• by Mark Walsh  @markfwal, November 3, 2009

The ability to target and buy audience segments is rapidly becoming the holy grail of online marketing, replacing traditional media planning strategies built around content. But who will win in this race to deliver targeted audience? The new crop of ad exchanges? Ad networks? Agencies creating their own demand platforms?

In a keynote talk at the OMMA AdNets conference, Robert Coolbrith, vice president of equity research at investment bank ThinkEquity Partners, did not necessarily pick winners and losers, but outlined the recent history of online display advertising and how it may evolve in the months and years ahead.

Highlighting key shifts leading to the explosion of ad networks, Coolbrith pointed to 2006, when the growth of Web 1.0 advertising for premium publishers hit a "speed bump" caused in part by rising prices and growing ad clutter. Increasingly, advertisers turned to ad networks for better pricing and greater operational efficiency.

The emergence of social networks and other Web 2.0 media hastened the shift away from the major Web portals and from direct buying from publishers to ad networks. Between 2006 and 2007 alone, the proportion of impressions sold via ad "intermediaries" rather than directly increased from 5% to 30%. ThinkEquity now estimates there are more than 400 ad networks, of which about a quarter are of substantial size.

But while the ad network model has brought more efficiency to the market and given advertisers greater control over the media-buying process, it has not been without drawbacks. Those include channel conflicts between publishers' direct sales forces and ad networks, the erosion of premium ad pricing and the blurring between premium and remnant inventory, according to Coolbrith.

With ad networks gaining increasing access to publisher audience data, tension has also grown between publishers, ad networks and agencies over who "owns" that crucial information and how it is used. All that has led to the desire for a "solution that will encapsulate all the benefits of a traditional ad model while eliminating as many of the faults as possible," said Coolbrith.

So what's next? Given recent trends, he described four possible paths that advertising could take going forward. One is simply maintaining the "non-premium" status quo, where ad networks continue to take market share from Web portals, but not necessarily faster than in the past. "I think the key potential takeaway from this course is that premium publishers will have to learn with less in the short term," said Coolbrith. But over time, it could lead to more ad demand, which in turn could bring more brand advertising online for top publishers.

Another possible future is the emergence of a "secondary premium" type of inventory encompassing co-selling arrangements, and inventory sold through automated sales platforms and other outlets like Yahoo APT. It could also involve partnerships with other publishers to deliver enhanced reach and frequency in targeted buys.

A third major shift could be toward real-time audience buying in which agencies define, create and deliver segmented audiences. Coolbrith also defined a fourth "hybrid" model that represents a new flavor combining "the notion of secondary premium and real-time targeting and audience delivery." He pointed to Omnicom Media Group's deal with Fox's online audience on-demand network as an example of such a hybrid in the online trading marketplace.

But Coolbrith also warned that Congress has taken a keen interest in the issue of online privacy, and that new legislation could alter the ad landscape. Rep. Rick Boucher, who heads the House Subcommittee on Communications, Technology and the Internet, has indicated that a bill affecting online advertising could come as soon as this month.

Coolbrith acknowledged that "people are not particularly happy about being tracked online," making privacy a popular cause for members of Congress to latch onto.