April 19th, 2009

Are Ad Networks on the brink of Extinction?

Posted in Online Advertising by sabotosh

A colleague asked this the other day in response to an article from Adotas of the same name. Now if you have worked in the online ad space especially the remnant ad space it is easy to dismiss this argument as pie-in-the-sky. Sure every site would love to run direct ads and cut out the networks 30-60% technology fee but every site does not have a full time sales staff to put together these deals.

Even the larger sites that do have the resources for ad sales staff and have the luxury of being in premium verticals cannot always sell all their impression inventory and this is where the ad network and/or ad exchange comes into play. Most all publishers turn to ad networks to fill remnant impressions at some point.

On the advertiser side, ad networks / exchanges offer the advertiser the ability to run ads on premium publishers at prices pennies on the dollar of what they would have to pay running directly. Advertisers are also able to find strong performing sites and channels of aggregated sites that they might now have thought of. In this way ad networks deliver value to both advertisers and publishers.

Now this value proposition between ad networks, publishers, and advertisers works pretty well until an advertiser or an agency finds their brand clients ads running on a porn site. This was not as much of an issue in the past with direct response ads – sure ad networks and (DR) advertisers did not condone this practice; but it wasn’t going to get anyone sued and when these publishers were identified they were terminated from the responsible ad network.

In 2008 the game has changed, we are seeing more and more brand advertising coming online. Now advertisers and agencies are demanding full site disclosure from ad networks in order to protect their brands. What the advertisers may not know is that most all premium publishers have NDA’s in place with the networks they work with to protect their rate card. If an advertiser can buy inventory indirectly on premium sites for $0.50 – $2.50 CPM – why would they spend $5 – $40 CPM on a direct buy? The answer is they won’t. So at the end of the day we have advertisers that need to protect their brands and ad networks that need to protect their premium publishers.

So are networks / exchanges on the brink of extinction?, 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 and publishers with transparency into what ads are running on thier site.

[UPDATE 8/22/2019]
All the ad networks have died, all the SSP’s and DSP’s have been consolidated / acquired into a handful of media companies.

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