At the same time, some predict a coming shakeout will reduce the number of third-party ad serving companies even as the technology continues to evolve. All the while, the debate about setting standards to measure online ads' performance goes on.
"[Centralized] ad serving lays the foundation for doing a lot more things," says Bob Habeck, managing partner and chief media strategist for DDB Digital, New York.
LAYING A STRONG FOUNDATION
The interactive agency outsources its ad serving to MatchLogic, Westminster, Colo.
"It lays the foundation for database marketing and it simplifies tracking creative. Also, it allows us to start to put our media buys into more traditional perspectives-we can start to understand reach both within a site and across a campaign," Mr. Habeck says.
Such data is crucial to advertisers who are demanding proof that their online campaigns are paying off. That proof is in the form of impressions, click-through counts and conversion rates. Increasing online ads' efficiency is the reason many agencies have centralized the function or turned to outsiders, says Evan Neufeld, senior analyst, Jupiter Communications. "But the problem is that a lot of [agencies] haven't gotten past the heavy lifting [of serving ads to Web sites].
'GETTING UNDER THE HOOD'
"Agencies are getting stuck on what had been the publishers' side and [are now] serving ads, but they haven't yet seen the value of getting under the hood and looking at all that data to measure ROI. Many agencies have underestimated how hard it is to serve ads. It requires them to be much more involved in technology," Mr. Neufeld says.
Still, some interactive agencies are centralizing ad serving just as third-party companies scramble to produce technology that does what they say it can do-measure online ads' effectiveness.
"[This] is the year we'll see a dramatic increase in the number of advertisers and agencies using ad-serving technology," says David Rosenblatt, general manager, closed loop marketing for ad network DoubleClick, New York. That's because most agencies are convinced centralized ad serving, whether outsourced or executed in-house, will eventually deliver that crucial information about how consumers are interacting with banners, pop-ups and other online advertising.
STREAMLINING UNWIELDY PROCESS
Working with a third-party company or an in-house team devoted to centralized ad serving streamlines what has been an unwieldy process for many agencies.
"[Centralized] ad serving centralizes the reporting process," says Larry Ware, VP-global services for NetGravity, a San Mateo, Calif.-based ad serving software and technology company.
VAST AD-SERVING OPTIONS
NetGravity recently launched AdCenter for Agencies, a browser-based ad-management service for agencies. "Otherwise, agencies would do buys on 50 sites and wait for the sites to give them back numbers and the numbers could vary depending on the site [serving the ad]," Mr. Ware says.
But with frequent changes in technology, several incarnations of ad-serving technology are available, depending on the company that developed it, each with its own strengths and weaknesses. So interactive agencies have several choices available to them. One choice is to outsource all ad serving to one ad-serving company.
New York-based Agency.com, for example, has NetGravity serve all its clients' ads.
"Third-party ad-serving companies already have worked with hundreds of ad-supported sites out there and are used to all the technical requirements," says David Manning, Agency.com's media director. "If we relied on [a Web site's] own ad-serving capabilities, we would be limited by the amount of information [about an ad's performance] we'd have access to. But if we have a third party serve our ads, we have access to a wealth of information and can tie our ad measurement into key action points within our client sites."
Agency.com can create customized campaign performance reports for its clients via NetGravity.
DDB Digital similarly works with one company to serve all its ads. The agency is using MatchLogic for every online campaign it has live right now, Mr. Habeck says. Like Agency.com, DDB Digital would much rather outsource than bring ad serving in-house. "That would be something that's way too complex for us to take on," he says. "That's MatchLogic's expertise."
Mr. Habeck says the agency never would work with multiple third-party ad-serving companies at one time because their technologies and reporting capabilities differ too much. "It wouldn't be possible to compare apples to apples," he says.
But other agencies do work with multiple third-party companies to serve ads.
"We are using more than one [ad-serving company] because the companies have different strengths," says Lynn Bolger, senior VP-media director for APL Digital, the interactive arm of New York-based Ammirati Puris Lintas. "We use the best company per our clients' needs, and we are trying to familiarize ourselves with the benefits of each." The interactive agency outsources ad serving to MatchLogic; DoubleClick, which serves and tracks ads using its Dynamic Advertising Reporting & Targeting (DART) technology; and AdKnowledge.
JUGGLING MULTIPLE PARTNERS
Darwin Digital, New York-based Saatchi & Saatchi's interactive shop, also works with multiple third-party ad servers, including MatchLogic, DoubleClick and Accipiter.
"We are using a few companies because all of them have a slightly different methodology and one methodology might be better than another depending on a client's needs and, more important, the type of ad being served and what we are trying to measure," says Greg Smith, director of strategic services at Darwin.
Mr. Smith is convinced third-party ad servers will help agencies better target their ads. "That's the promise of addressability on the Web-serving up only the ads you know a person wants to see. At the end of the day, the objective of new media is to target efficiently. Eventually, third-party ad servers will be able to give us patterns in terms of where people are going on the Web," he says.
But says David Levin, VP-strategic services for i33 Communications, New York: "Ad serving ultimately will be bundled into the services agencies provide to clients."
I33 is in the minority in being an agency that both serves and tracks ads in-house. I33 launched its proprietary ad server, AdMaximize, in 1997, believing that "long-term, this would be a better way to go," Mr. Levin says.
WHAT A MEDIA PLANNER NEEDS
"An agency-based server offers a lot of advantages," he says. "We built ours from the perspective of what a media planner needs to help a client win. We felt we needed to focus on reporting what happens and give the media planner the data to use to do analysis for clients." AdMaximize tracks data such as impressions, clicks, sales and pages visited.
MORE OBJECTIVE REPORTING
Mr. Levin argues agency-based ad serving can yield more objective reporting.
"For us, this isn't our sole revenue stream. That allows us to do a much more honest metric to measure ads, [for example] we audit whether the ad is fully loaded to the user's browser."
Still other interactive agencies are building a hybrid of sorts, taking a best-of-breed approach to centralized ad serving.
Ann Arbor, Mich.-based Beyond Interactive, for example, uses DoubleClick's DART technology for ad serving, but is building its own data warehouse to bring data analysis and reporting in-house.
"Our plan is to take the data DoubleClick gives us and load it into our own database so that we can do any data analysis we want for our clients rather than rely on DoubleClick to generate reports the way we want to see them," says Jonn Behrman, CEO at Beyond Interactive. "There's no beating being able to do [reporting] in-house."
STILL A FLAWED SYSTEM
Regardless of whether they bring ad serving in-house or outsource to third-party ad servers, many agency executives say ad-serving technology, because it is so new, still has many flaws.
"Tracking and targeting [are] supposed to be a benefit of thirdparty ad serving companies," says APL Digital's Ms. Bolger. "We get reports on a weekly basis, but buys are being managed by an eyeball technique rather than by any kind of automated algorithms. It's not really an exact science yet."
SMALLER POOL OF PLAYERS?
And debate continues as to whether industry shakeout will reduce the number of players.
"I think we'll see continued consolidation," says Ms. Bolger. "In the next two or three years, we'll see only two or three companies accounting for 80% of the ads served in the industry."
A standard, industrywide way of counting inventory, measuring online advertising's effectiveness and reporting still is only in early stages of development. Through industry efforts such as the FAST coalition, groundwork is now being laid to eventually develop such a standard, or at least specifications.
SORTING OUT THIS 'MESS'
Efforts such as these could be just the solution to what Jupiter's Mr. Neufeld calls "a mess, but an important mess that needs to be figured out."
"Eventually, a standard makes sense," says Mr. Behrman. "[Ad-serving technology] is developing at different rates and there are a lot of inconsistencies. A lack of standards is a reason for many of the problems that occur. But we are in a