Vertical Networks: So Close But Yet So Far

by Jeff Hirsch, May 28, 2008, 8:00 AM

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Following trends in the online space is a lot like watching reality TV shows. There are hot concepts that spring up all the time--some that stick and some that fall off the face of the map.

The most recent conversation in the network space is around "vertical" networks: A network made up of sites addressing one specific industry or topic. These networks were born based on a need that is similar to the need that behavioral targeting (BT) addresses, that is when behavioral targeting is executed correctly. I thought it might be interesting to address where this new phenomenon stems from and its relation to behavioral targeting.

The vertical network trend was born from a marketer's need to appeal to a sizable, highly concentrated audience. This first led to vertical networks in extremely competitive verticals, such as Travel, Finance, and Technology, where audiences are in high demand and premium inventory is in short supply. Creating a vertical network of niche sites that appeal to a specific audience can prove to be a valuable way to expand available inventory to reach those people with greater scale. Advertisers can then leverage these networks in a more cost effective manner.

The interesting thing about this "new" idea is that this is exactly what behavioral targeting is about and has done for years. An advertiser wants to reach a specific audience, based on interest and intent, and there is enough demand to do so outside of premium contextual placements. Hence, consumers' behaviors are observed, the audience is indexed and identified, and sophisticated technology enables advertisers to target those users in non-contextual environments.

Some might say that a vertically oriented site is a good proxy for consumer behavior. Maybe. Maybe not. I know that the blogs I check include technology sites, however, I am not a technology product shopper. When I visit these blogs I am looking for news and information, not for gadgets. This is the big difference between reaching a specific audience through a vertical network and through behavioral targeting.

Behavioral targeting is about truly identifying a person's behaviors in a way that is directly relevant to an advertiser's objectives. The difference between a consumer visiting a car enthusiast site and someone visiting an auto site and using a car configurator and using a lease calculator is incredibly significant. The person who visited the car enthusiast site would be considered part of an auto-intender audience in a vertical network environment. However, an auto advertiser would never consider that person to be in market. They are not in market unless they specifically act like they are by demonstrating the types of behaviors highlighted above.

The rise of vertical networks is clearly another indication of the need to provide scalable reach to specific audiences. Behavioral targeting hit some roadblocks early on around scale. Unfortunately, the stigma still exists and influences marketers to consider vertical networks. The truth is, the logic is flawed because BT's scale issues are no longer a limitation. That's not to say that targeted advertising can provide the same reach as untargeted advertising. It is to say that perceptions of scale issues are not consistent with the quality of today's behavioral targeting offerings.

By creating audience segments utilizing behavioral targeting technology that empowers sophisticated definitions, an advertiser essentially creates its own highly customized vertical network based on specific, real actions that indicate intent.

At best, vertical networks can complement behavioral targeting but they can't replace it. If mass media takes a shotgun approach, vertical networks can at least help you reach the target. Only behavioral targeting will hit the bull's eye, every time.

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