A few weeks ago, a post on the OpenX blog announced the availability of a marketing white paper on “The Real Cost of Hosting an Ad Server“. This marketing paper aims to provide a comparison of the costs of owning and operating a self-hosted OpenX installation, the costs of self-hosting a copy of DART Enterprise and the costs of using a hosted account at OpenX Enterprise.
When I studied this marketing paper, I immediately noticed that the comparison doesn’t actually mention the real costs of using OpenX Enterprise. This is surprising. How can you compare two or three numbers without giving one of those numbers? The OpenX Enterprise product page on the OpenX.org website doesn’t provide any pricing information either. All it has is a form that people can use to contact the OpenX sales team.
Fortunately, I’ve received copies of several quotes provided by OpenX to potential customers of OpenX Enterprise. Let me outline the cost structure for OpenX Enterprise below:
- First of all, there is a one-time start-up fee of US$ 1,000.
- Next, there is a minimum monthly fee of US$ 1,200, for any volume of up to 50 million ad impressions per month.
- Finally, for volumes over 50 million impressions per month, there is a surcharge of US$ 17.50 per 1 million impressions.
What does this mean for publishers? I’ve done the math and calculated the total yearly costs of ad serving through OpenX Enterprise using a number of volume data points, and the resulting CPM (cost per mille). I’ve included the startup fee in the first year’s costs.
- 10 million impressions per month: US$ 15,400 for one year or US$ 0.128 CPM
- 25 million impressions per month: US$ 15,400 for one year or US$ 0.051 CPM
- 50 million impressions per month: US$ 15,400 for one year or US$ 0.026 CPM
- 100 million impressions per month: US$ 25,900 for one year or US$ 0.022 CPM
- 250 million impressions per month: US$ 57,400 for one year or US$ 0.019 CPM
I think it’s clear from these numbers that for any publisher with volumes below 50 million impressions per month, OpenX Enterprise is just too expensive. The CPM might in fact be higher than the gross margin on their ad sales, effectively producing a loss rather than a benefit from outsourcing the ad serving. Once you go over 100 million impressions per month, the CPM price becomes more realistic, but it’s still pretty high.
The only conclusion I can draw is that the OpenX company is not really interested in taking over the OpenX hosting of what they consider to be “small publishers” with volumes below 100 million ad impressions per month. They seem to be going after the “big fish”, which is perhaps understandable, because those customers would produce nice yearly revenues.
But what is left for the typical OpenX user, organizations and individuals that use OpenX to manage the ad serving for their niche websites or small publications? There is still the option of using “OpenX OnRamp”, which is the new name for what used to be called OpenX Community Hosted. OpenX OnRamp is a free service for volumes up to 50 million ad impressions per month. There is a significant downside, however, because OpenX OnRamp frequently suffers from performance issues, down time and lack of support. For any serious business, it is my opinion that OpenX OnRamp is not a realistic option.
The other option is to use “OpenX Source“, which is the new name for the downloadable source code of OpenX. People can put it on their own server, have their hosting company setup a dedicated server for it, or even outsource it to a specialized hosting firm. This option is completely ignored in the marketing paper. While it is true that this will force publishers to take care of their own OpenX hosting, the yearly costs when you have monthly volumes of 5 or 10 million ad impressions might actually be completely fine relative to your ad revenue and the out of pocket costs you can afford.
Update February 2013:
OpenX OnRamp, the free hosting service based on OpenX Source software, operated by OpenX, has been discontinued.
Update October 2013:
I received a copy of a recent quote for OpenX Enterprise hosting, and it shows that the ad serving fee for OpenX Enterprise has been increased significantly since I wrote this post in December 2010. There now appears to be a startup fee of $ 20,000 and for a volume of 500 million impressions per month the rate is set at $ 0.045 CPM. That’s about 2.5 times higher than before.