Ad Network & Exchange Guide 2010

What Happens When Publishers Walk Away From Ad Networks?

Partnerships Can Help Many Media Companies by Providing Advertisers With Better Services

By Published on .

NEW YORK (AdAge.com) -- If one thing is clear about the intense debate within the publisher world about if and how they should work with ad networks, it's that there's no answer.

More than two years ago, ESPN.com walked away from the ad networks, and the decision has yielded no regrets.

"Walking away from the ad-network business has helped us focus," said Lisa Valentino, who heads up digital and mobile as VP-digital sales for ESPN.com. While it was never a large amount of inventory, pulling out sent the right message to the sales force and to advertisers, she said. That renewed focus is now yielding dividends as the economy starts to turn.

Ms. Valentino said revenue would be up double digits this year and CPMs, or the cost for 1,000 ad impressions, were also up. "Our mobile business is up triple digits, our sell-through is up. We're innovating. Walking away has helped us focus on multimedia, video, social and creative innovation," she said.

But not every publisher is espousing such an extreme view. First off, not everyone has a brand like ESPN, a cable network to support digital ad sales or the reach of the sports megabrand. And if you're in a business lacking that foundation or the resources to commit to a dedicated sales force, an ad network may be a great option.

'High-class problem'
Whelan Mahoney, publisher of Inc.com, is working with Undertone Networks to extend reach because inventory on Inc.com is starting to run out. "It's a high-class problem to have," he said, noting that all extensions onto network sites are made transparent to advertisers.

Since cookies follow Inc.com visitors to other sites, Mr. Mahoney said, he is not vetting each site and is comfortable the destinations are appropriate because the customers are choosing them.

Three Inc.com advertisers now extending to the Undertone network are Comcast, Principal Financial Group and an upcoming DHL campaign. Success is being measured, Mr. Mahoney said, by delivery and click-through rates. Given the level of banner-ad burnout, Mr. Mahoney suggests click-throughs might actually improve because consumers who see a message may finally click on it through a partner site rather than being exposed repeatedly on each visit to the Inc.com site.

Russ Fradin, president of Adify, which provides a technical platform for vertical networks, said a hybrid model in which publishers sell their own inventory and also use high-volume networks for remnant inventory is where the trouble begins. He told a gathering of industry executives recently that a hybrid publisher's model is a deadly addiction leading to eventual brand ruin.

"I'm not anti ad-networks," Mr. Fradin said. It's how one uses them. "For high-quality premium publishers who can afford sales forces, it can be very dangerous."

Not surprisingly, he believes premium niche brand publishers can continue to do well by partnering with a niche ad network.

Since nearly 85% of inventory in the top 10 ad networks comes from the top 10 publishers, according to ComScore, advertisers know they can buy at a better rate. The Interactive Advertising Bureau's benchmark study with Bain & Co. was an eye-opener, revealing average realized CPMs on ad networks ranged from 60 cents to $1.10 per 1,000, vs. $10 to $20 in direct-sold display inventory. This dramatic price differential, the study warned, would lead to the erosion of premium CPMs if publishers maintained their current behavior.

Looking up
But pricing on quality brand inventory is remaining stable, Mr. Fradin said. Adify tracks ad prices on 11 vertical categories and found in the fourth quarter that seven of those were up, with travel at a high of $8.95 and real estate at a low of $2.36.

The real story, maintains Jay Sears, general manager of ContextWeb's ADSDAQ Exchange, is that the ad network business is so good, publishers are getting into it. The fact is a single web domain -- BrandedPublisher.com -- is a walled garden. And you simply cannot help your advertisers with their full array of challenges while staying within a walled garden. ContextWeb has over 40 publishers and networks that actively purchase inventory from the ADSDAQ Exchange to package and sell to their advertisers.

CBS late last year, for example, announced the launch of its own internal ad network to serve 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.

The Interactive Advertising Bureau recently released standards that will allow ad networks and exchanges to apply for voluntary certification so that marketers and agencies have better control over where ads are placed and not appear next to content they deem inappropriate.

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