Our expert, Cory Treffiletti, breaks down the differentiating factors between five categories of networks.

Question:
I know iMedia has covered ad networks extensively, but I'm still confused as to the different types available (i.e. rep firms, ad exchanges, etc.) and, more importantly, what the differentiating factors are. Could you please give me the layman's scoop on this?

Answer:
With new ad networks launching what seems like daily, each presenting itself as the answer to your ad-serving needs, it's not surprising that there's still a lot of confusion among marketers.

There are essentially five categories of networks: ad networks, vertical ad networks, ad exchanges, buying services and rep firms.

Cory Treffiletti, president, managing partner of Catalyst: SF, says the differences between these five categories are based on three primary areas: technology, media exclusivity and media buying methodology.

"The technology component refers to whether there is a unifying technology back-end that allows for optimization and measurement across all the sites in the network, or if they are considered separate and the optimization needs to be executed on a site-by-site basis," he says. "The media exclusivity component refers to the sites or content being sold and whether you can buy that same inventory elsewhere. The media buying methodology component applies to whether the partner allows for you to buy across a transparent list of sites and whether the network owns the inventory or it goes out and aggregates the inventory on your behalf."

Treffiletti defines ad networks as "a collection of small- to medium-sized sites coupled with remnant inventory from larger publishers that they were not able to sell on their own. These networks typically have a unifying back-end technology that allows for optimization across their entire network."

They typically do not have media exclusivity, and do not provide transparency regarding the sites you'll run on. The primary way you buy media from them is either based on demographics or contextual categories, but they usually also offer regional targeting.

Vertical ad networks are similar to general ad networks except in three ways, according to Treffiletti. "They focus their attention on a specific category such as auto, entertainment, women or travel. They typically are exclusive in their representation and focus on the small- to medium-sized sites in a specific category -- those sites with too little traffic independently to make it on a larger buy or to hire a sales staff -- and they typically are willing to be transparent and share with you the sites you are buying."

Ad exchanges often cause the most confusion. They are similar to both ad networks and vertical ad networks in that they also provide a collection of small- to medium-sized sites as well as remnant inventory from major publishers. They also typically are not media exclusive. But, they differ in that the technology component is intricately tied to the media buying methodology.

"These sites offer a marketplace or an auction that allows advertisers to control their buys more deeply and bid on inventory rather than place a standard buy," Treffiletti says. "Think of it as going to the supermarket and paying whatever costs the store has laid out for you vs. going to a farmer's market and negotiating in real-time for what you want. You can identify the produce you want and make bids right there and you would be willing to pay a premium for a perfectly ripe tomato vs. one that was too early or too late."

The final two categories -- buying services and rep firms -- appear to be networks but are actually different animals.

"A buying service does not actually own the rights to sell or represent specific media," Treffiletti explains. "A buying service makes it easier for you, the advertiser, by becoming an effective one-stop shop for your media needs. From a technology standpoint, a buying service tends to focus on buying tools, which create a more efficient process."

Buying services are not media-exclusive, and their buying methodology is the same as for advertisers: CPM, CPC and CPA.

Unlike ad networks, rep firms do not have any technology that ties together their sites, they are typically not exclusive, and they are transparent in their product offerings.

"What a rep firm effectively does is leverage existing relationships with advertisers and marketers to provide a service for publishers," Treffiletti says. "They can be a one-stop shop for advertisers looking to reach a different audience, and they make it easier to hear about different sites in one meeting. But that is their primary role. They are a valued service as not every site can hire the necessary staff to grow, and in the early stages of a company's growth, they become a cost-effective way to drive revenue without creating more overhead."

I hope that helps. If anyone else has thoughts on the topic, please add them to comments below. And send me your questions -- yours might get featured in the next Dear Dawn!

Dawn Anfuso is senior editor, iMedia Connection.