Vertical Ad Networks Clash With Custom Targeting

Vertical ad networks had a big year in 2008, as dozens of publishers began selling ads on behalf of partner sites. They were aided in many cases by Silicon Valley-based Adify, which provides infrastructure and sales support for vertical networks and now powers at least 140 such networks. Seevast and DoubleClick have similar platforms, and many more vertical networks have been built independently by the likes of NetShelter and Travel Ad Network.

Yet the future growth of vertical ad networks would appear at odds with another big trend of the past year. The very largest media sellers — Google, Platform-A, Yahoo, and Microsoft — have steadily built up targeting options they say can deliver any audience segment, including interest- and industry-based ones typically aggregated by vertical networks.

Is there room in the media marketplace for both approaches?

It depends who you ask. Sarah Zielie, senior interactive media specialist at Minneapolis-based Periscope, happily works with vertical networks. She estimates 25 percent of her agency’s overall ad network spend now goes to niche networks.

“Our spend has been shifting in the favor of vertical ad networks, reducing the budgets of both content placements and general ad network placements,” she said.

Razorfish is also experimenting with vertical audience aggregators. Chief Strategy Officer Jeff Lanctot said the Microsoft-owned agency has increased its investment in niche aggregators, though he added some of the uptick is routine testing.

“The vertical ad network model provides more of a brand filter for Martha Stewart or MTV to say, we’ve looked across thousands of sites in our category and we’ve deemed these 20 or 30 to be the highest authority. I think that is a compelling story,” Lanctot said.

He added, “In my view it’s not better or worse than the traditional ad network model, but it’s been a better filter for us.”

But some believe that advantage will disappear.

Amy Auerbach, SVP Interactive at IPG-owned Initiative, used the word “flat” to describe her spending on vertical ad networks.

“We want to move toward models that have to do with custom targeting, and leveraging new targeting technologies,” she said. “We don’t necessarily need to go to a vertical content network to reach our customers. We can do that modeling on our own.

“This whole concept of data and targeting optimization is really what’s going to start driving the business,” she continued.

Stacey Shudak, interactive media director at Ocean Media, says her firm has bought from vertical networks but is more interested in working with larger ad sellers to develop powerful segmentation.

“We have done some vertical stuff, not to a huge amount of success,” Shudak said. “More important…is technology that offers more targeting capabilities within the ad network.”

Despite those attitudes, many vertical networks report rapid growth. Tech-focused ad network NetShelter launched in May 2006 with 12 sites and 1.2 million U.S. unique visitors. In less than three years it has grown to an estimated 17.7 million spanning 150 sites, according to ComScore. That audience figure puts it ahead of previous tech category leader CNET.

NetShelter’s growing reach has been matched by a rise in the size of media buys and the number of advertisers on the network.

“We were getting RFPs [requests for proposals] in the tens of thousands of dollars,” in 2006, said CEO Peyman Nilforoush. “Budgets now are in the hundreds of thousands of dollars.”

Adify now supports 152 networks, and approximately 100 of those are delivering sales, according to Joelle Gropper Kaufman, the company’s SVP of marketing and corporate partnerships.

Kaufman rejects the idea that vertical networks are in conflict with large networks and portals.

“Every agency and media buyer is trying to add value,” she said. “Buying directly on portals is part of a media plan, buying on vertical ad networks is part of a media plan, and buying remnant is part of a media plan.”

She argues that any advertiser embracing custom targeting on large ad networks at the expense of vertical networks is essentially choosing remnant over premium.

“Adify and other networks not supported by Adify for the most part don’t sell remnant,” she said. “If they’re making that choice [against vertical networks] they’re compromising transparency and context in exchange for black box targeting.”

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