the second banner gives as many impressions as the first. This is a disadvantage of the auction.
It often turns out that you do not need to win the auction, but you need to win second or third place.
Take the Yandex.Direct auction. The optimal strategy is to be in specials. placement. When users enter a search query, advertising results are displayed - three places above. The biggest bet is for the first place in the special. placement, but being in second or third place, you will receive about the same number of impressions, but cheaper.
There are alternatives to this ad auction; the second popular auction is a VCG auction.
VCG auction
There is another feature in this auction - the more clicks you get, the more you pay. This type of auction takes into account that different banners have different CTR and give different number of clicks. An advertising platform receives more money from those advertisers who received more clicks, regardless of which slot they won.
The layout of this auction is not clear to advertisers. If in the previous auction the advertiser paid the bid that the next one placed in the line, then this is not the case. You pay for those clicks that competitors do not receive in the advertising auction if you were not there. It is difficult to understand and explain, and this is the main disadvantage of the auction.
This type of auction provokes advertisers to set true bids. If a click costs 3 rubles, it’s advantageous to bet exactly 3 rubles, you will receive the optimal number of clicks at this rate, and the result will be maximum when the rate is 3 rubles. At a lower bid, for example, 2 rubles, you will either receive less clicks or receive worse quality clicks.
Facebook works according to this model, Yandex started working according to this model. This model is gaining popularity now. It’s difficult to work with, but you need to understand that such an advertising auction exists.
Conclusion
We examined the methods of buying advertising, discussed advertising auctions.
The next lesson will be the final, in which we will talk about the tools that you will need for arbitration: software, books, blogs. We will discuss the expectations and reality that an arbitrageur faces in real life.
You can ask any questions about arbitration in the comments or in our VKontakte group .