• by Joe Mandese  @mp_joemandese, February 1, 2010

The lingering effects of the economic recession, coupled with an expanding supply of efficient, and highly targeted online advertising networks, is reshaping the way big advertisers and agencies perceive the value of online media outlets. The result has been a pronounced polarization of the online advertising marketplace, with perceived demand rising for both the high-end of the most premium publishers and the low-end of ad networks and aggregators. This has caused perceived advertising value for the muddled middle of the marketplace - all but the most premium publishing sites, and the major online portals like AOL, Microsoft and Yahoo - to erode, as the ad industry focuses its attention on the top and the bottom players.

"We were very surprised," says Ken Pearl, a partner in Advertiser Perceptions Inc., which has just released the findings as part of the 12th edition of Advertiser Intelligence Reports, a semi-annual survey of top advertiser and agency perceptions of the major ad-supported digital media outlets.

"In retrospect, we think it's basically the impact of the recession," Pearl explains, adding," and the fact that there has been a lot of pressure to reduce costs and the ad networks have done a great job of creating CPMs that are irresistible."

The findings mirror rising concerns among online publishing executives that the rapidly expanding supply of a so-called "non-premium" advertising marketplace created by advertising networks that often target, or re-target the very same audiences of some of the most premium online publishers, is driving overall market values down. The issue has been the focus of many online industry conferences and the Interactive Advertising Bureau has made a major push to turn the momentum around, including its so-called "Building Brands Online" initiative with Bain & Co.

But the momentum is continuing in the opposite direction, says API's Pearl, noting that online advertising networks, "Have done a really good job of convincing advertisers, 'Why should you advertise individually with a hundred different sites when you can buy all of them more easily with us. And by the way, we will sell them to you at a lower price.'"

While a number of top-tier publishers have or claim to have boycotted advertising networks, they continue to grow, largely because they are so efficient, providing audience delivery at a fraction of the cost of buying sites individually to reach the same audience, but also because they have been developing more sophisticated tools and systems for buying, planning and targeting online audience buys, and especially for proving their ROI, or return-on-investment.

In fact, the new study shows that "results" is by far the No. 1 criterion among advertisers and agencies buying online media, with 85% of respondents citing it as "very important," followed by audience delivery (75%), and targeting opportunities (68%), which are all factors that ad networks excel in. Content, the variable best controlled by premium publishers themselves, now ranks fourth, with 60% of ad execs citing as very important, and tying it with cost/price on the criterion scale.

And while ad networks obviously compete favorably on the basis of efficiency, they have also made significant inroads in other important value-based criteria, including the quality of their syndicated and primary research, and their promotional materials, which now rank near or above parity with all but the most premium publishers in the industry in the minds of top advertisers and agencies participating in the survey.

In fact, while ad networks and aggregators are perceived as being largely automated and "self-serve" models, the quality of their sales organizations in terms of their "knowledge," "customer service" and "professionalism," has been closing in on the perceived quality of major publishers, and has actually surpassed that of the major online portals.

"Content is still important, but what this shows is that price and efficiency are becoming more important," API's Pearl says, leading to a "dichotomy in the market.

"There has been a marked increase in the importance of content. It is up significantly in comparison to previous waves, but at the same time, cost/price is up even more."