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Why ad networks are no longer ad networks

Why ad networks are no longer ad networks Dan Reich

We are at the cusp of a new age of online advertising. As news ways of thinking about the ecosystem emerge, so too are there new ways for advertising campaign deployment. Math now seems as equally important as creativity. Technology now seems as important as artistic ability. This evolving trend has spawned new companies and has required older companies to change their very DNA, and with that, their name or classification.

Ad networks in particular are in the middle of this paradigm shift. We heard last year that ad networks were doomed, and yet for some reason, they are still around.

Why do marketers continue to work with ad networks? Do marketers work with ad networks for their technology or for their sheer reach in size? Do marketers cultivate these relationships because they are easy to manage or because there are favorable economics involved?  When considering these questions, demand-side platforms (or DSPs for short) emerge as the newest member of the ecosystem with similar traits.

Let us take a second and look at how most ad networks operate today. Today, ad nets:

  • Work with ad exchanges or DSPs and can offer their advertising clients real-time bidding (RTB) -- if the ad network hasn't just evolved into a DSP in the first place.

  • Integrate with various third-party data sources and can offer audience targeting.

  • Get pressure from advertisers to reduce prices, whereas DSPs and ad exchanges already offer relatively efficient CPMs (even with RTB).

  • Have a hard time evaluating the quality of the ad inventory or time spent with the ad.

  • Have some mechanisms or levers for driving performance.

Whether it is a DSP or ad network, there is a new aggregation movement afoot in the assembly of various technologies, data sources, and media sources to create an über-demand-side platform. If the race is on to assemble the same technologies, the same data sources, and the same inventory, where is the ultimate differentiation?

This very issue makes it increasingly difficult for marketers to understand who, how, and what they need to include in a comprehensive end-to-end solution for display advertising. To overcome this hurdle we need to overcome the idea of titles and classifications. Marketers need to understand that the words RTB, DSPs, ad exchanges, ad networks, supply-side platforms, ad optimizers, and [insert fancy-sounding algorithmic mumbo jumbo here] are all meaningless unless a provider can clearly identify and evaluate the following items within the context of a marketer's business needs:

Audience targeting: Understanding what data are, where they come from, and their segmentation a-priori
It's very easy for a solution provider to say "We have audience data." In reality, there are many data providers that offer similar-sounding audience segments, but the segments may actually come from completely disparate entities over different time periods for a given cookie's lifecycle. As an example, one data provider may sell a "parenting" segment whereas the marketer thinks they are buying parents.

Often times, the brutal truth is that the data provider determined that person to be a "parent" because the publisher media kit declared that 70 percent of a site's visitors to be parents. That's fine, but what about the other 30 percent? There is a big inefficiency there, and at the aggregated level, even more inefficiencies squeak through. Marketers need to thoroughly understand where data come from, and how providers package the segments within the segments.

Real-time bidding: You're bidding on an impression because...
Not a day passes where there isn't an article about RTB and its effects on the display advertising business. But, while you read or hear about real-time bidding, you rarely read or hear about the logic behind the bid. Marketers must understand how a certain RTB solution works in order to align their success metrics appropriately.

For example, why would a marketer want to bid on an impression that is optimized for clicks when conversions are the end success metric? Moreover, why would a marketer want to bid on any impression, regardless of whether that impression comes packaged as part of a CPA buy, if the end consumer never sees the ad in the first place? Real-time bidding will no doubt increase efficiency in the online ad ecosystem, but without a good understanding of the logic and transactions behind the efficiency, marketers may very well experience poor performance without knowing it. If history is any guide, think back to the very recent history of the super-efficient, highly organized, real-time transaction oriented banking system.

Ad visibility: It's 10 o'clock, do you know where your ad is?
The advent of efficient ad delivery systems has, for the most part, not yet accounted for ad placement and visibility. If a marketer invests money in an ad campaign, they should account for any waste associated with the investment (i.e., ads that are never seen).  Over the past year, we've seen the rise of a cottage industry of companies, including RealVu and EyeWonder, specifically start to shed light on the dirty little secret of unseen but counted ad delivery, which currently, according to RealVu, can account for 5 to 95 percent of all display impressions.

In the future, we expect the major ad measurement and ratings companies to buy, build, or partner with companies like those referenced above to provide marketers with measurement of real audience reach multiplied by visibly and verified frequency. It will be a long time before traditional media will see the opportunity afforded by traditional gross rating points (GRP), but armed with the knowledge of true visibility, marketers can begin to look at discount rates across all media. (Full disclosure: At Lotame, we measure

Dan Reich is currently Co-Founder of Spinback, a company that is focused on helping online retailers quickly launch social features while measuring its effectiveness and ROI. <br><br> Prior to Spinback, Dan was Director of New Business...

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