NEWS: On Ad Networks: Pork Bellies, Diamonds, Or The New Direct Marketing?

On Ad Networks: Pork Bellies, Diamonds, Or The New Direct Marketing?

Over the past few weeks, a debate over the use and growing prominence of ad networks and exchanges has been gathering. The recent shuttering of ESPN's (NYSE: DIS) and the Washington Post's (NYSE: WPO) respective ad nets, as well as the news that Forbes was starting another one, have given legs to a comment made at the Interactive Advertising Bureau's annual conference by Martha Living Stewart Omnimedia's Wenda Harris Millard (pictured, above, left) warning that media companies were selling web inventory like "pork bellies." I interviewed a number of execs, including Millard, MSLO's president of media and new IAB chair, and AOL Platform-A President Lynda Clarizio (pictured, above, right), about their views on the buying and selling of media companies' online ads, including some at a recent IAB conference with programming inspired by the debate.

All ad networks are not created equal: If all sides can agree on one thing, it's the need for greater clarity to what's being sold and where it's being placed. Until then, the divide will remain. On one side, there are the vertical ad nets run by media companies like CondeNet, MSLO, Nickelodeon's ParentsConnect Network, CBS' network of local TV station sites and Forbes' forthcoming financial network. Verticals promise control over ad sales and placement. On the other side are the sale of remnant ads (ad space that has gone unsold and is typically offered by web publishers, often at a discount) handled by Google/DoubleClick, Microsoft (NSDQ: MSFT), Yahoo (NSDQ: YHOO) and AOL (NYSE: TWX).

Some of their views after the jump.

-- Millard: "Both buyer and seller require transparency. In a lot of cases [in terms of ad nets' handling of remnant, or unsold ad inventory], the buyer doesn't really know what they're getting. And the seller doesn't have any control over price."

-- Clarizio: "I've said before that there are an enormous amount of ad networks out there. And over time, the industry will consolidate. Speaking of Advertising.com, we have a different value proposition - what we sell is really reach across a network of sites - and there are 8,000 sites in the Ad.com network. Or we sell targeting within a sub-set of sites. We sell what the individual sites cannot sell. I freely tell people, if you strictly want to be on the front page of iVillage, then you should have a conversation with iVillage. But not everyone has those kinds of specific needs. And to lump all networks together and compare it to the sale of pork bellies can confuse the issue. The people who are going to win are the people who drive the best results for advertisers and offer the highest monetization for websites."

-- Millard: "Basically, the main message is that there is a lot of room in the marketplace for ad networks and ad exchanges. But there are a number of networks out there that are focusing on simply amassing volumes of inventory that all result in decreased pricing—and, the discussion about value is never heard. I do believe in exchanges and networks. But I don't believe in networks that are just amassing massive amounts of inventory, just so they can sell it off cheaper. I don't consider that marketing and I don't believe that serves the publisher well or the marketer for that matter."

-- Joelle Kaufman, VP, marking, Adify: Remnant ad sales operate in much the same way direct response campaigns do, which is unlike a TV sponsorship or other major branding campaign, Kaufman, whose company, Adify continues to power the WaPo network, MSLO's and others: "In direct response, all you care about is reach. Just trying to get people to click, trying to get in front of as many people as possible and get as much reach as you can – therefore you don't care what you're next to… It's not as if unsold ads proliferate because these people are bad at selling advertising. It's unsold because it's not appropriate for brand advertising."

-- Mutual benefits: Bill Wise, GM of the Global Exchange, Right Media, contends that if exchanges didn't benefit publishers, the Yahoo-owned unit wouldn't be trading over 5 billion impressions a day with over 30,000 sellers. He doesn't see a real conflict with what media companies like MSLO or Forbes are doing with their vertical ad networks—promising premium placement. Despite publishers' established links with advertisers and agencies, they face a world where the proliferation of blogs and vertical content has resulted in their respective category - inventory and ad dollars - growing at a faster rate than their business. The best way to maintain their growth is to partner with exchanges - like Right Media's, of course - in order to address the challenges to their businesses.

-- Not all targeting is equal either: Adam Shlachter, senior partner and group director at MEC: The message from some networks has been: we have a ton of inventory across the web and we're going to run ads across these types of places and these types of users. Targeting is crucial and the more refined the targeting can be, the more valuable that type of inventory can be—but only if the message fits. To tell me you're going to be able to target a particular behavioral segment because of the recency of their consumption of a piece of content – and then immediately, they're hit with an ad – well, I think we're beyond those days. It doesn't work as well. Consumers are taking in a lot more content. We've seen some variance in things that are more contextually targeted. More precision is needed.

-- All about pricing: Sarah Welch, co-founder and COO, Mindset Media, an ad network specializing in "psychographic" behavioral targeting, noted that a lot of the ads on exchanges is undifferentiated and does get pushed down to absolute bottom – that is, commodity level prices. What happens from their perspective is that advertisers, and agencies who support them, think that they can get Martha Stewart level inventory at bottom of the barrel prices. That's not good for the publishing industry, in general. I absolutely understand [Millard's] perspective on that. Is that what's happening, fundamentally on exchanges? I think what happens is, unless there are dimensions on which inventory can be priced and understood by buyers and sellers to be of value, yes, things do get traded down to that level."

--Diamonds, not pork bellies? In a post on IAB's blog shortly after Millard's pork bellies comment, Randall Rothenberg, the organization's president and CEO, weighed in, noting how Michael Rubenstein VP-GM of Google's (NSDQ: GOOG) DoubleClick responsed to Millard by comparing the sale of remnant ads to the gem exchanges of Antwerp: "We like to think of our publisher impressions as diamonds, not pork bellies." At the recent IAB conference, ThinkEquity analysts William Morrison and Robert Coolbrith were asked what publishers could do to work with ad nets on premium ad placement without putting their ad sales at risk? Coolbrith responded, saying publisher could seek "iron-clad" business arrangements that would keep them off site lists. But ultimately, it's up to the publishers to monitor what is done with their advertising.

-- No magical platform: John Battelle, who runs the Federated Media blog ad net, weighed in with two long posts on his Searchblog. In his initial take, he said "neither the publishers nor the brand marketers believe that a magical ad platform will somehow address their needs online." He grudgingly accepts that advertisers will spend 5-15 percent of their budget on lower-CPM "pray and spray" DR and awareness campaigns. And he figures that publishers really like seeing algorithms raising CPMs for the remnant inventory. But Battelle insists no one believes that ad networks can achieve the level of engagement provided by basic two-page print ad or a 30-second TV spot. So what's going to happen? Battelle: "I think brands will also build the next batch of great online media companies. And up until recently, I thought Yahoo, AOL, and MSN were best positioned to be those companies. Now, I'm not so sure."

Related

• Washington Post Moves On After Closing Blog Ad Network
• Forbes Plans 400-Member Financial Ad Network; Viacom Forming Ad Nets For Music, Male Lifestyle
• ESPN Pulls The Plug On Ad Network; Millard Warns About Treating Ads Like Pork Bellies
• IDG Expands Ad Network To Outside Blogs

Ed: With efficient markets, not much difference between exchange and marketplace. Vertical and fragemented adnets are not efficient. AS could be more efficient, if fully transparent.

AOL Launches Ad Service For Small Publishers (TWX)

AOL (TWX) has launched a new bid to get small publishers to join its Ad.com display ad network. The service, called PubAccess, allows publishers to sell a portion or all of their ad inventory via Advertising.com, as well as control their campaigns and screen advertisers through a Web-based interface.

Platform A president Linda Clarizio said the idea is to give small publishers the same opportunty to sell ad inventory on a costs-per-thousand (CPM) basis, rather than on cost-per-click or auction basis. The ad inventory is sold by AOL's Platform A sales staff and optimized by AOL's AdLearn technology.