Reports from the field: Ad Revenue 2009

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reporter_small.jpgADOTAS – The herd shuffled down the darkened corridor, the only light being a faint neon green glow that emanated from the entrance to the theater. Heavy but muffled bass pounded next door and the attendees exchanged glances.

“Didn’t you know we were coming to a rave?” someone quipped to his colleagues and received a few chuckles.

That no one quite knew what to expect as they entered the opening of PubMatic’s Ad Revenue 2009 conference seemed highly appropriate as the second channel — non-guaranteed inventory — is a brave new world filled with evolving creatures — media buying platforms, ad revenue optimizers and so forth — discovering how to cohabitate.

In his keynote speech, PubMatic Founder and Chairman Amar Goel noted that in three years, second channel revenue could represent 34% of all revenue in online display advertising; for many ad networks he talked to, this figure was already up at 70% to 80%.

The second channel ecosystem has grown exponentially in only a few years — where once the publishers and ad buyers sat across from each other with ad networks standing firmly as the intermediaries, a slew of different providers have popped up, all promising to smooth the process of connecting inventory and ads.

However, trust and transparency are major issues on both side of aisle — Goel noted that many ad networks and media optimizers are promising the moon without any real guarantees of what they can deliver. Publishers in particular are rather wary, searching for partners they can trust.

“In this early section of the hype cycle, the promise can eclipse the reality of the situation,” Goel said. “If it sounds too good to be true, it just might be.”

The buzz acronym of the morning was RTB — real-time bidding. In the first panel, “The Blurring Lines of Ad Exchanges, Ad Marketplaces and Ad Networks,” Philip Smolin, general manager for platform solutions at Turn, described as a process in which ad buyers, through plugging their technology into an ad exchange, were able to determine which ad to show on which publisher in real time. Thus the exchange becomes less like a middleman and more like a mutual access point — a full-service platform.

The elephant that was in the room (although not present) was Google, which is attempting to make a splash in the display platform space through the introduction of the DoubleClick Ad Exchange. While some in the audience tittered when the name was uttered, Smolin remarked he thought Google’s entrance into this space was a good thing as it would enlarge a too-small pot and drive more standardization in practices, another word that seemed to be on everyone’s mind.

While he believes Google will help make second channel a more viable option, he’s less worried about the company banishing all competition. Google may be the king of paid search, but it’s display has oft been lacking, somewhat due to its approach to service. “Google is like a big hammer — only thing is it sees every obstacle as a nail,” Smolin said.

The second channel market has become quite confusing for publishers, remarked Tom Sipple, vice president of IAC/Dictionary.com, who represented that segment on the panel. Determining how many partners in what sectors a publisher needs to best optimize this inventory is a fluctuating equation due to the growth of the ecosystem.

“A one-stop shop doesn’t seem to exist yet,” he said. “But if there is one, talk to me afterward.”

The general consensus seemed to be that it is still early in the game for the second channel. There is plenty of space for innovation, but change is constant.

“The good news for everyone is that the wind is at our backs,” said Jay Sears, executive vice president of strategic products and business development for ADSDAQ by Context Web.

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