AD TECH INSIGHTS
by Roman Vrublivskyi
Posted on Jan 9, 2024
White Label vs Private Label: What to Choose?
by Roman Vrublivskyi
by Roman Vrublivskyi
For those embarking on their journey in the ad tech market without proprietary advertising technology or a dedicated team, choosing between various business models can be a challenging task.
When deciding between white-label and private label options, one must take into account their own resources, business strategy, and the goals one aims to achieve. In this article, we will delve into the pros and cons of these popular business models — white-label vs private label — and provide guidance on choosing the most suitable option for each specific case. Plus, we’ll discover the best way to build your own ad exchange and demonstrate why SmartHub can be the best solution for this.
Let’s start off with defining both models and then proceed to their core differences.
So, let’s turn to the white label meaning. White-label is a type of partnership where one company manufactures goods or IT products or provides services, and another sells them under its own brand.
How it works?
Company A is involved in producing a particular product or providing services. This could range from food and beverages to electronics, software, or hosting services. Company B purchases the fully packaged product from Company A, brands it with its own name and sells it.
In our case, the ‘product’ is an ad exchange that is typically manufactured by one big tech vendor and then rented or purchased by a smaller company or startup.
In this arrangement, Company B saves resources by not having to build everything from the ground up. Company A, meanwhile, gets additional perks as such a collaboration becomes an additional source of income for the manufacturer.
Private Label is a brand owned by a company that is not directly involved in the production of goods bearing that brand. Companies that utilize private label manufacturing services include trading companies, manufacturing companies diversifying their market offerings by selling products, and non-network retailers interested in reducing the cost of certain goods.
How it works. Products under a private label are manufactured by a producer but belong to the client – the owner of the private label.
This model implies that the original product can be modified or developed absolutely from scratch and then adjusted to the specifications of the client. Then, it is bought from the online store. This is the most common model that is used in commerce.
The category of private label products includes items both under the original brand of the retail organization and those with a different name but exclusively available within the product range of that organization.
For instance, a retailer might opt for a private label product to present a comparable style of clothing at a more affordable price compared to other renowned apparel brands. In this scenario, pricing serves as a pivotal factor, enabling the retailer to gain popularity over competitors by offering a similar product aesthetic at a more budget-friendly cost.
The terms “white-label” and “private label” are often used interchangeably. However, the difference between them lies in who determines the content of the product or service.
With white-label, the manufacturer fully determines the composition, specifications, and packaging, while the client only specifies the branding on the product. The manufacturer may release the same product under their own brand or under other trade names.
On the other hand, a private label is fully developed by the client, taking into account the manufacturer’s capabilities or based on the specifications provided by the client.
If there might be a white-label vs private label dilemma in ad tech, with private label, everything is almost always pretty straightforward – this model is frequently used in retail and eCommerce.
What is the difference between white label and private label?
The terms “white-label” and “private label” are often used interchangeably. However, the difference between them lies in who determines the content of the product or service.
With white-label, the manufacturer fully determines the composition, specifications, and packaging, while the client only specifies the branding on the product. The manufacturer may release the same product under their own brand or under other trade names.
On the other hand, a private label is fully developed by the client, taking into account the manufacturer’s capabilities or based on the specifications provided by the client.
If there might be a white-label vs private label dilemma in ad tech, with private label, everything is almost always pretty straightforward – this model is frequently used in retail and eCommerce.
Now, as we’ve already understood the essence of both models from the above-placed descriptions, it’s time to proceed to more in-depth consideration to distinguish between them. Let’s fully plunge into such a comparison.
So, white vs private label ready for a challenge; let’s see their peculiar features.
The products created based on the WL model are more widely spread in the market, as they are sold by multiple retailers. Due to their prevalence, such products can be priced lower for consumers compared to private label ones. To sell WL products to retailers, sellers must carefully plan their marketing strategy, as similar products are sold by multiple companies.
According to Amazon, you should invest significant funds in the production of a private label product and further promotion. For example, on average, Amazon sellers spend $2,500 or more on launching private label products, whereas a standard WL product’s cost may start from $1,000 (depending on the product, provider, and additional custom features).
With the WL model, the brand or logo of the manufacturer is removed from the final platform or product, and instead, the buyer’s mark is applied. A private label vendor can produce a unique version of what white-label is capable. A retailer using this concept will normally turn to a third party to create a product that will differ in appearance or characteristics from similar goods.
With this, it is worth remembering that a lot will depend on the particular vendor that you collaborate with. Among WL professionals, many offer quick-to-deploy standard solutions. However, some of those vendors, like SmartHub, can offer a lot of customizations, including non-standard integrations, further ad platform scaling, and feature development.
White label products enter the market faster because sellers only need to attach their own brand to them, and they are ready to go – all set, fully working, and prepared. The entry of white label products into the market is faster also because retail sellers already have all the necessary licenses for sale, whereas selling products with private labeling may take time. In the case of software or ad tech platforms, it is especially valuable.
Let’s look at some white-label and private label examples. In the case of white-label, companies often sell software platforms like SSP, DSP, or ad exchange, as well as martech platforms like CRM or social media management platforms. Although WL can also span cosmetics and electronics, the tech specialization of this model is more prevalent.
On the contrary, private label is usually applied for food products, household chemicals, clothing, and accessories.
The development and production of products under the private label model are generally more expensive for the seller because the products are unique. For this reason, the higher the seller’s expenses, the higher the cost of the finished result.
It is a common practice for retail sellers to modify the characteristics of private label products to make them more competitive.
Let’s review another differentiation between white-label vs private label products – scalability. Private label in the technology niche is technically a completely unique product that fully and entirely belongs to its owner. Because of this, the owner is also responsible for growing and developing technology.
Yes, in the WL model, the owner is also in charge of solution scaling when the business grows out of current capacities. However, WL platform owners face fewer technical challenges as, normally, WL providers already have a working path for migration to bigger capacities. For example, SmartHub white label ad exchange offers an easy transition to bigger QPS plans without affecting platform functioning or requiring terminations in the operation cycle.
Interestingly enough, when we talk about Western Europe, we can see that businesses are more willing to work with private label as they might be more familiar with this concept. This concept is embraced by 40% of local businesses in Europe. For comparison, in the US, this number only reaches 19.5%.
While there are no available statistics for private label vs white-label comparison, the ever-increasing demand for apps in certain industry niches (e.g., banking) has given rise to unprecedented growth. For instance, the White-Label ATM market is a multimillion-dollar industry with a huge growing CAGR (2022-2023), which applies to such regions as Northern America, Southern America, the Middle East, and Europe.
As we’ve reviewed the core distinction between those two models, it’s time to focus our attention on the precise benefits of each. Let’s start with 3 very important WL tech benefits.
Those who get a prebuilt WL product do not need to “inject” extra budgets into the initial stages of release and support or pay for the work of additional specialists. The vendor can offer a new type of service in a short time, thereby quickly increasing competitiveness in the market. The development and testing period for a new product with WL is 2-5 times shorter than developing a solution from scratch.
Typically, companies implementing WL solutions offer flexible pricing and discounts. This depends on the extent of customization required. Individually crafted products will always require more planning, time, and resources. Thus, it will also require more funds. In the WL model, those are optimized to save the client time and money.
Digital advertisers and publishers often develop their own WL SSP or DSP because of the easy scalability of the white label advertising business model. Basically, the whole platform is being constantly updated and improved in the background. The platform owner doesn’t have to meddle with the technical side of the business. The scalability of the solution is also entirely the vendor’s task, so you can be sure that this process is also streamlined to the maximum.
Now, let’s review private labeling vs white-label advantages one by one.
With a private label model, you own the brand and the product. This is the main advantage of private labeling. If your business with this model is successful, you can sell it as well, along with a platform.
You develop a unique product according to your own individual plan with this model, meaning that you open the chance to better suit it to the individual needs of your clientele. With your own product vision in mind, it is advised to opt for a private label as this way, you will ensure a customer experience that matches yours.
A product under a private label is a trademark, and its rights belong to you. Therefore, other solution providers or trademark owners cannot sell such products as you. As a result, you remain in a virtually competition-free zone. This means that you can set a higher price, and the profit margin in this business can also be potentially higher.
| Comparison criteria | White-label | Private label |
| Uniqueness & ownership | Made for several suppliers | Made exclusively for one supplier. Fully belongs to the owner |
| Pricing | Starts from $1,000 | Starts from $2,500 |
| Speed of market entry | Within 7 days (or more with customizations) | From one month (personal development is always longer) |
| Niche | IT, ad tech | Food products, household chemicals, clothing, and accessories. In some cases, tech |
| Scalability | Scaled by vendor | Scaled by your team |
| Development costs | Standard (+ can range depending on additional features) | Individual (more customizations will translate into higher costs) |
Ad exchanges are quite complex technological platforms, the construction and launch of which are, to put it mildly, neither quick nor cheap. However, programmatic purchases today account for approximately 70% of all known types of purchases, making the launch of a platform in this niche incredibly attractive.
Both methods considered today can significantly simplify the life of an entrepreneur who wants to open their own platform. At the same time, it is important to know which determining factors to take into account.
Do you have the essential resources and budget to set up a unique platform? Is it important to you that it is unique? If both answers are yes, then your choice is a private label. If your resources and budget are limited, you can get a working platform with white-label.
If you plan to sell your platform one day or modify it? If yes, then private label can suit you better. WL platform is labeled as your own, too, but the technology itself is provided by another party.
Do you need to enter the market ASAP? If so, your solution is white-label. Private label products are created according to the individual vision and plan, which requires more time. Plus, such a product will require licensing, and the WL platform is a licensed and risk-free option.
Do you plan to scale and grow the platform? If yes, it will be easier with the WL platform provider. With a private label, it will be performed by your team.
In a nutshell, in the ad tech market, white-label is mostly chosen by those companies that need a working solution installed ASAP, while private label is preferred by those who strive to get a platform that is most tailor-made to their unique requirements.
If white-label versus private label is still a dilemma for you, SmartHub white-label ad exchange will help you set up a fully functioning and market-ready platform within 7 days. SmartHub has tremendous experience in building ad tech solutions spanning 5+ years. More than 150 clients have highly praised the results that they achieved with SmartHub after launching their platform.
As case studies prove:
Finally, what brings SmartHub closer to the perks of the private label approach is on-demand integrations that turn your final solution into a tailor-made platform suited to all your business needs.
Start off your own ad exchange with SmartHub!
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