The “death” of the ad network continues to be delayed as new players appear, a few are skewered, existing players scramble, adjust, prepare or just stand still because everything’s “just fine, thank you very much.”
What exactly is an ad network today (and in the future), you ask? I’d say it’s quite a few things.
And, into the weeds we go…
The traditional ad network focus has started with the aggregation of display advertising inventory through a network of publishers who are looking to get rid of unsold inventory blocks over a set period of time in return for an agreed upon CPM.
Today, the publisher’s options have grown as ad exchanges and aggregators (i.e. yield optimization companies) are buying and selling inventory by the impression and leveraging the media buyer’s new best friend: real-time bidding. This has created new challenges and new opportunities for the ad network.
The New Focus On Inventory
Ironically, a step some ad networks are putting into place is providing access to their publisher network inventory to select buyers – namely the agency trading desks (ATDs), who are now the ad network’s competition in agency deals (more on this later).
Ad networks managing network yield with ATDs may find that certain deals sold by their own direct sales team are no longer competitive to the agency trading desk firehose. If the agency trading desks are successful, the ad network salesforce will become less important, more automated. Sounds familiar, eh? Publishers are grappling with the same issues.
Providing access to differentiated inventory could be the new focus for the ad network salesperson that may look to slide into a publisher development role.
The Ad Network Publisher
In addition to securing blocks of inventory through exclusive publisher deals, ad networks will increasingly become publishers themselves as this opens up the premium side of the business where integrated sponsorships command big bucks from brands and can leverage the ad network’s salesforce –poof, the direct sales team is back! The unsold inventory of an ad-network-owned property is unique, differentiated inventory and adds value for the ad network as it floats through the ad network’s client campaigns, ATDs, exchanges and other ad networks.
The Ad Network DSP
If you were to take a look at the buyers of Google DoubleClick Ad Exchange inventory today, you should not be surprised to learn that exchange buying by the ad network crowd is full-steam-ahead. If you can buy by the impression, why would you buy blocks of hit-and-miss inventory from publishers? So, however you define a DSP, one key element is buying by the impression through multiple supply sources including exchanges and aggregators – especially as Google’s DoubleClick Ad Exchange continues to ramp and offer the juicy inventory of DoubleClick For Publishers (DFP) clients. Ad networks are there in big numbers today – effectively, they are demand-side platforms (DSPs). And, some are offering self-serve platforms to their clients in order to facilitate buying through the exchanges and the network’s publishers, too.
The Ad Network DMP
If you’re an ad network, you’re going to need your own data management platform (DMP – keep those acronyms coming!) which will leverage your client’s data, your ad network’s data and any third-party data. For almost all of the larger ad networks, this DMP has existed in some form for a while and is why the model has been healthy for so long.
The challenge here is to continue to innovate the technology that leverages the data and produces attractive network margins even as the ad tech space moves at top speed. Companies like AppNexus, BlueKai, Google and others hope to provide the infrastructure that many ad networks and agency trading desks will require to remain effective in the future.
Placement “Lives” By Vertical
Plain ‘ole vanilla arbitrage still works like a charm as the vertical ad network continues to thrive. Though some vertical ad networks offer data-driven buying – especially retargeting (known as “reach extension”) – marketers love the vertical ad networks because they present an easy-to-understand, (hopefully) brand-safe environment of transparent URLs in unique niche content. The only thing missing here can be scale, but for the vertical ad network, scale isn’t as much of a concern since the CPMs are much higher. Here, too, is another way ad networks may scale by acquiring smaller, valuable niche publishers.
Ad Network Agency
Next, ad networks are taking their ad technology and growing a services layer. Yes, agencies are becoming ad networks and ad networks are becoming agencies.
For now, the ad network may only service the agencies . But, if it doesn’t already, it will also service the marketer -especially direct-response marketers in areas such as e-commerce where the opportunity to retarget potential customers is the easiest to justify since attribution for any buy is simpler than brand awareness campaigns. A new technology-driven competitor is being born for the agency as ad networks move up the marketing dollar funnel.
The conundrum for the marketer will be their agency relationships which use agency trading desks – is the agency truly an agent of the client? If the agency trading desk is always used on behalf of the client, does this mean the agency trading desk actually outperforms other ad networks? How does the agency know? And, if so, what are the cost benefits to me, the marketer?
Some ad networks will use this gray area as an opportunity. And as CMOs steadily become more digitally astute, aware or just plain younger, this question will be raised.
For agencies to succeed with an agency trading desk (a.k.a. ad network) strategy, transparency and communication will be critical. Also, through its unmatched buying power, agencies will look to drive better deals for inventory than an ad network might be capable of. This savings presumably gets passed on to the client with a cut for the agency and ATD.
There is one part to all this that remains a puzzle – how will incentives play out? If agencies are in the trading desk game, with a trading desk run by people who are not incentivized or commissioned to perform like the go-go days of the ad network, can they perform as well as a non-agency ad network? The answer isn’t simple. Technology increasingly makes at least part of the media buying process automated, so incentives won’t be as important. On the other hand, people making smart decisions, coming up with new ideas for the marketer and leveraging the latest technology would still seem important –and incentives may be key to keeping those people in-house.
That said, there’s too much cheap inventory for the trading desks not to succeed in scooping up many ad network buys of yore. Still – another guess! – this will create an opportunity for a next level of performance driven by technology, service and incentives. The slice will be smaller on a total impression basis (maybe), but will be very lucrative as data ninjas butter their ad campaign bread with meta skills and solutions.
The Final Score
If you’re scoring at home, I’ve got ad networks as ad networks, DSPs, publishers, DMPs, vertical ad networks and agencies. That oughta keep AdExchanger.com busy for the next decade.
By John Ebbert
