• by Dave Morgan , Featured Contributor, March 27, 2008

Yes, another column about ad networks. I know that probably dozens of folks have written or opined on the topic over the last couple of weeks, many reacting to the recent spate of news about networks, from ESPN's announcement to stop working with some networks to Washingtonpost./Newsweek.com's decision to shutter its blog ad network, to the news that Forbes.com has 400 blog affiliates in its new network. All of this against the backdrop of many premium publishers openly questioning whether working with ad networks is undermining their brands and their premium-brand-focused ad sales efforts.

In my view, ad networks can be a very important and very valuable complement to most publishers' direct sales efforts. This view is not surprising, I'm sure, since I have been a proponent of the concept for the better part of 15 years and started two ad networks along the way, Real Media and TACODA.

Online ad networks have the potential to bring a level of scale, sales channel reach, targeting and back-end analytic capabilities, market knowledge and account management that most standalone publishers can not deliver on their own, and certainly can't deliver for all of their inventory. Typically, as you know, most publishers that work with networks use them to help fill their unsold or under-sold inventory (remnant inventory), since the theory is that online impressions are perishable and, like airlines, there is little value in flying planes with empty seats. Better to get some advertiser -- any advertiser -- in that seat if they will pay. So why are publishers starting to worry so much lately about ad networks? Here are my thoughts:

Publishers have always worried about networks, and for good reason. Just as in the offline side, online media companies have recognized that handing over your audience and environment and brand to a third-party company presents a lot of short-term and long-term risk. If they screw up, you lose. If they undercut your own sales efforts, you lose. It was only in the middle part of this decade, driven by post-Bubble economics, that working with ad networks took on a level of acceptability for premium publishers, as the pressure to maximize the yield of their inventory took some precedence over fears of working with networks.

Some bad history. As everyone that has worked in this industry knows quite well, a lot of networks have been less than forthcoming and less than honest -- with many of their publishers. Many networks have "sold-around" their publishers, explicitly selling supposed "blind" inventory by name at rates well below their publishers' rate cards to make a buck. It used to happen a lot, and happens a lot less today, but it certainly still goes on.

Bad ads. Many of the ads that publishers have historically received from ad networks have not been the kind of high-quality, name-brand ads with award-winning creative executions that get publishers excited. All too often, they are same lead generation ads with flashy-blinky creatives that infest sites all over the Internet and turn off most Web users.

Pork-belly mentality. Many ad networks are driven at their core by a DNA that is purely commodity- and direct-response, lead-generation focused and doesn't understand or appreciate the value of the environments where the ad appear. To them, it is only about the back-end, not about the consumer experience. As Wenda Millard of Martha Stewart warned with her brilliant keynote at the IAB annual convention this year, this industry needs to be on its guard about letting its premium Web site environments and audiences be sold like pork bellies, sold on automated exchanges with little or no sense of the premium and differentiating value that great marketing, great salesmanship and great client service can communicate and deliver to advertisers.

Lousy economics. A final thorn in the side of networks has been the extremely low rates that many are able to pay. In the post-Bubble world, when there were real questions as to whether online media and advertising had a future, any money was good money. No more. Today, most premium publishers are able to get premium value for their best inventory and sponsorships. In this world, when premium inventory is selling for $8 to $14 CPM on average, getting 40 cents CPM for remnant inventory doesn't mean nearly as much.

Will this change? Yes. In fact, it has been changing for some time. Today, for many publishers and networks, the issues that I raised above have been going away. However, for ad networks of the future to work with premium publishers, they are going to have to find a way to add value beyond just moving perishable inventory at the last moment. They are going to have to deliver more than just aggregate scale and last-second revenue.

They are going to have to deliver real value, with high-quality ads and solid rates, offering something that publishers have no chance to deliver on their own. They have to be able to deliver value in their campaigns for advertisers that are not possible for advertisers to buy on their own, and I am not talking just about efficiency here, but effectiveness, and it will need to be more than just direct marketing lead generation. Whether this is in share of audience or share of voice or data-driven targeting or actionable analytics - well, there will have to be some element of 1+1+1+1=10, for everyone involved. Will that happen? I am sure of it. When? I don't know. What do you think?