Advertising tiers explained

There’s a lot that goes into determining the dollar amount an ad is worth. We’ve gone over a few different aspects of cost attribution for ads on the blog, but the geographic location of your users might not be one you’ve considered. But before you get any further into this blog, check out our free downloadable whitepaper all about how user geos can affect the CPM of your ad inventory.

Let’s quickly investigate how location impacts the value of your ads. When an advertiser is looking to reach a particular audience, they’ll want to get the most bang for their buck when it comes to reach. They’ve already pinpointed the ideal audience for their product, the user most likely to be interested in or purchase what they’re selling. By setting out parameters like expendable income, language barriers, and more, advertisers are able to utilize budgets more effectively. This is why advertisers might pay more (or less) for ads to be shown to users in different countries. And those countries are handily categorized into different ‘tiers’, which we’ll break down for you below.

Tier 1

Tier 1 is typically made up of countries advertisers categorize as ‘most valuable.’ Advertisers with the largest available budget often come from Tier 1 countries themselves, and thus are looking to reach consumers close to home. As well, advertisers from Tier 2 countries are often looking to advertise to users within Tier 1 countries. This creates demand for the limited ad space, driving up the price even more.

Tier 1 countries are classified as countries that have English as the national language, or a large part of the population that speaks English. These countries often have among the highest GDP per capita and the most expendable income for individuals within the population. Some countries that are always classed as Tier 1 are Canada, the United States, and the UK.

Tier 2

Tier 2 countries are the midpoint between Tier 1 and Tier 3 (obviously). They often have comparable GDP per capita to Tier 1 countries, but have a national language that isn’t English. Oftentimes there is a large segment of the population that speaks English as a second language, so it can be a good option for advertisers looking to reach English-speaking users with comparable expendable income to Tier 1.

There’s less demand for advertisers to purchase inventory within Tier 2 countries, so often there’s more available inventory at a lower price than Tier 1 countries. For publishers, this means that you’ll see a lower CPM for inventory coming from Tier 2 users. A few countries that are typically classed as Tier 2 are Spain, France, Italy, or Japan.

Tier 3

Tier 3 countries have both the lowest GDP and the smallest segment of their overall population that speaks English. Advertisers within Tier 3 countries will spend money to reach their own countrymen, but you’ll likely not see ad spend from advertisers in Tier 1 and Tier 2 countries. Tier 3 prices are the lowest among the three tiers, as there’s low demand for the inventory. There’s the least competition for this inventory across the three Tiers. There’s also likely limited access to the Internet, or reduced speeds that make loading programmatic advertising not worthwhile.

Some Tier 3 countries include Nigeria, Cambodia, and Pakistan.

Now that you understand the basics of advertising Tiers in relation to your ad budget or your ad inventory, why don’t you download our User Geos eBook? It includes a sample Tier list and further breakdowns of the three Tiers.