• by Tameka Kee , May 12, 2008

During a UBS "Conversations with the Blogosphere" conference call on Friday, AdBrite Marketing VP Paul Levine rebutted recent comments made by digital media executives about the not-so-bright future of ad networks and exchanges.

"Publishers will always have the right and the imperative to figure out the best way to monetize their inventory," Levine said. "But the facts prove that there's a lot of growth. Every day, more and more (publishers) are choosing to use networks and exchanges showing that they can be a successful compliment to the overall monetization strategy."

Levine's statement was in response to a presentation given by Forbes.com President and CEO Jim Spanfeller, in which he maintained that the role of ad networks and exchanges would start to diminish as publishers got smarter about selling their inventory on their own.

Levine said that ad networks and exchanges like San Francisco-based AdBrite could be particularly effective at helping social network publishers monetize their inventory--which, by accounts of executives at Google, News Corp. (parent company of MySpace) and other companies, has been difficult to sell.

"The monetization of social inventory is a big battlefront," Levine said. "While it will never clear at the same CPM as other forms of inventory--like a typical $50 effective CPM for search, or a highly monetizable vertical like travel--I'm confident that the revenues will improve over time."

Levine also countered Martha Stewart Living Omnimedia Media President Wenda Harris Millard's now infamous "pork bellies" comment by saying that the ad exchange model, in particular, brought transparency to buying display inventory and upgraded the quality of the process. Millard warned that media outlets both large and small must not devalue their content or their audience by allowing it to become commoditized and traded like pork bellies.

Levine equated the ad exchange model to that of travel giant Expedia. "Expedia is not a commoditized process. They have a bulk of inventory, but if you look at it, five-star hotels go for $200 and up per night, while a two- or three-star property goes for $40 or $50 per night," Levine said. "People still inherently understand the value of what they're buying, and it's the same with an ad network. The value is in the transparency."

He backed up his rebuttals with ad network revenue growth forecasts and anecdotal data from sources including eMarketer, comScore and Collective Media. For example, a recent study by Collective Media (a New York-based ad network) found that over 95% of media buyers said that they would be working with ad networks this year, while 75% said that they planned to increase their ad network spending from 2007.

Meanwhile, eMarketer is pegging ad network spending to reach $5 billion by 2010, a compound average growth rate (CAGR) of 31% from 2007 to 2010--higher than the CAGRs of both search (23%) and non-network display ads (15%).

But he did allow that some of the pricing, reporting and qualifying structures behind ad networks and exchanges would have to evolve to achieve the bullish growth forecasts. "Right now, reach--in terms of unique visits, as determined by services like comScore--is the most commonly used measure of scale for an ad network," Levine said. "But we anticipate a shift from the reach-only focus in the coming months to one that includes frequency. How many pages can you serve to a user in a given month? It needs to become less about reach and more about engagement."

Ad networks are also moving to offer exclusive representation and analytics deals to increase their publisher appeal. AdBrite, for example, announced that it has partnered with concert promotion service Live Nation to launch a service that helps Live Nation concert promoters track and view the performance of their online ad campaigns. Dubbed the Live Nation eFan Finder, promoters, artist managers and agents can use the tool to see which sites their ads ran on, when they ran, and how many users clicked on them.