The online advertising climate is always changing and with the emergence of Web 2.0 and the diminishing availability of ad space, a next generation of online advertising model is emerging.
The current ad network model was developed at a time when bandwidth was still very expensive and ad campaign management was hard to do and understand. Because of this, ad networks could charge high commissions and get away with it. However, the tide has turned and the economics of online advertising have changed.
Presently, the large ad network model provides aggregation across multiple online publishers and this provides advertisers with a broader scale, reach and efficiency.
The existing models achieve these “breadth” goals, but at the expense of depth, quality control, and transparency. Through the use of a blind or semi-blind optimized product, these larger networks offer minimal targeting for buyers and sellers. Advertisers only have slight power over the placement of their ads and publishers have little control over what appears on their sites.
Algorithms try and bring publishers and advertisers together, however they are based on keywords, opening the door for content spam and click-fraud while demonstrating questionable value. Without full transparency and someone watching over the ad network ecosystem, these problems will only continue to grow in magnitude.
In addition, they force advertisers — who often best understand how and where to reach their customers — to rely on technologies that they cannot understand or replicate. While behavioral or contextual targeting may, in some cases, increase relevance and response rates, they exacerbate the control and transparency issues. Frustration with these typical, but unresolved problems, has given rise to a new online ad network paradigm.
A New Market Emerges
The online advertising market is large and growing fast enough to support many different innovative business models. As advertising continues to grow on the Internet and inventory is selling out on prime websites there is a larger demand for ad space on more targeted, vertical networks. We are seeing the emergence of a new advertising network model which, in many ways, reflects a very successful offline media model — the magazine industry.
Stroll by any magazine rack, and you will see dozens to scores of special interest, or vertical, publications focused on specific business and consumer topics: from tennis and fashion to interior design and chemical engineering and the list goes on. Why do companies spend millions of dollars on magazine advertising? It’s simple — they know what they’re getting. Magazines are focused content vehicles attracting readers with clear and explicit interests.