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Alan Schanzer is the Chief Strategy Officer of Undertone Networks.

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Death of Ad Networks Greatly Exaggerated

Written on
Dec 5, 2008 
Author
Alan Schanzer  |
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Death of Ad Networks Greatly Exaggerated



adfutures_smaller.jpgADOTAS EXCLUSIVE — Having recently joined Undertone Networks as Chief Strategy Officer from a Managing Partner position at MEC Interaction, a full service global media investment firm, I’ve pondered the network space quite a bit.
The conclusion I came to, first as a buyer and now as a co-conspirator, is that not all networks are created equal. In fact, the products that networks offer are quite different and more often influenced by the business model than by the technology platform (assuming your model is not sitting squarely on the back of an exchange).
I agree with Jeff Lanctot’s recent assertion that dozens and dozens of networks will fail. But Jeff, like many others in the industry, is too quick to group all networks together, pinning them with the same fate. Consider this: are Microsoft, DrivePM, PlatformA and Undertone exactly alike? For that matter, is there no difference between Forbes, Yahoo! Finance and CNN Money? Each network and each website has its own value proposition and the key to success is to have a great product, impeccable service and ensure clear differentiation in the marketplace.
In recent years, the cost of entry to the ad network space has been relatively low, financing has been easy to find and demand has been high. That has led to an overabundance of network business models that thrive on arbitrage and pay very little attention to providing value in the communication chain.
Many of the high-value networks have done little to combat that perception and are now raising the bar and focusing on differentiation. It is time for top tier ad networks to work together, educate the market and set the record straight. By top tier, I do not mean the largest based on audience or comScore ranking, I mean those that understand the delicate buy/sell model and work toward a publisher friendly approach; that resist a pure exchange model and that can tell you where every ad is placed, and every advertiser runs. The standards should be as high as those expected by an agency from an agency client.
In the end, I don’t know if this means 10, 15, 20, or five ad networks will survive. If you look across the spectrum, there is room for multiple winners in any one category. Regardless of the marketplace, there is room for several success stories and certainly, there will be several failures. Again, the future for the ad network business rests is in the hands of the ad networks themselves.
Currently there are three major portals (which look more like ad networks every day); three search engines (all directly or indirectly connected to ad networks); just a few stand-out social media sites, about eight news and finance sites with any real scale and quality. Over the next year, clear winners will emerge as incredibly valuable parts of the online advertising ecosystem.
Digital channels will always be challenged by hyper fragmentation as well as structural issues in the supply and demand model. Ad networks will have an important role in solving those issues the same way big broadcast networks came together to monetize commercial space running in content that is often owned be a third party, providing an incredibly efficient system for reaching national and geo targeted audiences.
The ideal network values direct publisher contracts and contacts and works under an operating model that protects both the advertiser and publisher from rogue and dubious advertisers. Within our industry, networks with a white glove service offer designed to efficiently connect publishers with buyers, and marketers with attractive, well targeted audiences adds tremendous value to the advertising space. Ad networks that commit to striking such a balance will ultimately distance themselves from their competitors and establish a strong foundation for continual success in the coming months.
The next year will be a challenging time for businesses across the board, particularly online ad networks. We’ve reached critical mass and we are beginning to see the natural progression of the industry but at an accelerated pace given the current economic climate. I see this as less of a bloodbath and more of an overall maturation in the space that will have industry wide benefits for publishers, agencies, and marketers.





Reader Comments.

I bet 95% of current ad Networks out there will be out of business within two years. I’m sure most would agree, that the death of ad networks has not been greatly exaggerated. I guess we will just have to wait and see

Posted by PJ | 5:26 pm on December 16, 2008.

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