A Fresh Look At Ad Networks

Advertising can certainly be exciting. Big-budget buys, breakthrough creative placements, alternative media experimentations…it all gets our blood flowing and our brains engaging. Who doesn’t want to be involved with something big and splashy that pushes the edges of advertising? Cool stuff is cool, there’s just no way around it.

But let’s be real for a second. One reason we can do the cool stuff, especially online, is because there’s a bedrock of well-optimized, well-performing, reliable ads that run quietly, doing their work and cranking out results. It’s hard to not love these hard workers. In fact, this is where a lot of the action is right now in online advertising.

Last week, “The Wall Street Journal” nailed the current hot point of online advertising with “Selling Web Advertising Space Like Pork Bellies,” an article about the current trend of the Big Three (Google, Yahoo, and Microsoft) buying up companies involved in the nitty-gritty of serving ads. The article’s focus, and a lot of the excitement, is around the ability to take large amounts of data, generated from large amounts of ads, and make smart decisions. Much of this ability comes from the fact ads are served within a network of publishers and advertisers.

The ad network is an elemental part of the online advertising universe. Once we realized that we could serve one ad from one spot to multiple locations (thanks to the nature of HTTP and HTML), it followed that we should put these locations together. Now that we’re starting to see so much motion around ad networks, let’s take a fresh look at this core component of our space. Unsexy? I think not.

Where Did This Inventory Come From?

An ad network’s lifeblood is remnant inventory. What exactly is remnant inventory? Officially, it’s ad impressions the publisher couldn’t, or didn’t, sell.

How did these impressions get tossed into the remnant bucket? In some cases, merely because of the network sales department’s priorities. Clearly, the people who sell ad space will go after significant deals. They want to respond to RFPs (define) for those large, sexy placements. Increasingly, they look for opportunities to break out of the banner space and create real partnerships, bringing the advertiser into the content in some way. Everything they didn’t want to spend the time selling simply got tossed into the remnant stack.

So, it’s not exactly clear whether remnant inventory is good or bad. All we can really say is it’s unsold, which may have more to do with how busy the sales force was that week than whether the inventory is worthwhile. When all of this goes into the ad networks, it actually creates a great opportunity, because the ad networks will apply some technology to see if they can make that inventory more valuable.

The question, then, isn’t so much where the inventory is from and whether it’s remnant. It’s how good the technology is at determining whether the ad will work in that spot. This is really the networks’ power. Not scale, not source, but targeting technology. That’s precisely how they should all be judged.

The Age of the Verticals

The other significant evolution is the growth of vertical networks. That is, ad networks built specifically around a particular kind of content or a certain topic, such as Blogads, a network that serves ads on (you guessed it) blogs, and Travel Ad Network, which serves ads on travel sites.

Clearly, segmenting the Web benefits advertisers with a specific niche or audience to reach. Organizing the world vertically started with search and has slowly spilled out into many other facets of online life. Having humans organize the Web (instead of computers) makes sense, and being able to choose a purpose-built ad network means you get an immediate relevance boost. You will most likely have to pay for that, but it should be worth it.

No More “Set It and Forget It”

If advertisers imagine ad networks are simply filled with ad spaces no one else wants, they act accordingly. They create media plans and partnerships to get the best, biggest bang, then backfill the buy with the networks. They don’t think about using the networks first.

That’s fine, and it certainly makes sense. Those big buys create the framework for the campaign and will be its most visible points. A large campaign will probably focus first on using ad networks in the same way.

But it’s time to consider ad networks separately. They are, at the least, a more direct response channel than home-page takeovers and cobranded content. Ad networks are the pathway into a new world for advertisers, a world where they can manage their campaigns at least somewhat like the imagined commodities trader in “The Journal.” Once buyers see the networks’ latent power, they’ll find ways to manage advertising in a highly efficient manner.

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