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What is White Labeling and What Does It Mean for Business?

by admin

White label is a term that stands for prefabricated products, specifically software, that are issued under licenses by one company and sold to another company. Technically, it is very similar to franchising, with the difference that a white label implies rebranding that makes that software look as if it was developed by whoever sells it. But what does it mean for businesses? Building a brand is an intimidating process. Planning, developing, launching, standing out from the competition, and building a customer base takes a lot of time and effort. To streamline these processes, marketers came up with white label platforms. Let’s have a detailed look at how it all works.

What are white label products?

White label products are anything that is produced by third-party manufacturers and sold under a different brand . In this way, such products change logos to what is requested by a buyer in order to be later sold as their own development. Great examples of white labeling can be found on supermarket shelves: items of the “everyday value” type marked as store brands are often offered by supermarket chains.

The main advantage for manufacturers here comes from the ability to skip multiple phases between producing a product and earning profits for it. Ideally, one company explicitly focuses on production, while the other(s) deals with marketing and sales to final customers. This not only can shorten the journey to consumer shelves, but also is more financially efficient as businesses concentrate on what they do best, be it manufacturing, transportation, or marketing. It ultimately conserves both money and energy, especially for smaller companies.

What is white label branding?

The point of rebranding products under another brand’s name does not only have economical benefits but can also increase customer trust and loyalty. What does it mean for business growth? The white label model is a great opportunity for small businesses and startups that are yet to build their own strong brand name but which instead can already offer a high-quality and competitive product.

Proceeding with the WL model also does not require major capital investments even for IT products or services as the seller takes care of logistics, provides tech support (ideally), licensing, handles servers, and other operational expenses. Under white label, digital technologies can be deployed almost immediately and get a share of a buyer’s revenue in the form of commissions or loans.

How do white label platforms work in ad tech?

The meaning of white label is quite simple. The chain begins with the seller delivering a ready-to-use product for some company to use. For instance, let it be a digital advertising platform to be implemented into that company’s ecosystem. Then we proceed with ‘disguising’ that product by adding relevant branding, i.e. naming, unique UI/UX design, other key corporate identity details, etc.

It works the same way in the ad tech industry since software products can be sold and rebranded just like any physical product on a shelf. Just like in the case of supermarkets, some digital companies are unwilling to invest resources in developing their own software from the ground up. Instead, they can acquire a ready-made asset, adjust it here and there for custom needs, put a logo on it, and insert it into their product or service.

Some software solutions are delivered for a fixed monthly fee, some are sold with a single-purchase plan. One way or another, the buyer is regarded as the owner and has the right to manage it at will (with some regulations may be applied). The natural benefit of white labeled software is that its owner can have his/hers own domain, user interface, logo, and even customize functionality or add new features, given they have the skill for that. For instance, after purchasing a white label DSP (demand-side platform), buyers can normally edit its admin panel, including backend code, access publishers’ data, or insert API wherever they please.

What businesses are best suited for the white label model?

Large producers and mass merchandisers are the first to mention. Tesco, Walmart, Target, and Whole Foods, are the retailing giants that benefit from selling products from third-party manufacturers to cater to specific consumer groups making billions a year.

The same strategy is often used in the electronics industry. Similar to the big retail experience, companies like Samsung put their branding on cheap third-party devices to increase their product line and cover more market segments. White label products are not rare for PC brands as well.

The good thing about white labeling approach is that it is not only good for physical products. For instance, many banking systems include third-party processing in their credit card business. Or companies that don’t have their own banking operations, might want to issue custom-made cards to their clients or employees.

For the same reason, software solutions are generally well suited for WL business models. One of many possible examples is the advertising technology field, where buyers can acquire the whole ad exchanges, ad servers, and even demand-side or supply side-platforms. That gives buyers the way to build and manage their own partnership network where they can manually include or exclude participants, mediate traffic, and add their own monetization rules.

The benefits and disadvantages of the white label model

Just like with any other business model, there are vices and virtues.

Benefits:

  • What white labeling essentially does is it gives a blank sheet of paper to draw your brand upon. Instead of producing that piece of paper, cutting it precisely, reinventing all the other papermaking processes, and experiencing related errors, companies can acquire a ready-made product, put their branding on it, and start earning.
  • Another benefit of purchasing a WL brand comes from saving countless hours of work. Building a brand from scratch not only takes designing, drafting, recruiting, managing, developing, etc. In a world where time means money, white label marketing is a great way to fit into a strict budget.
  • The good thing about white labeling is that it allows teams to focus on their best competencies. Choosing this path can save companies from dealing with tasks outside of their usual area of responsibility and ultimately shield a business from related risks.
  • White labeling allows companies to quickly expand product offerings to target various customer groups to gain a competitive edge.
  • Despite the common misconception, WL brands can be just as good as brands built from scratch but also cheaper than main competitors. That gives an upper hand in a battle for customers’ attention.

Disadvantages:

  • Essentially, companies that sell their products via white label lose the opportunity to build and develop their own brand and push them to become a hostage to a buyer’s will because of tight contracts.
  • Big companies can dominate the market by acquiring smaller brands to ultimately destroy healthy competition and hinder new (or better) players from entering the market.
  • For buyers, purchasing a white label brand is always tied to the risk of getting a low-quality product which can damage a brand’s reputation. Finding a diligent contractor might become a huge headache and require constant control.

White label platforms in programmatic advertising

The WL model provides a great opportunity to acquire countless software solutions or services. In the programmatic advertising field, buyers can even have whole ready-made platforms like demand-side platforms (DSP), supply-side platforms (SSP), custom ad servers, and more to automate media buying/selling.

To enable programmatic ad purchasing or enrich its abilities, companies can purchase custom-built DSPs that feature smart bidding, CTR pacers, creative ad mediums support, and other digital tools. For instance, marketers might benefit from private invitation-based programmatic environments, where they can manually select advertisers and publishers they want to work with. This will lead to more relevant and brand-secure traffic as well as lower maintenance costs.

Business optimization professionals might benefit from white label platforms through the ability to segment user data. There can be lots of applications to this. For example, using behavioral targeting or look-alike modeling to improve media buying or plan future ad campaigns and ultimately expand customer acquisition effectiveness.

Key takeaways

  • WL products are manufactured and marketed by two or more different companies and are branded under a buyer’s license.
  • Large retailers and electronics manufacturers are the brightest examples of a successful WL business chain.
  • The WL model has both benefits and downsides that make it rather specific than a universal business tool.
  • The main benefits of the WL approach are time savings and cost efficiency.
  • The main downside comes from dependence on a buyer’s decision and contracts, which damages fair competition.
  • WL works great with both physical products and services.
  • AdTech companies can benefit from acquiring ad exchanges, ad servers, demand-side, and supply side-platforms through the ability to integrate custom partnership networks, manually include participants, mediate traffic, or add their own monetization rules.
  • White label DSPs and SSPs are among powerful digital marketing tools that can improve programmatic advertising for both publishers and advertisers.

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