Data from a Collective Media study reveals what the future of ad networks may hold, how the market's perception of this segment has changed and what adoption rates currently are.
The ad network landscape continues to grow and evolve at an amazing rate. Just when you thought there couldn't be any more entrants to this enormously crowded field of players, new publisher brands are entering the space with their own "vertical" spin on this highly successful business model.
Recent announcements by Forbes, IDG, BET and MSNBC, among others, have proven that you don't have to be a start-up to throw your hat in the ring and capture your fair share of this fast growing display advertising market. What's most interesting is that many of these leading brands are focusing on extending their audience reach by networking the innumerable independent, topical blogs rather than banding together vertical sites with similar appeal to increase their reach and market share beyond their wholly owned site(s).
While blogs present a large, under-monetized inventory base, they have proven to be a tough sell to Fortune 1000 advertisers looking to diversify their media buys beyond recognized portal and publisher brands. As a point of fact, the results of Collective's 2008 Ad Network Study ranks blogs second only to user-generated video as a "no-no" for interactive agencies/advertisers campaigns (39 percent of respondents place blogs on their "do-not-buy" lists).
Unexpectedly, social media sites, which have carried the burden of convincing advertisers to run with them, have a better standing among these online media buyers -- with only 27 percent of agencies/advertisers having them on their "do-not-buy" lists.
While vertical networks will continue to garner a lot of attention and market share in 2008, the study shows a major shift in the market's perception of ad networks and the primary drivers influencing usage by agencies and advertisers. When comparing 2007 to 2008 results, the market now values audience targeting and inventory quality far more than gross reach and efficiency as primary benefits of working with ad networks. As a result, we see that brand advertisers are open to buying from ad networks where they were never a material component of the average media buy in the past. Ad networks that deliver quality inventory and reliable targeting solutions are no longer considered for direct response initiatives alone, but are complementing buys that previously were assigned to premium publishers and portals exclusively.
Although ad exchanges have been a hot topic, adoption by agencies and advertisers is lagging -- approximately 10 percent of those surveyed had tried ad exchanges in 2007. The "automation" of online media buying/selling is definitely technically feasible, but ad exchanges, unlike stock exchanges, can't factor in the nuances of how media, not just online media, is bought and sold.
Online publishers and agencies alike have an enormous investment in their people and services. Their ability to think strategically and offer/evaluate the value and differentiation of one ad impression compared to another is critical to the process. This is much more complicated for a brand advertiser or a direct marketer that values its brand, beyond how it performs on a strict CPA basis. For these advertisers, important buy criteria take center stage and today ad exchanges can't adequately consider editorial environment, transparency, share of voice, audience targeting, etc. Based on these criteria, don't expect ad exchanges to instantly marginalize premium ad networks and publishers where brand advertisers are concerned.
As the data suggests, the industry predicts more agency spending to be allocated to ad networks in 2008. With this, we should see a stratification of players emphasizing their core focus and benefits. Many will stay committed to the pure blind, performance market while others go vertical, video, exchange or premium. However as the ad network landscape evolves, there is one thing we can count on: more choices for buyers and sellers. Let's hope this comes with greater innovation and value for all stakeholders.
Joe Apprendi is CEO of Collective Media.