As Top Ad Networks Bulk Up, Can Niche Players Compete?

  |  October 4, 2007   |  Comments

Large networks are going through a period of consolidation, while specialized ones continue to proliferate. Is there room for everyone in media buyers' budgets?

Niche and vertical ad networks are more plentiful than ever. Advertisers looking to reach Hispanics, affluent gay men in major cities, ecologically concerned women or even Ironman tri-athletes can now do so through targeted buys on specialized networks.

Can these firms challenge ever larger ad networks run by the likes of Google, Yahoo, Microsoft and AOL, which through acquisitions and incremental site sign-ups are accumulating massive audiences they say can be segmented into the equivalent of a niche network buy? Yahoo was given the go-ahead this week to acquire BlueLithium, while AOL has consolidated its considerable network business under the new Platform A banner, to name just two recent developments.

Specialty ad networks vary as widely as the verticals markets they represent. Good Health Advertising, for instance, works with publishers like Medhealth.org, Wrongdiagnosis.com, Diet.com, Caregiver.com, Allnurses.com and others. The Gay Ad Network represents Gay.com and Planetout.com as well as alt weekly papers. Consorte Media represents publishers in the Hispanic market. Active Athlete represents exercise enthusiast sites, and Yardbarker represents sports fan bloggers. These firms say their expertise in the subject matter, close relationships with publishers, and their transparency to advertisers give them an edge.

Amy Auerbach agrees. Auerbach is VP and director of phdiq East, the interactive division of phd, a media buying and planning firm owned by Omnicom. As specialty networks have improved their technology and ability to target ad placements, she said she can "assure clients their ads won't end up on Bumperdumper.com."

"We find that the niche networks allow us better opportunities to reach specific audiences we define more with psychographics than demographics," she said. "For example, for a mom-targeted campaign, a niche content network drove traffic more efficiently than our portal buy and the users spent more time with the creative as measured by higher interaction rates."

Many niche networks say they provide detailed information to advertisers about sites in their network and feel a responsibility to monitor those ads to make sure they are appropriate to the content they're running against – something they claim the largest networks can't automate.

"We police the type of advertising that will affect their users' experience. We believe that our relationship is based on trust... When Nike trusts me with an order, or American Express, my job is to help Nike reach athletes they are willing to reach," said Robert Tas, president and CEO of Active Athlete Media.

Also, while the terms "niche" and "specialized" imply small audiences, many such networks have now billions millions of unique online viewers. As the mammoth networks have grown, they say, so have the vertical contenders. Tas said Active Athlete has 15 million uniques.

"Niche doesn't mean small, where as it did five years ago," he said. "Niche means millions."

For publishers, it all comes down to money. While the auction model favored by Google's AdSense and ad exchanges like Yahoo's Right Media puts media buyers in competition with each other and drives prices up, it can't match the revenue sites can bring in through a combination of large and small network representation, according to analysts.

"If you are a relatively small Web site, as are virtual all Web sites really, you're not going to make a lot of money on Google adWord," said Barry Parr, media analyst with Jupiter Research. "You have to be a big players in a high CPM market to make money. Google looks a lot more like remnant advertising. If you can run an honest to goodness brand ad that is getting real value, and is getting exposed to your readers that are clearly interested in your product, you almost certainly get more money from that ad."

Networks like Sustain Lane, Glam.com and Good Health Advertising claim to capture premium CPMs in the range of $15 to $20. If true, according to Parr, "that's a sit up and take notice event... Online advertising is dirt cheap, we all believe that, and God bless Google for doing what they do, but for this industry to make it and content to make it on the Net free, we need higher CPMs than Google can provide, and these networks may be offering us a path to that destination."

Of course, the arguments for large and small networks don't necessitate either/or thinking. The majority of specialty firms say they're complimentary to outlets like Advetising.com and BlueLithiums of the world.

"Most of our sites have Google AdSense running on them and when we have a targeted display ad for that site, the Google ad comes down and the higher paying display ads come up," said Robert Kadar, president and founder of Good Health Advertising, representing health publishers. "Google and Yahoo are good for backfill and passive revenue steams that doesn't require the publishers to lift a finger."

While the niche ad networks may not want to compete directly with AdSense and other big networks, the same can't be said for Google, which asserts it can reach the exact same vertical markets and publishers, but can do so with a greater depth and scale than any other publishers.

"Size matters. Scale really matters," said Kim Malone Scott, director of AdSense online sales and operations for Google. "We have both the size and the ability to target any vertical or sub-vertical you want... If you want to advertise on the Internet in any kind of serious or very specific way you've got to be on the content network."

Regarding the company's interest-based targeting capabilities, she said, "If they wanted to reach everything about dancing they could do that, if they wanted the Tango they could do that, if they wanted everything on the Tango in the Bahamas in 1929, we could reach that... You can do precision at scale. If you want to choose only one site, you can advertise only on that site. It's hard to be more precise than we are."

The much smaller specialty ad networks are not blind to the threat that large ad networks pose to their long-term strategies, but they insist that despite Google's claims, expertise within a market niche can't be automated.

"We really know the... environmental space inside and out, and it would be hard for Google to have that expertise in every area," said Christine Volden, vice president sales for Sustain Lane, a Green Ad Network focusing on eco-consumer sites. "I don't think a computer can figure out who is green washing [and who] has been around for 20 years."

Alicia Morga, CEO of Hispanic ad network Consorte Media, also acknowledged the inevitable advance of the behemoth ad networks into her firm's area of specialization.

"They will bring on fashion, they will bring on Hispanic, they will bring on whatever [they can]. Ultimately these big guys want to control it all," Morga said. "While ad networks can come in, to the extent that they are not as focused on it as we are, they are never going to be as successful as we are."

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Matthew G. Nelson

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