Commentary

The Ad Network Cleanse

I attended a formal gathering of the MPA (Magazine Publishers of America) here in New York last week dedicated to the topic of ad networks. I am always flattered and honored when asked to either moderate or be on panels such as these, but on this occasion I was there as a student and paid $225 dollars for that privilege. The panel was made up of six top-level executives representing various ad network plays. The audience was filled with executives from major magazine publishers.

The session turned quickly into six separately prepared sales pitches. Listening to all of the presentations in a row provided some side-by-side clarity. It does appear individual companies in this space are trying to differentiate themselves, but the fundamentals tying them all together remain intact. They are reselling something they buy rather than create, so the less they pay initially, the more they make. Everything in between becomes fair game to ad networks as they structure favorable arrangements for themselves, filled with promises they have little intention of keeping with the publishers they have become so reliant upon.

I heard plenty of false claims made during these presentations, such as delivering click-through rates 14,000% higher than average display yields, and CPM returns to participating publishers well north of reality. But I also witnessed how loaded ad networks are with innovation, all driven by the desire of incredibly talented people.

Ad networks could fuel the online industry to greater heights -- but the way they currently approach their partnerships with publishers will stall them. The issues are many, but none bigger (or broader) than channel conflict.

One initial way ad networks tried to soothe this fear for their publishing partners was to make a promise of blind buys. The advertiser (and their buyer) would not be allowed to know which specific publishing brand's inventory was part of the sale, allowing publishers to collect incremental revenue without publicly commoditizing their value.

So as this meeting approached its conclusion I posed this question to the panel: "Given the significant issue of channel conflict, what policies do you have in place at your company to enforce this promise of publisher anonymity -- and how do you hold your sales team accountable if they break this promise by sharing specific sites an advertiser will run on?"

One ad network executive answered, "We no longer promise blind buys" so if a publisher wants to be part of his network they must allow his sales team to use their brand name in their sales efforts. Another answered, "We take the rep out back and shoot them," and the room responded with laughter. When the laughter died down, I reiterated my question was a legitimate one and that was met by awkward silence until the moderator stepped in and moved the meeting to closure.

How do these or any ad network for that matter, plan on fulfilling this contractual promise of anonymity for their publishing partners without any formal internal plan or process in place to do so? And if the resolution to this issue mirrors the one answer given, than how does complete transparency solve the problem of channel conflict? It doesn't.

Three weeks ago I endured and enjoyed a three-day juice cleanse -- nothing but freshly prepared vegetable juices and lots of water for three whole days. Once you take the planning of what to eat, the execution of that plan, and the digestion of your decision out of your daily existence, you allow your body to eliminate toxins that have stored up through daily food choices. The benefits are amazing. By day two, your energy level is off the chart, the world around you slows down and the clarity of your own thinking and feeling sky rockets.

The current way ad networks structure deals with publishers is toxic. So I challenge any publisher who engages ad networks alongside a direct sales team, to hit the pause button for 90 days on all ad-network-run campaigns. Then turn to your sales team and tell them they have 90 days to show you this was the right decision.

If they don't respond with greater sales energy, and if you don't see the toxic value ad networks deliver with greater clarity, then turn the hose back on. In the meantime, ad networks ought to focus on solving the problems they create for their publishing partners instead of on the solutions they can't sell without them.

Then both parties can try this thing all over again.

6 comments about "The Ad Network Cleanse ".
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  1. Kirby Winfield from Dwellable, October 8, 2009 at 12:04 p.m.

    Ari,

    Transparency may not solve the channel conflict problem, but it can certainly help publisher sales teams generate more direct business.

    As a former buyer, I used networks to broadly test performance and engagement on hundreds of sites on which I could never take the time to buy directly. Once the cream rose to the top, I cherry-picked the best sites and went direct, paying less than I paid the network but giving more net to the publisher than they were receiving.

    These publishers had no shot at selling me their inventory directly, regardless of whether their sales teams were responsible for all inventory. But, via transparent networks, they got my direct business.

    Cheers,

    Kirby Winfield
    CRO
    Mpire

  2. Jay Tierney from Underdog Media, October 8, 2009 at 12:12 p.m.

    Not all inventory was created equal (i.e. top tier vs. secondary/remnant), so the concern of direct sales teams being undermined by networks is largely overblown. Articles like this - and it seems there are many these days - always seem to gloss over this fact. Not to mention that many publishers' sales teams are simply not large enough to make up the difference from lost revenue by not outsourcing their remaining inventory to networks, and hiring another employee and paying his/her salary to attempt to do so would typically result in a net loss.

  3. Wendy Hidenrick from AwesomenessTV, October 8, 2009 at 12:26 p.m.

    Ari,

    When will you come to Chicago to participate in a panel? I would love to see you in action! :)

    Best,
    Wendy Hidenrick - Entrepreneur Media

  4. Russell Glass from Bizo, Inc., October 8, 2009 at 12:52 p.m.

    Ari, your points are generally good ones. Many, if not most ad networks out there play a "squeeze" game where they are looking to try to get as much margin out of the middle as possible. However, when you say "they are reselling something they buy rather than create, so the less they pay initially, the more they make", you are actually falling into the same flawed logic that most of these ad networks do. I actually believe that the opposite is true, and I'd like to rephrase it: "they are reselling something they buy rather than create, so the more they can pay, the higher quality and consistency they will get, and the more they will make."

    Most ad networks are dealing in the dregs of impressions -- below the fold, irrelevant, untargeted ad units that go unsold for a very good reason. This is the problem with many ad networks today -- their models have largely been predicated on getting worthless inventory so they can mark it up to still breakneck prices. However, I believe that the ad network still has a great deal of value to deliver IF it can pay for quality and deliver quality at prices that are appropriate for the value they deliver. At Bizo, our approach is to pay our publishers industry-best rates (they average over $4.00 CPM net from us today) and in turn, we ask for quality inventory for our advertisers. We charge more, but advertisers get to target very specific business audiences on high quality sites -- and thus are more successful so they're more than willing to pay more for this quality. Bizo isn't alone -- interCLICK is a great example of another network following a similar approach. Its a virtuous circle, and one that all ad networks should consider: Pay more, and you'll earn more!

  5. Tony Anderson from Incline Video, October 8, 2009 at 6:32 p.m.

    Good one Ari!

    <BR>

    Having been "taken out back and shot" myself when I was fairly new to the biz I can relate to the comment made by the panel member. Some ad networks publish or provide a "partial site list" to buyers. The challenge there is your buyers might want to cherry pick that list and then include the site names in the Insertion Order that in many cases is generated by the agency NOT the publisher. In my case the agency listed 3 sites from the partial site list and faxed the IO to the main office before I found out. No warning. No email from the agency buyer of the impending IO. When my sales manager called the agency buyers boss to tell the guy he could not fulfill the order, the agency buyer lied and said I gave him the green light to list the sites on the IO! All this happened 72 hrs prior to campaign launch. So I got "shot out back" , they do the deal anyway and of course I don't even get my commission from the deal. Having signed an at-will contract with a non-disparagement clause with my employer I had no legal recourse and was forced out. Folks...this happens all the time in our industry to good people! The lesson to publishers and ad networks is: USE YOUR OWN IO. DON'T LET BUYERS CHERRY PICK SITES!

    <BR>

    Also, if a publisher is going to work with ad networks-in addition to employing a full time sales team-the revenue earned from the ad networks should be used to better train the sales team or go toward client appreciation events and/or help pay for industry functions like AD:TECH and OMMA.

    <BR>

    Bottom line- there is only a finite amount of inventory a publisher can sell be it Online Display, Interstitials, Preroll Video, Overlays, Mobile, etc...I recommend to publishers a) hire the best of the best well connected sales people. b) Bend over backwards to foster relationships with the big ad agencies and direct marketers. c) Make sure Ad Sales + Marketing + Ad Operations work well together and establish a clear, open line of communication between each.

    <BR>

    If publishers choose to work with ad networks to supplement a sales force: a) View the ad network as an agency. Direct buys only and/or NO REV SHARE DEALS over 35%. b) Publishers use your own IO's and IAB standard T&C. c) Make the inventory you sell to the ad network preemptable and have a 48 hr out clause.
    Only the use of common sense, best practices and mutual respect amongst all involved will make the buying and selling of advertising a fun and rewarding experience.

    <BR>

    Tony Anderson - Online Media Sales Advisor - tony@genymediainc.com

  6. Charlie Ray from Broad Street Interactive, October 9, 2009 at 9:57 a.m.

    Ari,
    I think you are throwing out the baby with the bathwater here regarding the ad networks. We have to call ourselves an ad network because it's basically what we do. But, we don't even offer blind network buys to our clients.

    Additionally, when we ask publishers to participate we aren't asking for remnant, below-the-fold space. We want to get a good ROI for our clients and have visibility on their brand. We pay a fair price for it and expect to deliver great results.

    Yes, we may be an "ad network" but that just means we've put together a nationwide distribution of your ads where appropriate because instead of you having to make hundreds of calls to do it, we can do it with just a few.

    I think the bigger focus is why would anyone buy a blind ad network in the first place? What kind of value are you delivering for your client if you don't even know where the ads are running?

    Maybe that is where the "ire" against ad networks should be directed these days. The blind ad networks everyone despises only exist because someone somewhere is too lazy to do anything else.

    Charlie Ray
    Principal
    Broad Street Interactive

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