The real costs of OpenX Enterprise

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.

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About Erik Geurts

Erik Geurts is the world’s most experienced independent OpenX Source Specialist, offering support, training and consulting for OpenX Source Ad Server since 2004. He also develops plugins for OpenX Source and runs an advanced server platform for OpenX Source hosting.
Find out more about Erik Geurts on his profile page on Google+

Comments

  1. Stan Mushkin says:

    Why is OpenX comparing OpenX Enterprise to DART Enterprise. OpenX Enterprise is an ASP and DART Enterprise is self-hosted software for publishers running many billions of impressions a month. I think a more accurate picture would be to compare OpenX Enterprise to DoubleClick for Publishers Small Business which is free up to 90 million impressions a month. But I guess the OpenX marketing department doesn’t want to point this out. I hope publishers are smart enough to do the research and not be led down a wrong path by the lame comparison of OpenX Enterprise to DART Enterprise. This is like comparing a Yugo to a Rolls Royce. You get what you pay for.

    • Hi Stan,

      Thanks for your comment. I agree that it’s a rather peculiar comparison to make, but that’s what they decided to do. I think you’re right that the purpose of the marketing paper is to point readers towards the paid product OpenX Enterprise. Of course it’s the job of the marketing team at OpenX to promote their own offerings. As long as readers realize that they should at least investigate other options, that’s fine.

      I think a comparison between DoubleClick for Publishers (DfP) and OpenX Enterprise, and between DfP Small Business Edition and OpenX OnRamp would be the most accurate.

      The point I’m trying to make in my post is that OpenX Enterprise is in my view too expensive for smaller publishers with monthly volumes lower than 50 or 100 million impressions. And yes, those publishers should consider the alternatives which include DFP, OpenX OnRamp but definitely also running your own self-hosted copy of OpenX Source. And the other point might be that the white paper doesn’t even mention that a publisher could also outsource the hosting of their OpenX to a qualified hosting provider other than OpenX.org.

      Regards, Erik Geurts

    • Hi Stan, this is Alex Dean from Keplar – I actually co-wrote the TCO whitepaper with OpenX, so hopefully I can shed some light on our thinking.

      First and foremost, this was a comparison between the cost of hosting your own ad server versus using a hosted ad server – that’s why we were comparing an ASP like OpenX Enterprise to a downloaded product like DART Enterprise. This is a valid comparison to make: businesses want to know how the costs stack up between self-hosting a given product (ad server, email, source control etc) and going with the equivalent software-as-a-service provider.

      On the Yugo/Rolls Royce metaphor: OpenX Enterprise is a web-scale hosted publisher ad server (written in Erlang/Thrift/Cassandra/etc) – so the difference really is that DART Enterprise is a Rolls Royce you buy, while OpenX Enterprise is a Rolls Royce that you rent based on how many miles you travel.

      If you wanted to do a straight ASP (hosted) ad server comparison, then the most interesting comparisons would be Google DFP versus OpenX Enterprise, and Google DFP Small Business versus OpenX OnRamp. It makes sense to compare OpenX OnRamp and DFP Small Business because they are both free, self-service hosted ad servers, each with a usage cap (90m imps for DFP versus 100m currently for OnRamp).

      I hope this clears up the rationale behind the whitepaper!

  2. Hi Erik, Alex Dean from Keplar here again just adding my 2 cents as the whitepaper’s co-author. First off many thanks for taking the time to read through the whitepaper in detail and share your thoughts! The whole self-hosted versus SaaS debate is well-developed in other web software categories (email, source control, CRM, e-commerce etc), and it’s good to be now having that same discussion around ad serving.

    First off, what we tried to do in this whitepaper was compare the fully-loaded cost of running your own ad server versus going with a hosted solution such as OpenX Enterprise. Fully-loaded means that we tried to include all of the non-obvious/hidden costs such as technical support, CDN, server hosting etc. I didn’t understand in your blog post why you say that we don’t consider OpenX Source as an alternative to OpenX Enterprise – the first TCO comparison which we make (section 3.2 in the whitepaper) is explicitly between using OpenX Source and OpenX Enterprise, factoring in all of the costs for each.

    On the subject of OpenX Enterprise pricing: the pricing model is multi-tiered so rather than put in the detail, we simply calculated the typical costs at each impression volume and displayed that as a chart (see section 3.1). This allows publishers to figure out roughly how much they would be paying for OpenX Enterprise at a given impression volume, and they can compare that to going down the self-hosted route. The pricing model you received from your contacts is somewhat incomplete.

    Regarding smaller publishers – actually OpenX tells me that plenty of smaller (sub-50 million impressions) publishers are going with OpenX Enterprise. This is for a few reasons, including: 1) these publishers fully expect to grow to 100m+ impressions and don’t want to have to migrate/re-tag their sites when they get there, 2) they have globally distributed audiences and don’t want to go to the hassle of building a globally load-balanced ad server, and 3) they don’t want to manage the security risks of running their own ad server.

    If you have any other questions about the whitepaper, I’d be very happy to answer them here!

    • Hi Alex,

      Thanks for your comments. I remember meeting you once in the London UK office, a few years back when you still worked at OpenX. I didn’t realize you are still involved with OpenX marketing. Isn’t it ironic that the most active discussions regarding OpenX are between people not even working at OpenX anymore?

      I did not write that the marketing paper doesn’t consider OpenX Source. What I wanted to point out is that instead of just comparing with a “self-hosted” installation of OpenX – where the site owner installs and operates his own OpenX instance – the marketing paper completely ignores the option of having the OpenX installation hosted by a specialized and experienced hosting company. Site owners are well used to outsourcing the hosting of their site, their office automation, maybe even their CRM, and should also consider all available options for outsourcing the hosting of their ad server. In my experience, there are much less expensive and still very good alternatives to OpenX Enterprise, both for the smaller publisher below 50 million impressions per month and the larger publisher with much higher volumes.

      I still don’t understand why there is no mention on the OpenX website about the pricing model, even if it’s multi-tiered. If the model is too complicated for people to understand, than perhaps just making it simpler is the best option.

      You mentioned an important reason why people dislike OpenX OnRamp: if they ever outgrow the free tier (sub-50 million impressions per month), they will be forced to leave OnRamp. They could go to OpenX Enterprise, but at the cost of having to enter all of their inventory once again and the putting new invocation on their site(s). Too much hassle. Going with OpenX Enterprise while you’re still below 50 million impressions per month is simply too expensive. For example, if you have a nice site about a niche subject with 10 million ad impressions per month, the costs come in a US$ 0.128 CPM. So that’s not an option.

      Perhaps the best alternative then is to start with a self-hosted installation of OpenX Source, and install and configure it so that it’s easy to migrate the hosting of it to a specialized hosting provider. This would enable the user to continue running with with the same URL, with their own database with all inventory still in it and all statistics intact. Self-hosted doesn’t necessarily mean buying or renting a server either, nowadays we are blessed with so many choices for virtual servers. The benefits are obvious: no vendor lock-in, a reasonable pricing level at small and higher volumes, and you’re still in control.

      You mentioned that there is a security risk in running a self-hosted ad server. That is true, just like with any software. OpenX has been plagued with security problems in the last year. If ad revenue is an important element in a company’s books, then they should treat their ad server as a vital element of their corporate IT infrastructure. There are costs involved, obviously, but it doesn’t have to come in at the premium price of OpenX Enterprise. There are literally dozens of experienced OpenX consultants at all price levels, just have a look at the Consultants Directory but keep in mind that there might be an expert near by too.

      I’ve heard from many people that delayed the upgrade of their OpenX because they felt the upgrade procedure is too complicated. Perhaps this is something the OpenX developers could work on? Just look at the example of WordPress for simple upgrade processes. But even if it’s slightly complex, the OpenX upgrade procedure I’ve outline in an earlier blog post will take you trough the upgrade process step by step.