Competing in an Online World with No Barriers to Entry


To better understand the dynamics of the online advertising business, in 2002 my firm decided to staple together a “network” of online publishers. To capitalize on the Hispanic “craze”, the core of the network consisted of independent publishers with very niche audiences; at its peak, this network reached over 690,000 unique visitors per month. But the marketed value was in the sort of visitors: the largest number of “U.S.-based, English-dominant, Hispanics” online.

As far as we could determine, we followed all of the supposed “musts” in launching our network: we picked a niche and promoted ours as the best; we launched at lower rates per CPM, since our business was commission only and non-exclusive; we standardized metrics methodically across all sites to be able to deliver consistent results to our clients, without the expense or headaches of pricey technology; and we went right to the media buyers.

While cajoling various publishers to put this network together, we also harvested hundreds of names of media buyers. So when we put the finishing touches on our media kits, we mailed them out to all of these prospects at great expense. Our response was abysmal. There were two inquiries, and no buyers within a span of 6 months. It led some publishers in our network to openly criticize our efforts and at least one to renege on its contractual pledge to be part of our network. Supporters lamented that it was too soon for this sort of ground-breaking niche network. We later learned that some media buyers rightly wanted to see more longevity and case studies before committing. This was an obvious response to a veritable deluge of “networks” that seemed to spring up and die off by the minute. (A more recent analysis our firm conducted on the industry reflects the true nature of the marketplace: zero barriers to entry really mean insurmountable challenges in actually establishing a business for the long-term).

During a consulting engagement for a large marketer, we concluded that buyers potentially avoided presenting alternatives to their clients, and possibly worse for the marketer’s ultimate return on investment, when buyers did present alternatives, clients were too “busy” with their established relationships—where their “meager” low-million-dollar budgets usually went—to investigate new opportunities themselves. In response, publishers and networks briefly found themselves skipping buyers to go directly to advertisers. But the overwhelming attention quickly made advertisers miss their gatekeeping media buyers, who in turn, discreetly retaliated against publishers’ violation of industry protocol by making it even harder for new networks and sites to start and flourish.

A subsequent (and periodic) re-alignment of buyers brought in a new crop of buyers with less creative flexibility, demanding higher accountability from everybody. This was immediately followed by an explosion of online innovation (still going on now) which opened up the floodgates to every Tom, Dick and Blogger with Adobe Photoshop and Macromedia Dreamweaver. The official body for online publishers, the Interactive Advertising Bureau, is currently trying to catch up with suggestions on how to standardize all this innovation, which at first sprung up too quickly to realistically assess.



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