Ad Networks and Rep Firms: Know the Difference

We ended our last column on the subject of sales channels with a reference to how differently various rep firms and ad networks address the ad sales business. Several attentive readers asked us, “Aren’t ad networks and rep firms the same thing?”

Though some use the terms interchangeably, we believe that understanding the difference between the two goes a long way toward helping site publishers and ad buyers understand some key differences in services offered. Traditionally, rep firms have operated as extensions of a publisher’s own sales team, much as a manufacturer’s rep or a value-added reseller might handle a few noncompetitive brands. A network, on the other hand, carries a large number of products with little attachment to which products are sold so long as the total number of orders is high.

Think of it as the difference between a specialized home appliance dealer and a local hardware store. The dealer’s showroom carries just three brands of ovens, and the salesperson on the floor knows a lot about each one. The hardware store stocks hundreds of products, but the clerk at the register can’t explain the difference between the two socket wrenches you picked up.

Get the picture? A rep firm historically carried a few brands with higher margins and good incentive to individually sell those brands, whereas the network made smaller margins on much higher volumes, and its business was made by lots of transactions, not by selling any particular item.

We italicized “historically” above because, of course, the lines dividing a rep firm from a network are blurring today, and we fully understand that many ad sales firms have some features of each. But the historical perspective is still valid because it can help you calibrate expectations about what a firm can do for you. From the publisher’s point of view, a true network will offer less personal representation of your brand, less price protection for your rate card, but much greater access to customers. Volume over margins.

The rep firm, on the other hand, will have salespeople who know you almost as well as your own internal salesperson would and will spend more time on each call, promoting individual sites and working to get you the price you want. But they won’t have the broad market coverage because the depth of offerings is more limited (fewer buyers walk into that appliances specialist in a month than into the local hardware store in a day.) You get higher-priced buys, but fewer of them.

Although few firms in the Internet ad space fall neatly into one category or the other today, firms do trend in one of these directions; no business does both equally well. Your choice of direction as a site publisher has to be reached by evaluating your sales proposition, your brand value, the perceived value of your offering (by actual customers, not your own wishes), and how aggressively you are willing to support the sales and marketing efforts for ad sales.

Without promising a comprehensive list, we can safely say that DoubleClick, 24/7, and Engage as well as Clear Blue Media and BURST! Media are more firmly in the network space, whereas Real Media, Winstar, Cybereps, and Phase2Media are closer to the rep firm model. Some are not listed here because their positions on this scale are difficult to determine. If any sales organization wants to let us know where you place yourself on the network to rep firm scale, by all means, send us a note.

Rep firms and ad networks have strong positions for some publishers, and both offer great value to advertisers. Choosing which one to do business with has everything to do with deeply understanding your own sales goals and realities; it makes no sense to go for a rep firm-type of representation if you haven’t invested the time and money into building a clear and defensible sales proposition. It makes equally little sense to use a network model if you are selling to a unique audience that carries high individual advertiser value.

Next week, we’ll take a look at two other things that differentiate firms: market coverage and team size.

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