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The case for ad networks

In November 2013, many witnessed a humorous exchange between industry luminaries Brian O'Kelley and Brian Lesser. O'Kelley was speaking with Lesser at the AppNexus summit, and referred to Lesser's Xaxis as a "trading desk." Lesser quickly responded, "We're not a trading desk -- we're a programmatic media company."

The exchange was good-spirited, but representative of a stigma associated in our industry with certain labels, one of these being "ad network." To media veterans, these two words conjure up imagery of a relationship-based, non-transparent entity, proficient at cookie-bombing and at gaming last-click attribution. The reality is that today the line has blurred between ad networks, trading desks, and programmatic media companies. Companies deemed as "ad networks" can, in fact, unlock significant value for customers and investors alike.

Here are three reasons why these companies should continue to exist and to thrive.

Many are technology companies

There are three top ways that ad networks source inventory today: via partnerships, via a third-party DSP, and via their own bidder. Companies deemed as "ad networks" who have gone public in 2013, including Rocket Fuel and Criteo, have built their own bidders and additional technology assets. Others, like Dstillery, have built out proprietary data assets, and excel at expanding a customer's first party data set. It is true that the majority of their revenue comes in via a managed service model, but it is a misconception that there is no technology there. These companies have an in-house DSP and more.

Ad networks allow a media buyer to outsource trading operations

Since my early days as a programmatic insider, I saw a misconception from those less familiar with RTB that technology alone can power successful campaigns. In fact, no DSP or buying platform has launched fully-automated, closed loop optimization. Automated media buying still requires a high degree of human oversight, and trading has become a specialized skillset. Not too long ago I witnessed a major entertainment advertiser attempt to take media buying in-house via a third-party DSP. Although the advertiser eventually succeeded, its original attempts to buy media at its target ROI fell short -- simply because it underestimated the operational rigor, effort, and expertise necessary to trade successfully.

The largest benefit of ad networks is their in-house specialized staff that performs the media buying on an advertiser or agency's behalf. Ad networks have done trading and media buying for a long time. Often they can help an agency or advertiser to increase profitability by not just exceeding the original media ROI target, but by saving on staffing costs, as well.

Transparency and exclusivity are now possible

Today's media buyers demand inventory transparency, as well as exclusivity between their inventory sources. Both are possible today as ad networks realize that their real value is in providing media buying expertise. An increasing number of networks today implement brand safety controls, turn on levers to combat fraud, and target publisher whitelists and blacklists. To ensure that a media buyer "doesn't compete with himself" by bidding on the same inventory across multiple networks, targeting is used. Most commonly, these tactics include exclusive geotargeting, different audience segments, or prospecting and remarketing separated across multiple platforms and networks.

In conclusion, I believe that ad networks will continue as a valuable member of the advertising ecosystem. Their specialization has shifted from relationship-based, non-transparent media arbitrage, to expertise in trading operations and technology. In many cases, ad networks can operate simply as an outsourced trading desk with deep domain expertise. Media buyers should evaluate ad networks based on total ROI, and consider their benefits on a per-advertiser, per-campaign basis.

George Tarnopolsky is the senior director of media platforms at Merkle.

On Twitter? Follow iMedia Connection at @iMediaTweet.

George is the Director of Account Management at Adelphic, where he leads a team of Mobile and Cross-Channel experts responsible for customer education, services, retention, and growth.    Prior to Adelphic, George led Platform Solutions at...

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