What Is an Ad Network? Isn't That a TV Thing?

Your Questions Answered: Networks

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Not in this case. An ad network is a group of sites that a portal or a media company can sell collectively to an advertiser. But just like TV networks, the point of selling as part of a group is to increase scale and reach in an ever-fragmenting web.

ARE NETWORKS A NEW THING?

They've been around since the early days of the web, but were mostly the domain of direct-response advertisers. Now, as the web has become increasingly fragmented and targeting tools grow more sophisticated, brand marketers are starting to warm up to ad networks as well.

WHAT DO NETWORKS SELL? JUST DISPLAY ADS?

Some networks sell text ads, some traffic in display and others sell things like video ads and ads in video (not necessarily the same thing). Networks also differentiate themselves by how they target. You've got performance networks that use a variety of optimization tools to try to increase the value of often low-priced, behavioral-targeting networks that use a person's past web-surfing habits to target them with relevant ads; contextual networks that try to match an ad's subject to that of the page on which it appears; video and widget networks that sell in, well, videos and widgets; and rep firms, which are more like an outsourced sales staff for smaller but often high-quality sites.

WOW, THAT SOUNDS CONFUSING. HOW DO I BUY INVENTORY FROM A NETWORK?

Start by figuring out what you want: General reach or a specific audience? Is your end goal action-based, like clicks or newsletter signups? Or is it the more general brand-building that a site-specific rich-media network could provide? If you want clicks from a broad 18-to-49 target, any one of the portals or major ad networks can help by using text, display or cost-per-click-based video ads. Are you seeking a more granular audience? Perhaps something like MTV Networks' Logo ad network for the LGBT audience or Complex Media's group of blog and community sites for urban males aged 18-to-34 could be of use.

IF I BUY A NETWORK, DO I KNOW WHERE MY AD WILL APPEAR?

It depends on the network. Some networks operate blind, meaning an advertiser doesn't know where its ads will appear. This usually happens with straight performance networks. Other networks allow you to cherry pick specific sites. (Or, as the case may be, avoid certain sites.)

I'M A PUBLISHER. WHAT'S IN IT FOR ME TO GET INVOLVED WITH A NETWORK?

Some networks will buy a publisher's inventory and then use their targeting tools to sell it at a higher price. This is called an arbitrage model. Other networks work on a revenue-sharing basis, where they will sell your inventory for a cut of the deal. To gain contracts with lucrative publishers, many networks will guarantee a minimum amount of revenue through the agreement.

WHO ARE THE TOP NETWORKS?

AOL's Platform A reached 91% of the online audience with 166.8 million unique visitors in January 2008, according to ComScore. It was followed by Yahoo's network (155.8 million uniques), which includes recent acquisition Blue Lithium; the Google Networks (143.2 million uniques); and Specific Media (142.3 million uniques). But just because it's big doesn't mean it's necessarily the right network to buy -- there are tons of vertical networks that specialize in certain types of audiences or sites.

WILL CONSOLIDATION AFFECT THE SCALABILITY OF AD NETWORKS?

Denmark West, president of BET Digital Media Group, said, "You're going to see more competition. ... You'll start to see a higher demand on not just sales but systems. The [necessary] infrastructure is going to require a large investment."

OK, SO WHAT'S A VERTICAL NETWORK?

Vertical networks allow advertisers to target more specific demographics and communities within a larger network; for example, male gamers aged 18-24 through Heavy.com or fashion-loving women18-34 on Glam Media. Existing media companies also are getting into vertical networks to extend their online reach, including Martha Stewart Living Omnimedia's Martha's Circle or Nickelodeon's ParentsConnect, to name a few.

I KEEP HEARING ABOUT AD EXCHANGES. EXPLAIN.

The idea is borrowed from Wall Street, where buyers and sellers all trade in a central market, in real time. Networks put inventory into the exchange to be bought, most often by another seller, which needs the impressions to fulfill an advertiser request. Buyers can gain access to a pool of online-ad inventory that may not have been available through any one vendor.

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Portals & Publishers Compete for Ad Gold

Nada Stirratt is on both sides of one of the hottest debates in online advertising: When it comes to vertical targeting across ad networks, who does it best -- the portals or the publishers?

Ms. Stirratt, exec VP of MTV Networks Digital Media, is positioning her company's multiple offerings to the middle of the ad network's short and long tails. A major portal-based ad network such as AOL's Advertising.com or Microsoft's DrivePM has more scale and diversified audiences to sell an advertiser looking to target through search, display and other algorithm-based ad models.
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But a publisher-based vertical ad network, centered around a specific demo such as parents (Nickelodeon's recently expanded ParentsConnect) or the LGBT community (the Logo network), can aggregate scale for advertisers looking for the same reach, but target through engagement-based ad models such as banners, video and brand integration.

Although Ms. Stirratt is steering clear of the algorithm model for MTVN's properties, her digital-media group has recently aligned with Microsoft on a broad-based partnership that spans technology, data, content and ad-serving to help monetize remnant ad inventory on the back end. On the front end, it allows her to focus on what she considers the "middle part of the tail," the vertical ad networks.

"It's very different from 10 years ago, when you were talking about AOL and AOL only. ...You'll see a lot more of these distribution deals and see [vertical ad networks] playing a bigger role. "

Ms. Stirratt is not alone in this blitzkrieg approach to targeting demos. A wide range of publishers have built their own large-scale ad networks around specific audiences by following a two-pronged approach: they start with a core site (like Heavy.com or MarthaStewart.com) that generates steady traffic but maybe not enough scale in unique visitors to represent a major buy for a marketer, then ramp up that scale by adding other similarly-themed sites to the network and selling across the impressions.

That's a major selling point for Heavy.com -- a site geared toward men 18 to 34 -- that reaches around 5 million unique visitors a month on its own. But after its network of partner sites is factored in, that audience grows to as much as 17 million to 20 million uniques, depending on how broadly an advertiser wants to target the audience. Eric Hadley, a Microsoft vet who joined Heavy as its chief marketing officer last September, is hoping to expand that audience to closer to 30 million by year's end, having just launched the Heavy Men's Network to include sites such as Vidshadow, USA Today's BNQT, and urban-entertainment site QD3 among the Heavy-hitters.

As consumers spend time on different sites within their lifestyle categories, so go the ad dollars. In its annual Digital Outlook report last month, Microsoft-owned Avenue A/ Razorfish showed year-over-year media spending on the main portals decreased for the first time in the past four years, declining from 24% in 2006 to 19% in 2007. Concurrently, the number of individual sites the agency spent its dollars more than doubled from 863 to 1,800 in 2007.

Ryan Roslansky, VP of product management for Glam Media, said the network has begun to cast a more critical eye before welcoming more publishers to a network that already includes more than 400 indie fashion and lifestyle sites. "We've really started to determine from an advertising-dollars side it's really about quality not quantity," he said.

Carl Fremont, senior VP-media director at Digitas, said the larger vertical ad networks tend to get the same consideration as a niche print or cable buy, and the buys are always based on the audience and the content. The targetability is the most appealing factor, but "driving revenue from scale is going to be one of their greatest challenges. "

Because of this sentiment, the major portals aren't sweating their status just yet. Advertising.com, the largest online ad network and part of AOL's Platform A, recently added a Performance Video Product to bring more formats and accountable metrics to an already sizable client base. President Lynda Clarizio said, "It's all about providing choice and options to advertisers. The bigger your network is , the greater the targeting options."
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