Exponential's CEO and founder explains how basic ad serving will become a no-cost enabler of more valuable offerings, benefiting users, advertisers and publishers.

A lot has been written about the changing online advertising landscape in the wake of recent acquisitions. Speculation is rife about the combined offerings of Google/DoubleClick and MSN/aQuantive, and the impact of these transactions on other players in the industry. Through all this activity, one trend is clear: The value in ad serving is no longer simply delivering an ad unit to a user on a website and reporting about it. Rather, it is in enabling advertisers to reach their audiences more effectively online, and in helping publishers to better monetize their valuable inventory. Paying purely for ad serving as a business model is rapidly fading into the past.

Many of the companies delivering ad serving offer pure technology products and services. However, as the larger digital media service companies higher up in the value chain build out integrated offerings, they will view basic ad serving as an enabler for their higher value offerings and will begin to offer it at little or no cost to advertisers and publishers.

Benefits for publishers
The first benefit of no cost ad serving for publishers is the direct savings impact on the publisher's bottom line. However, when a publisher uses an ad server that also offers fully integrated higher value products such as behavioral and contextual targeting, it enables the publisher to increase the value of its entire inventory. By targeting past user behaviors -- often deduced from behavioral or contextual technology that determines the user's interests at the page level -- publishers can increase the overall effective CPM for their sites.

The recent trend of no-cost ad serving solutions symbolizes the new realities of the publisher landscape: Ad servers are evolving to become a tool that helps publishers generate more revenue for their sites. It's no longer sufficient to just deliver, manage and report: the technology must provide publishers the same advertiser targeting features I described above for the campaigns that they sell.

They must also offer publishers many different ways to generate revenue, from CPM display campaigns, to CPC contextual programs, performance marketing programs, local and mobile opportunities. Publishers need the ability to manage all their providers through one platform, and be able to quickly prioritize and make changes to their campaigns based on effective yield. In the end, these and other innovations are enabling publishers to run more profitable businesses, and to devote more resources to what they do best: creating great content.

Benefits for advertisers
Advertisers will also reap the benefits of reduced costs for basic ad serving. In addition, using an ad server that integrates behavioral and contextual technology across thousands of publishers can give an advertiser in-depth reporting on the demographics, psychographics and behaviors of the audiences that viewed and responded to their ads. Although this kind of reporting may cost extra, it is the holy grail of advertising. Advertisers will be able to see what age and gender segments responded to their ads, as well as determine how ads performed by household income, ethnicity, interests and other psychographic elements.

Advertisers can use the insights these reports provide to fine-tune both their online and offline media plans. Leading-edge ad servers are also moving towards enabling advertisers to use audience profile analysis to dynamically change which audiences to serve a specific ad to based on prior campaign results.

Ad servers are also providing format enhancements like the ability to dynamically adjust the creative of an ad based on user attributes, or to synchronize major ad units across sites for maximum brand impact. They are evolving to be able to manage all types of emerging media, from video to mobile and gaming. And ad servers in the network space have pioneered automated optimization: the ability to shift impressions to the best performing sites and placements in real time across a network of sites. Even on the reporting front, ad servers are adding the key functionality of being able to report by audience profile: the demographics and psychographics of people who have viewed a campaign.

These new developments represent a fundamental shift away from simply being a platform to measure and report on online campaigns across multiple websites. They translate to the delivery of more effective campaigns with less waste for both brand and performance advertisers.

More broadly, fundamental changes like no-fee ad serving are good news for the future of technology innovation in our industry. They signal that we are creating value beyond commodity services: better targeting for advertisers, better optimization for publishers, more effective campaigns. Companies like ours are creating better, cheaper and faster ways to get things done online, and building businesses that can scale for the long term. Ultimately, this translates to a better online experience for everyone: users, advertisers and publishers.

Dilip Da Silva is CEO and founder, Exponential. Read full bio.