Has the significant shift of ad dollars from the traditional direct response media to online lulled the industry into complacency and left us unprepared to capture the significant part of the ad dollars that are NOT direct response?
In many respects direct response was the low hanging fruit for the internet. Direct marketers (some under pressure from their financial backer) needed to hit their aggressive sales goals and online was easy to implement and almost risk free. Advertisers set their budgets and their CPA goals and sites, and ad networks delivered exact impression numbers as they were asked. Advertisers got more excited, ramped up their online budgets and went as far as saying that the ONLY worthwhile direct response is online response. This gave a false sense of momentum as dollars flowed in significant amounts for the first time. New ad networks started sprouting like weeds and terms like behavioral targeting and CPA optimization became part of the industry conversation. But, with DR, we were capturing only a fraction of the total ad dollar spend.
The remaining ad spend is not yet here today, but is coming faster than we all thought. Numerous reports say that although there is softness in traditional media spending, we can expect continued growth in online advertising this year and in the years to come. The big brands are finally realizing that audiences are better found online than in front of a TV set where remote controls dodge ads or TiVos skip them entirely. But the question is, are we ready?
I would argue that vertical networks are better prepared than other kinds of ad networks.
Horizontal ad networks are built around serving direct response advertisers as they focus on two main parameters-- reach and feedback technology. While this works well for DR campaigns, it fails to deliver any value for branding campaigns because they fail to engage the target audience. There is a significant brand interaction and engagement process that is completely missing and is only achieved through strategic execution of branding campaigns.
In spite of their claims of transparency, most ad networks operate as partially or completely "blind network"-- meaning that they do not tell advertisers up front where their ads will run. Given the size and scope of some networks, with tens of thousands of sites under management, I doubt that brand stewards will risk what it took decades to build on the chance that their ad will appear in a highly inappropriate context. The Wall Street Journal recently outlined the severity of this problem.
Most networks have lots of different kinds of sites to offer advertisers. But do they have enough relevant inventory to deliver the millions of impressions that major brand advertisers need if they are to supplement or replace TV advertising? To get more impressions, some ad networks buy inventory from publishers and then sell to advertisers on a CPA, CPC basis. This might work for DR, but for branding initiatives inventory control is critical to the success of the campaign, which won't be possible through an ad brokering model.
The big advantage vertical networks have (and there are ones for auto buyers, travelers and health-minded individuals as well as our own technology play) is that we have nothing but the context of interest to potential buyers. This means that every inch of our inventory is in an environment with relevance to our marketers. We don't have to fudge users from irrelevant sites to make our numbers. With this kind of extremely high audience composition, vertical network buys tend to end up being more efficient for advertisers.
Media content networks (CNET, IGN, Ziff Davis, et cetera), despite their ability to execute branding campaigns, cannot do it alone. For one, they don't have enough ad inventory given the scale major brand advertisers require, and there aren't that many of them out there. Take the tech vertical as an example and you'll see how few choices there are for advertisers when it comes to established media networks with significant reach. The overwhelming demand results in sold-out inventory, which will force media content networks to jack up prices and leave advertisers with even less choices.
While BT has improved targeting capabilities of horizontal ad networks leading to more successful direct response campaigns, it hasn't proven successful for branding clients. Behavioral targeting networks claim serving an out-of-context diaper ad to a new mother will produce a higher response rate than the same ad served where she might be researching ways to get her infant to sleep through the night. I would challenge that a mother actively engaged on a site of her choice and assuredly in a "baby mindset" is a better prospect than the same mother searching for a cake recipe or movie starting time three weeks later.
Many horizontal ad networks have non-exclusive deals with their sites in their portfolios and in reality control only a portion of the inventory they claim to represent. Often, it is less desirable inventory since the sites are keeping the best stuff for their own sales reps. And, why not? They don't have to share a commission on those sales. Advertisers should take a hard look at what inventory and what kind of ad placements most horizontal networks can offer. If a major brand wants to really capture the hearts and minds of an audience, it will take more than "bottom page" banner ads; it will take high impact and engaging ad units such as road blocks, interstitials, online video and various other rich media units all working in conjunction with each other. Most ad networks can't offer or coordinate this.
Finally, it stands to reason that general ad networks have to be jacks of all trades to rep sites with vastly different content. This makes them masters of nothing. Vertical ad network execs are wholly devoted to their category becoming more knowledgeable and more able to offer strong strategic and tactical advice with each new campaign. That knowledge accumulates and becomes a valuable resource for new or major category advertisers who want to go fishing where the fish are.
While direct response initiatives brought accountability to online and revamped our industry, it will be branding dollars that will provide the greatest opportunity for ad networks in the upcoming years. Vertical networks are well positioned to deliver on the opportunity while others have to play catch up.