Ad Networks: On the Verge of Extinction?
ADOTAS EXCLUSIVE — This week’s news from ESPN and Forbes has created a lot of buzz in the interactive advertising industry about the future of ad networks. On the one hand, we have a sports media giant rejecting ad networks as being detrimental to the integrity of their brand and on the other; we have a leading business publisher announcing the launch of a network of 400 financial blogs.
The question on the tip of many tongues: are ad networks growing or fading? This isn’t the question the industry should be posing. The real question is about the value of different types of networks and whether that value will grow or decline.
I discussed back in January that 2008 will be the year online publishers will leverage the opportunity created by increased audience fragmentation and boutique independent publishing. Target audiences are becoming more elusive and advertisers are looking for new ways to reach them with relevant content in the right context.
Enter premium vertical advertising networks.
The networks ESPN is rejecting, i.e. the remnant, performance ad networks, serve a purpose for many publishers. They monetize unsold inventory where your ad sales team cannot – often because the inventory is comprised mostly of pages like forums, e-mail and non-premium content that advertisers will not pay premium rates to be alongside. Direct response, Google or behavioral targeting can often more effectively monetize these pages. Google is the largest contextual remnant ad network on the planet.
Vertical ad networks created by trusted brands and knowledgeable entrepreneurs efficiently deliver premium inventory from smaller, high-quality sites to advertisers. This helps the advertisers reach their target audience – and they know the quality of the content and placement is high (something a remnant network CANNOT provide). It also lets large publishers increase the audience they can deliver to advertisers in the face of fragmentation (where online users spend 64% of their time online OFF the top 20 sites according to comScore). Finally, this allows quality, smaller publishers to realize significantly higher rates than possible with any remnant ad network.
Companies like Forbes, Martha Stewart, NBC, IDG and more are expanding their reach with quality, exclusive vertical ad networks. Companies like Gay Ad Network, Good Health Advertising, Yardbarker and Gamers Media are creating new media companies based on their knowledge of the advertisers and publishers serving very distinctive audiences.
ESPN’s decision is an interesting one, but they are clear category leaders in their space who may be selling virtually all their inventory at premium rates and who have become experts at monetizing all types of inventory on their site.
Will every major publisher accomplish this? Unlikely – so remnant performance networks have their place leveraging technology to monetize remnant inventory for direct response advertisers. Vertical ad networks are next generation media vehicles bringing brand advertisers to the premium independent publishers that are attracting the audiences they target. Different types of ad networks for different objectives — and solving very different problems.
Reader Comments.
No question for premium publishers the ad network is neither good for the brand nor the bottom line ultimately. But there are still thousands of other sites that cannot afford or manage a sales staff. For those folks, ad networks will become even more important, not less. I expect to see a lot more vertical/boutique ad networks and retargeting plays in the next 12 months.
You are right about direct response advertising being very effective in remnant inventory, which is why Hydra handles so much of that for its partners. Ad networks are all so different that it would be hard to write anything talking about them as a class together and make sense.
ESPN should call us! 
I’m sorry but this article is a blatant plug for adify’s model (which I am a huge fan of, dont get me wrong) but feel it was an inappropriate “objective” peice of journalism for adotas to publish.
“Different types of ad networks for different objectives — and solving very different problems”
Well put Russell and I can’t agree more with that.
This is a huge move by ESPN and Forbes, but not one that is shocking knowing the industry climate. Large established publisher like the aforementioned should be concerned about protecting brand, both of the site and the advertiser. Networks need to come up with ways to nurture that. I would also add that Networks that are not flexible to Publisher and Advertisers needs will have difficulty becoming that nurturing element. Offering various solutions to advertisers and publishers across numerous verticals is the way Networks need to be thinking, focus on what works but look at trends to see where things can be improved. Networks of the future must have experience, technology, and the willingness to adapt.
Brendan J. Smith
Chief Executive Officer / Founder
Motive Interactive, Inc.
www.motiveinteractive.com
Russ, You rock!
Ken Margolis
So are networks / exchanges on the brink of distinction?, yes they are. At least the ones that do not provide a safe place for their advertisers and do not provide transparency to their partners. This does not have to be full site disclosure but ad networks need to provide their advertisers the ability to gain insight into where ads are actually running.
Tosh Bulger
www.sabotosh.com
Russ makes a great point here. In the Health sector, research shows that 75% to 85% of the online audience start at a search engine, not a destination site or Health “portal”. As a result they end up visiting smaller more niches sites www.DietDetective.com or www.Understanding-ProstateCancer.com. These are the sites that people visit after doing very specific. Vertically focused networks such as Good Health Advertising allow pharmaceutical and other health advertisers to reach audiences they would otherwise miss on the health sites important to them.
Robert Kadar
CEO
Good Health Advertising
www.GoodHealthAdvertising.com
I’m glad to finally see someone voicing the truth about ad networks. This is not advertising it’s not even data mining, it’s lead generation. Brands have no business being on “ad” networks that claim to be able to represent all verticals for all publishers. Find your niche or you’ll end up in the ditch!
Ad networks serve a great purpose, if an ad network is not fully transparent then there is no need for a big brand to advertise, but I know of many that currently are and will guarantee delivery on that site.
Ad networks are popping up everyday because for many DR clients they work, and every company internet centric or fortune 500 have goals which they are trying to meet.
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