Ad Networks That Buck the Downward Trend
ADOTAS EXCLUSIVE — The U.S. and world economies have taken a turn for the worse and are adversely affecting the prosperity of many industries. In online advertising, we’ve seen how this is directly affecting the various vendors in the space. Businesses are putting a hold on spending, and prices for display advertising – 33% of all online ad spend, is trending downwards. IAB issued a report recently showing that while the space continues to grow overall – “only” $5.1 billion year-over-year growth – it’s not growing in the widely awesome way that it did before.
Nevertheless, doesn’t it seem like the media continues to report the launch of the newest, latest and greatest ad network every week? You can bet that today’s innovators are not waiting around for the recession to be over to launch their idea. Especially considering people are spending 33 percent of their time on the Internet and only 8 percent of marketing is spent online, the growth of online advertising is undeniable.
Ad networks of all sizes have been experiencing monumental growth over the last few years. While the economy has recently slowed, ad networks are still growing, but just not as dramatically. Despite the downturn, it’s a good time to be a focused premium vertical ad network with a relatively variable cost structure and a reliable infrastructure that scales up or down, depending on how sales go every month. The overall climate will not likely cool off the launching of new networks, despite a more difficult fund-raising environment. It doesn’t take much money to get started – it takes a great idea and expertise.
Premium vertical ad networks continue to thrive in the current economy by outsourcing technology solutions and infrastructure as well as operational services, leveraging their expertise and conserving their capital. Many of the new networks being created require only one to five people with a great idea to capture a target audience and leverage their great relationships from advertisers and publishers, and who are taking advantage of technology solutions available in the market to scale the network up and down. Savvy network builders are leveraging Adify for network infrastructure and ad serving, Pubmatic and Rubicon for network remnant yield optimization and their own content, brands and relationships to create an online advertising economy that enables the vertical networks to survive and thrive. Plus, these partners do tedious and time-consuming billing and tax paperwork.
Using these services, ad networks can achieve increased efficiency, scale quickly, and minimize and manage core operational costs. Plus, they typically require no start-up costs. Many of the thriving networks have used a variety of these services to their full advantage.
Gay Ad Network, which was started in 2007 by former Planet Out president and Gay.com founder Mark Elderkin, has experienced no break in its business, with sales consistently growing month over month. Marketers will spend their money where they can get results. For the advertisers that want wide and unduplicated reach into a loyal gay audience, they will buy on Gay Ad Network – because the publishers are high quality and the marketer’s brand is protected. The key aspect is that if sales take a dive, Gay Ad Network has an infrastructure that prevents it from taking a major hit on the monthly costs of running the business.
From the larger end of the spectrum, Internet giant IAC is launching R Circle through its Rushmore Drive property to deliver more value to advertisers without capital impact on their business. Caring.com‘s Caring Alliance is enabling advertisers to reach busy but interested caretakers. Politico Network is bringing polifluential audiences efficiently to advertisers on high quality political content within known newspaper and TV websites. These networks are not established with large capital investment. They’ve been created with a variable cost model that grows only as their revenue grows, often with little upfront cost to their publishing partners.
In the current economic climate, entrepreneurs and executives who want to start ad networks, regardless of the size, will need to manage expectations. However, if they come to the table with a compelling value proposition or specialized expertise, AND choose a variable cost infrastructure, then they are in a position to build a profitable and viable business.
The Internet is still growing and money is still shifting. It continues to fragment as more publisher sites are popping up each day – the Internet is over 100 million sites at the moment. Nevertheless, marketers will spend money where they get results, and these are the independent sites that many consumers have an affinity towards. These sites are looking for help from people who are good at monetizing media. The services exist to make this relationship possible and manageable.
Overall, ad networks recognize that cash is going to be tight for a while, even while they build on their core assets, which is necessary no matter what. Strategic ad networks have found a way to leverage outsourced services to strengthen their businesses with minimal investment. Plus, they are realizing immediate and consistent return on their time and energy. In the end, it’s the perfect financial equation: variable cost online advertising technology enablers = low risk, high return.
Reader Comments.
Tribal Fusion is probably in the best position to last through this storm.
I agree Russell, Premium vertical ad networks like ours, e-Healthcare Solutions, are doing very well despite the down-turn. In the end it is all about the quality of the audience you reach. We were founded in late 1999, just when the dot-com meltdown began. This period is reminiscent of then, as our ability to compete against the larger national networks was only enhanced by their struggles and failure. I think you will see a shake out again, whereby only the strong survive and thrive.
R.J. Lewis
e-Healthcare Solutions
I just wanted to mention our service, YieldBuild, that also helps publishers optimize their ad inventory across multiple networks (similar to Pubmatic and Rubicon, which the author mentions). In addition to ad network optimization, YieldBuild uniquely offers sophisticated ad format optimization, narrowing in on the ad size, format, layout and other visual characteristics that also influence CTR and page eCPM.
We have a growing client base of publishers who are seeing healthy lifts to their online ad revenue, without having to use guesswork when it comes to selecting ad networks or formats. A doubling of revenue is not uncommon.
Jason Menayan
YieldBuild
To survive, ad networks must find ways to add value to their affilates. Our easy offer integration technology is being licensed across the industry to make this expensive and time consuming process more efficient. Several companies are laying off staff, including IT thus backing up their pipeline of offers to integrate. We are taking that pain away and enabling faster time to market for offers.
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