Future Ad Network: Arbitrage Model Dies And Ad Network Lives To Talk About It

The Future Ad Network“Give us back our lunch money!”

At times, the loathing is over the top. Certain members of the advertising ecosystem (even ad networks) have little respect for the ad network model. It’s as if someone stole the complainers’ lunch money each and every day of the year.

All ad networks have ever done is provide a service which matches a buyer’s need with a seller’s and fill a market opportunity. If you don’t want to participate, you don’t have to.

As real-time, impression-level bidding comes online, no doubt many will see the end of the ad network on the horizon as the advertisers buy only what they want according to data feeds assessing the impression and ROI metrics through the exchange model. No waste. No more ad network buys where a part of the inventory is high performing enough to overcome ineffective, backfilled inventory that maximizes ad net profits while still meeting the advertiser client’s goals.

From the supply-side perspective, pricing and control will move back into the publisher’s hands with RTB as liquidity improves. No more ad networks re-selling their site by taking advantage of market inefficiencies and oversupply which drive down pricing. Even better for publishers, if they have a valuable brand, they can leverage this in the open auction as it becomes a key data point especially for brand marketers.

It’s the beginning of the end of the ad network as we know it… but just as we know it.

The Future Ad Network

With the arbitrage game gone, yes, certain ad networks will whither.

But for most, the ad network company’s opportunity splits off in a few different areas.

Services – First, with a keen understanding of the online media buying and selling process, and optimization, ad networks stand to be important experts for hire. The service business will earn traction with a revenue model based on transactions or performance. From here, performance-based revenue models will hold the biggest payday. The ad network service business is where slow-moving, media agencies will get disintermediated. But, the new ad network service agency will also be the media agency’s best friend as they plug-and-play for agency clients, as needed.

Data – Some networks will leverage their unique technology to provide data or targeting feeds to exchange participants. Advertisers get to map their real-time buying against audience/contextual/creative targeting data provided by the ad network. More performance or transactional models are possible here.

Technology and Tools – Leveraging their experience in the space, ad networks who are more technically skilled will be able to create new tools that make the exchange work more efficiently such as buying platforms and full-strength, creative optimization tools. Some may even start their own RTB-enabled exchange.

For all the talk of too many ad networks, and given the opportunity unlocked by the exchange and RTB, ad networks will continue growing and competing with all parts of the advertising ecosystem.

It’s a new arbitrage for the ad network as it bridges gaps in service, data and technology. The ad network lives!

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  1. The ad-network model has been dieing for a long time.

    it is not quiet yet dead, even with the introduction of RTB. especially where there is no RTB live on any exchange yet.

  2. Thanks for your comment, Big E. You are right that the ad network model is not dead yet. In fact, it is vibrant currently. I’m saying down the road the model will need to change and their will be plenty of opportunities for ad networks to provide new products and/or services.