Online Ad Networks, The New Black?

5 Comments

The FeedBurner Networks and Adify are two recent examples of companies that are looking to cash in on the current boom in online advertising, and creating their own networks. They might not be alone, and even some of the older Web 2.0 properties might be looking to make an online advertising network play here. With nearly $16.7 billion being spent on online advertising, it is hardly a surprise that almost every is willing to throw their hat in the ring. The situation reminds me of the early days of Web 1.0, when ad networks popped up on a weekly basis, only to vanish is mists of time.

In the latest edition of the Om & Niall PodSessions, we discuss this trend and ponder about the issue of how some like FeedBurner share the bounty with the publisher. Will they do better than what the likes of Google, YPN and newer players such as Federated Media? Or will this be as Niall aptly writes is “another attempt to mine the seemingly free gold laying on the riverbed named user-generated content.”


Beyond that there are some other problems which these networks will have to contend with: the availability of crack sales teams with deep relationships with the advertising community, that typically moves at a pace slower than the Silicon Valley. The shortage of advertising sales talent is the Achilles heel of the new Web 2.0 ecosystem. (Ironically, the old media has a built in advantage here.)

Think about it this way – desktop applications that were once sold as shrink-wrap is now advertising supported. 411 services that cost as much as $1.99 a minute are being replaced by ad-supported services, and well even AOL is kissing a multi-billion dollar access business goodbye and replacing it with an ad-only model. Even Bill Gates has espoused a future where many of Microsoft’s services will be bolstered by advertisements.

You can listen to the podcast and comeback and your thoughts.

5 Comments

Kevin Burton

“Beyond that there are some other problems which these networks will have to contend with: the availability of crack sales teams with deep relationships with the advertising community, that typically moves at a pace slower than the Silicon Valley.”

Could someone from your crack sales team call me? I could really use some crack!

Jordan Mitchell

I disagree that the availability of sales talent is the major obstacle facing Web 2.0. That was a Web 1.0 problem.

The key is targeting and ad relevance. With relevance, you don’t have a user backlash, and everyone wins — the user, the publisher and the network.

The long tail of Web site publishers is getting longer, and they’re using ad networks and ad marketplaces to generate ad revs (the difference being that in ad marketplaces, commissions are lower and advertisers have visibility to the publisher network. With ad networks, the publisher network is a black box.).

At the same time, we’re seeing a longer and longer tail of advertisers (even with budgets of $100/month or less). You cannot match the supply and demand with talented salespeople. The online ad industry is successfully(?) addressing this with deeper and deeper targeting (keyword and behaviorial) and automated ad buying. I believe these two factors alone are driving the increase in online advertising.

While the likes of Google and others are basking in the profits from online sales automation and keyword-based inventory, the large traditional networks from Web 1.0 (like ValueClick, 24/7 RealMedia, etc.) are still primarily offering their publishers’ inventory across a dozen categories. Take a look at their revenue growth. Take a look at the eCPM they offer publishers.

The long tail of advertisers want to buy keywords, not categories, and they want to pick their publisher (marketplace model) for CPM buys. And they are all empowered with the tools to exactly measure their results.

Publishers are currently less empowered. They have many choices, can swap networks easily, and can negotiate the commissions down as their traffic grows. But they can’t profile their user base in order to contextually/behaviorally optimize their ad inventory.

Therefore, the holy grail is a mechanism (which users will accept) by which Web site publishers gain access to the desktop. But that’s another topic.

Dick Costolo

Hey Om, we are going to enable publishers to aggregate themselves for multiple reasons, one being in order to enable advertisers to aggregate purchases across a network of properties with self service tools for the publishers and advertisers, but there will be other reasons as well, including cross-promotion and discovery, etc. We have a ton of work to do before we fully launch these, and that work includes making sure we provide the tools that network members want and find that they need after experimenting, some general debugging, and disabling the stuff that people find confusing. Of course, creating or participating in networks is entirely at the individual publisher’s discretion, any revenue is shared with the publisher just like any participation in the ad network, and there are lots of publishers who won’t want to advertise, which is also purely at their discretion.

veridicus

At some point there will be some backlash to the advertising. Many people disliked Opera because the free version showed ads. Many (including myself) will not subscribe to RSS feeds containing ads. There’s a point where it becomes too much of an annoyance and it’ll be interesting to see when the limits are hit.

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