From portal plays to mobile, video and beyond, ValueClick Media's general manager reflects on ad network predictions for 2007.
If 2006 was any indication, 2007 is shaping up to be another big year for ad networks.
The ad network model received more validation than ever in 2006, through increased spending and heightened industry dialogue about their value and importance as part of a well-rounded media plan. Another telling trend in 2006 was the introduction of several new ad networks and the bets some larger media companies have placed on the network model.
The availability of capital and a relatively low technical barrier for basic entry have enabled several new ad networks to enter the space over the course of the past 18 months. And while vertical networks and network exchange models may find their place in the online advertising landscape, there are high barriers to entry when it comes to developing the business relationships and trust among advertisers and publishers that are at the heart of building and sustaining a successful network. Networks today must have either significant critical mass or an audience or content that is both very unique and very valuable in order to survive.
In 2007, there will be opportunities for growth among the specialty, niche content networks; however, several of the smaller network newcomers will remain small or phase-out altogether. Most will find it challenging to break-through and earn the attention of online planners and buyers without the scale that mainstream online advertisers and agencies demand-- buyers simply don't have enough hours in the day to take as many calls as there are ad networks to buy from today.
Even more significant than the increase in network start-ups has been the steps that portals and other major media companies are taking to establish their relevance in the ad network landscape. Yahoo!, MSN, AOL and Google will all look to expand their audiences via a network model in 2007. AOL started this trend by acquiring Advertising.com, which continues to be the strong performer for AOL, and others are starting to take notice. Yahoo reinforced this mindset with its 20 percent investment in Right Media, and other mid-tier networks and network technologies are likely to be candidates for acquisition in 2007 by larger media companies vying for position in the network space.
This trend also presents new challenges as these large media companies must juggle the inherent channel conflict of managing their proprietary inventory versus inventory from business development relationships, as well as the knowledge and technical expertise required to manage inventory yield to the expectations of all constituents.
As direct response advertising still makes up the lion's share of online ad dollars, brand measurement across ad networks has still not gained enough traction with major advertisers to be significant. As a result, in 2007 networks will place an even greater emphasis on performance, including investing heavily in technologies to advance the aggregation and use of behavioral data for targeting, as well as their optimization methods. Even Yahoo struggled with the growth of brand advertisers in 2006, and took resulting steps more towards a focus on performance. Look for other major players to acquire technology solutions in 2007 to help them better manage their inventory for better performance.
The largest and most reputable networks responded to the transparency needs of brand-sensitive advertisers in 2006 by further partnering with publishers in a way that earned trust in how the inventory is presented to advertisers; advertisers responded in turn by spending more on networks. As a result, expect to see even more networks touting transparency in 2007. In addition, with the rising popularity of sites like YouTube, even brand-sensitive advertisers seem to be more comfortable advertising on sites considered to be "the long tail" or niche content sites.
Expect to see more brand-sensitive advertisers extending their reach beyond traditional brand specific sites to explore well-defined audiences and individual consumers wherever they spend time online.
A wave of excitement over the video trend made in-stream video advertising a popular topic of conversation in 2006. The emergence of video networks such as Tremor, Broadband Enterprises and Brightcove -- as well as the availability of first-generation video solutions from traditional ad networks -- created a great deal of interest; however, the critical mass of both supply and demand is still lacking when compared to traditional display units. While in-stream inventory is scarce today, networks will be aggregating video inventory in 2007 in order to offer advertisers scale for this emerging format. Similarly, while mobile inventory may be scarce today, networks are exploring how to apply their expertise and relationships with advertisers and publishers to offer solutions with this equally compelling ad format.
Devices and content formats will always change, but the long-standing relationships with both advertisers and publishers will remain for the top ad networks, and you can expect that the most established networks will offer compelling advertising opportunities in these emerging platforms in 2007 and beyond.
Along with the continued growth of online advertising in general, 2007 holds great promise for ad networks, especially those that are able to differentiate themselves clearly and bring a high level of expertise, quality and technology to serve both advertisers and publishers with greater performance and scale.
David A. Yovanno is the General Manager for ValueClick Media. Read full bio.