NEW YORK (AdAge.com) -- Hoping to get an ad on CBS.com, Gamespot, TV.com or CNET? Better call CBS. CBS is expected to announce Dec. 14 that it will no longer do business with third-party ad networks, and will instead sell all of its considerable online inventory on its own.
In doing so, CBS re-opens a debate that raged mostly before the economy declined: Are ad networks good or bad for online media and advertising?
Former Yahoo and Martha Stewart Living exec Wenda Harris Millard splashed gasoline on the fire nearly two years ago when she admonished publishers not to allow third-party re-sellers to treat their inventory like "pork bellies." Publishers such as ESPN, Weather.com, Turner Networks, Forbes and Gawker were among the more vocal publishers to stop doing business with ad networks.
But then the economy got bad, and the debate subsided as publishers scrambled for revenue, any revenue. Now, a host of publishers are looking at the downturn as an opportunity to wean themselves off the drip-drip-drip of revenue from networks in hopes they will be better-positioned when the economy gets better. With 60 million unique visitors a month, according to ComScore, CBS is the largest single publisher to publicly make the move.
"We are prepared to take a step back on revenue if we have to, but over time we will monetize at a much better rate than ad networks do," said CBS Interactive CEO Neil Ashe.
Like a lot of publishers trying to decrease their dependency on third-party ad networks such as Ad.com, ValueClick or 24/7 Real Media, CBS is launching its own internal ad network so it can service advertisers that want to buy demographics or remnant display advertising across CBS sites. The company said its internal ad-serving platform, Madison, can offer audiences based on demographics or online behaviors, within CBS properties.
Mr. Ashe said CBS will also pull its inventory from some, but not all, online ad exchanges. CBS will continue to offer inventory to Yahoo's Right Media Exchange, Google's DoubleClick and demand-side exchanges such as Publicis Groupe unit Vivaki's Audience on Demand. "What we are careful not do is open our inventory to third parties that may have data interests not aligned with our own," Mr. Ashe said.
Ad networks arose en masse during the past decade in response to one problem: Publishers were generating many more ad impressions than they could profitably sell. Networks came in and offered to take that inventory and write publishers a check; they then turned around, chopped up the inventory and resold it largely to advertisers that paid by response or click.
Ad networks monetized by acquiring the inventory at as low a rate as possible, then adding sophisticated data and analytics to get a higher return. Because these were capabilities most publishers didn't have, taking the check seemed prudent. But then publishers started blaming the industry -- which grew to an estimated 400 ad networks -- for depressing ad rates across the web. Why should a marketer pay $10 for 1,000 impressions when 30 cents can probably get the same sites?
But in the meantime, much of the technology became ubiquitous -- anyone with a computer and a phone can, in effect, become an ad network. Publishers, too, could launch their own networks, and many have. Those publishers with scale, such as Yahoo, Google and Microsoft, acquired their own networks over the past decade.
Time Inc. launched its own internal network earlier in the year, and has been steadily turning off third-party networks ever since. Now it works with only one, former corporate sibling Ad.com. "Publishers have gotten smarter. We don't need to have 400 ad networks trying to do this; it only adds confusion, not clarity," said Time Digital President Kirk McDonald.
In truth, few individual publishers alone have the scale to impact the overall market, and networks are a key part of the online ad economy. For marketers and agencies, networks perform an important function by allowing them to get huge scale and efficiency without dealing separately with dozens of publishers.
Because the first big publishers made a show of dumping networks a few years ago, "the ad network marketplace has gotten bigger," said Mike Cassidy, CEO of Undertone Networks.
As for CBS taking its inventory out of the network market, Mr. Cassidy said, "It's not that big a deal, to be honest with you; it doesn't move the market." What will, he said, is if Yahoo follows through on its promise to kick networks off its Right Media exchange that don't add significant value with data or advanced targeting.
As publishers launch their own networks, this has added some new opportunities for third-party networks both as data and technology vendors, as well as additional sources of volume when a publisher needs more reach. That, and agency buyers start with a target audience first, the publisher or website second. If a certain campaign doesn't require a specific site (say, iVillage vu.s Babycenter), then the networks are going to be part of the buy.
"If you want to do something cool with a publisher, then buy directly," said Andy Atherton, CEO of Brand.net. "If you're buying standard media, networks offer a more efficient way to transact, regardless of your objective."
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