The 24/7 Real Media SVP of media and technology chats with our executive editor about the renaissance of ad networks, how to differentiate among them and more.

I recently had the opportunity to chat with 24/7 Real Media's Ari Bluman about what's going on in the ad network space.

Brad Berens: After the bubble, ad networks had a bad reputation, but lately the stock for this sort of business seems to be rising... why is that?

Ari Bluman: When the bubble burst, all ad networks suffered badly as advertisers either went out of business or went into hibernation mode. Publishers, however, still had a lot of inventory to sell, so they cut deals with networks that bought their inventory at a low price, sold it high and kept the profits. This game of arbitrage truly gave ad networks a bad reputation, and although the practice still continues I'm glad to see that increasing advertiser demand for inventory is enabling publishers to secure more profitable deals.

The online ad industry is currently undergoing a renaissance, with growth rates that we haven't seen since 1999. The IAB, in fact, is predicting 30 percent growth this year, and Wall Street analysts firms like Piper Jaffray are predicting the industry will grow to $55 billion globally by the end of the decade.

There are several reasons for this:

First, because advertisers are coming to realize that the online world offers greater flexibility, measurability and accountability that traditional media cannot match, plus unparalleled targeting capabilities that let advertisers reach specific niche audience segments to achieve a greater return on their investment.

Second, advertisers are shifting their focus and ad dollars more towards online and digital marketing because, simply put, that's where the audience is. Broadband use at the home and work is causing a major decline in usage of other forms of media. This trend will only continue as more people begin adopting next generation technologies that let them take content with them, such as cell phones, PDAs, iPods and hand-held gaming devices. That's why more and more advertisers are turning to networks like 24/7 Real Media, who already have the infrastructure and expertise in place and can deliver ads across a broad spectrum of digital media.

Berens: Relatedly, 2005 seemed like a terrific year for Ad Networks-- with a new ad network seeming to appear on the landscape every few days. Why do you think this happened in 2005? And what do you predict for ad networks in 2006?

Bluman: 2005 was a watershed year for the online ad industry-- and for the global economy in general. As businesses began to prosper, they were able to pour more spending into online and digital marketing. As more advertising dollars began flowing into the market, more and more companies formed in order to capture their share of the action.

If the projections from the IAB and Piper Jaffray are true, then the industry can expect to see even more new players joining the field throughout 2006 and beyond. These players will likely specialize in one particular area, such as behavioral targeting, in order to make themselves attractive takeover targets somewhere down the road. 24/7 Real Media is going to focus on its three core businesses -- technology, search and media services -- and will continue our pattern of global expansion.

Berens: Let's talk about differentiating factors among different networks, and this is something that we've been following closely here at iMedia for a while-- as you might have noticed with our Ad Networks Crib Sheet. Without it being too much of a commercial for 24/7, what are the three factors that you recommend advertisers think about when trying to choose an ad network?

Bluman: First and foremost, they should look at the network's pedigree -- it's past and present client roster, the longevity of its client relationships, et cetera -- to make sure that they're choosing a reputable partner. One way for an advertiser to know is if the network is willing to engage them in a long-term partnership, sharing both the risks and rewards, instead of playing the arbitrage game, which we feel is detrimental for both publishers and advertisers.

Second, they should make sure that the network they choose has significant audience reach, uses the most cutting edge technologies and methodologies, and has the capacity to scale up to meet the advertiser's needs. The ability to serve ads into any digital format will be critical for the future, as will the ability to target ads behaviorally, demographically or by other means in order to effectively reach the desired audience at the lowest possible cost.

Third, we're living in a global economy so having a global footprint will be crucial for advertising networks in order to provide seamless and localized digital marketing services to its global clients. More that half of 24/7 Real Media's revenue originates from outside of the U.S., and that number is growing every quarter. This is because we have offices in 12 countries, including the fastest growing online markets, such as Japan, and we're able to offer a broad spectrum of services, such as SEM and Behavioral Targeting. Networks that are slow to expand will soon be left behind as these other emerging markets race to catch up to the U.S.

Berens: Following up on your last answer, a lot of the time people think about ad networks as a terrific way of extending the reach of a campaign, but you talked about targeting "ads behaviorally, demographically or by other means." Can you drill down a little bit on this? Can ad networks limit reach and target by geography, daypart or demographic? If so, what are the strengths and limitations of this sort of targeting?

Bluman: Geographic targeting based on IP address location has been around since the beginning, but with the advance of new technologies, ad networks are able to offer a much broader range of targeting options. 

Right now, Behavioral Targeting is attracting the most attention for its ability to reach highly relevant audiences whenever they appear on any one of an ad network's sites.  Advertisers love it because they can pinpoint their messages to reach a specific segment -- such as Gamers, Women, Stock Watchers, et cetera -- with greater accuracy and at a lower cost than if they advertised broadly on a more expensive highly-trafficked site or portal.  Publishers love it because it increases the CPM value of their lower tier inventory and increases revenue.

We have other targeting options and techniques in our arsenal as well, including demographics, technographics (e.g., bandwidth, operating system, browser, et cetera), time of day, even search engine terms. We can conduct surround sessions that reinforce the advertiser's message on every page throughout a site visit or across the entire ad network; ad sequencing, which are episodic ads that draws viewers deeper into the "story" with each click, and retargeting -- one of the most effective forms of BT-- which serves relevant ads when visitors return to a site, or visit any other site on the same ad network, based on previously viewed site content.

The technology has progressed to a point where I simply can ask an advertiser, "Who are you looking to reach, and what are your goals and objectives?" From there I can provide, conservatively, five different options and utilize over 10 different targeting filters to achieve success. This may seem overly simplistic, but a considerable amount of heavy lifting is done behind the scenes, leveraging our extensive media network and using our award winning technologies. The end result is clear-- better targeting generates more revenue for both advertisers and publishers.

Brad Berens is executive editor for iMedia Communications.