I've seen this chart ( but it doesn't make a lot of sense to someone completely new to the industry.

[Source: I founded isocket, a 'thought leader' ad tech startup]

Allow me to try and demystify that Luma Partners graph that you linked to. It's a great graph and Terry has done a good job building it, but it strikes fear into new people like you - and sometimes, like any data source, it can be twisted or misunderstood.

Many look at it and go "wow, that's such an overcrowded market!" but I like to point out that this is a $30B (domestic) industry, and that graph essentially covers all the pieces. I'm sure if you look at any other industry that big and drill down into all the vendors and OEMs and so on it would be even more crowded. Like autos - there are a few big car companies, but thousands of little vendors that make this bolt or that gasket.

It's all about the two main entities, the ones that matter - advertisers and publishers. Everything else is there to help those two groups. Advertisers, like Ford, buy advertising space from the publishers, like Yahoo Autos. So there are buyers and sellers.

These buyers and sellers used to get together, shake hands, and do a deal. But over time its gotten more complicated for each side, so companies pop up to start handling different pieces of it.

Any time you have a market of buyers and sellers doing business (stocks, widgets, whatever), you tend to see things like:
* Brokers to help connect people and do deals.
* Marketplaces where buyers and sellers can find each other.
* "Authority" type services that help a buyer investigate whether a seller is legit and vice versa.
* Vendors/suppliers that help you execute a deal.
* And so on.

For example, if you want to buy a banner ad on Yahoo, you have to make a banner ad. So there are companies that help you make great banner ads.

Then maybe you want to bid on the ad space on Yahoo so that you can get a competitive price, so you go to an ad exchange like Right Media (owned by Yahoo).

Let's say you call up a website and want to buy a banner ad on them. Even if you do everything else by hand (like send them a check by mail, etc) - how does the banner ad actually show up on their website? That's why ad servers were born. Ad servers manage all the different ad spaces and banner ads for a website, handles rotating the banners, turning the banner on and off on specific dates, tracking clicks, etc.

One of the newest buckets is "DSPs" - this is a new type of service that popped up a couple years ago when buyers wanted to do a new type of advertising (called Real Time Bidding). A customer had a need/pain, so a group of companies started to help them.

So each bucket in that Luma graph is a piece of the chain to help buyers and sellers do business. Some buckets are more important and arguably more lucrative/sustainable than others, but that's how it developed.

Answered 9 years ago

Unlock Startups Unlimited

Access 20,000+ Startup Experts, 650+ masterclass videos, 1,000+ in-depth guides, and all the software tools you need to launch and grow quickly.

Already a member? Sign in

Copyright © 2022 LLC. All rights reserved.