• by Ken Liebeskind , June 1, 2001

With online advertising in retrenchment, online ad networks are suffering. Some have gone out of business; most have cut their rates and reduced the number of sites they represent. But many of the networks are responding to the situation in innovative ways, improving the way they serve ads and developing new lines of business that make them more than just banner-ad servers.

“The biggest trend is the movement away from pure media to diversified revenue streams,” says Marissa Gluck, a Jupiter Media Metrix analyst. “They’re not just representing sites, but also doing database marketing, email marketing, and promotions. They’re building tech competencies to shelter them from the downturn in online advertising.”

Companies are making acquisitions, establishing partnerships and mergers, and developing their own new products and technologies in an effort to expand their services. DoubleClick’s recent acquisitions include Sabela Media, an ad serving, targeting, and analysis company, and Flo Network, an email technology firm. It also announced a partnership with Radical Communications, another email provider.

Shar VanBoskirk, a Forrester Research analyst, says DoubleClick is focusing less on ad serving and more on spinning off its technology, especially the DART ad serving system. “The focus is on licensing technology and selling customer data,” she says.

While DoubleClick may be focusing on other areas, it is also changing the way it serves ads. In March, it introduced the DoubleClick Brand Network, a network of big-name sites that will allow advertisers to target their campaigns to specialized markets. DoubleClick is known for serving ads across its vast network of sites, but it is sometimes criticized for including small sites that aren’t worth running on. The Brand Network offers 30 top sites, such as Kelley Bluebook for car enthusiasts. “Marketers want to associate with trusted brands and will pay a premium through site-specific sponsorships,” says Bill Wise, DoubleClick’s vice president of U.S. media networks. Marketers can still use DoubleClick to reach a mass audience with its 1,100 sites. But now they can also target their advertising to a specific brand’s customers.

ValueClick’s recent acquisitions—ClickAgents, StraightUp, OnResponse.com, and Zmedia—have enabled it to grow as an ad server and expand its offerings. The ClickAgents acquisition enabled ValueClick to add over 4,000 sites to its network, few of which overlapped with ValueClick’s. While most networks are reducing the number of sites they represent, ValueClick is adding sites (it has over 30,000 now).

StraightUp enhances ValueClick’s analytics. “We always had tracking technology to show results, but we wanted something more powerful,” says John Ardis, vice president of marketing for ValueClick. “StraightUp has ETrax and ROI measurement software that provides information on the sale—who went from an initial response to a demo and proceeded to download to a sale. It allows the advertiser to track codes on their site and get a good idea of the bottom-line impact their marketing campaigns had.”

OnResponse is an affiliate network of 14,000 sites that runs ads that aren’t paid for until a visitor responds. The acquisition allows ValueClick to run CPA deals for the first time. Zmedia is a coregistration service that places check boxes at the bottom of email offers that generate interest in other products. Zmedia serves the check boxes and tracks the response.

“By acquiring these companies, we’ve become a much different company,” says Ardis. “We’ve diversified our offerings to advertisers and publishers. Our revenue is not as contingent on banner ads, it comes from a variety of sources.”

The acquisitions have allowed ValueClick to expand its network, offer new products, and sell advertising at different price points. As far as pricing goes, Ardis says cost per action, cost per lead, and cost per registration are all possible. He says the new pricing models benefit publishers. “We had one way for publishers to generate revenue, but this gives them more revenue-generating solutions, which is important in the days of falling prices,” he says. Many say publishers loathe CPA deals because there’s no guarantee of payment, but Ardis believes everyone will benefit from the new pricing models, which he says “help both ends of the equation.”

24/7 Media acquired Exactis, an email provider. In March, it announced the introduction of a new opt-in email marketing service, SelectMessaging, which allows web publishers to offer visitors customized email newsletters. Emusic.com is using it for its RollingStone.com site. After visitors opt in, they receive email newsletters with customized content about their favorite artists. The service is based on XML technology, which retrieves information from websites and sends it via email.

Will Tifft, vice president general manager of 24/7 Media, calls email “an important part of our building different revenue strategies.” He sees it as different from serving banner ads because “it targets down to the individual and allows us to deliver different kinds of creatives.” He says email is offered to half of 24/7 Media’s customers in package deals that include banners and enhanced search engine services offered through a company it acquired six months ago, called Web Site Results.

L90’s most recent move was to upgrade its Co-Registration ProfiTool, which advertisers use to acquire new members. The tool is a series of check boxes at the bottom of a registration page that consumers can click to learn about new products. Consumers registering to receive a newsletter, for example, will see the boxes at the bottom of the registration page offering a series of products. They have already entered personal information, which L90 uses to send them appropriate offers through the check boxes. L90 has upgraded ProfiTool by adding the ability to target offers. For instance, someone in the computer industry who lives in Miami might get offers for tech products and a cruise from Miami to the Caribbean. The upgrade is based on proprietary technology that captures data, queries it, and pulls the appropriate ads, according to John Bohan, L90’s president/CEO.

L90’s clients for this service are the companies making the offers through the click boxes. “We have hundreds of CPA clients sitting on a server. We profile them by various methods, such as type of industry and offer. When someone signs up, we query the info and pull the appropriate ads,” Bohan says.

The advertisers who use the service are looking to acquire new customers, and banners “don’t do a good job of that,” Bohan says. Coregistration is a new form of online advertising that meets that need.

Many online ad networks are partnering with rich media companies to provide advertisers with opportunities. RealMedia has gone about it in a big way, partnering with eight rich media firms—Bluestreak, ClicVu, Enliven, Eyewonder, PointRoll, Yesmain, Netcreations, and Unicast. “All of our properties, like Investors.com and Guinness World Records, accept multiple forms of rich media,” says vice president of marketing Mark Naples. “Rich-media ads have higher click-through rates, so we are going to great lengths to test all rich media formats as we integrate them with Open AdStream,” the company’s ad serving system.

Naples also notes that RealMedia serves ads to specific sites that advertisers select—not groups of sites, like most ad networks. This is important for rich media advertisers who don’t want to send it to the wrong audience. “Rich media is a valuable tool, but it could be served out of context,” Naples says. “The delivery is as important as the tool.”

Besides rich media, the new IAB large-size formats provide a new opportunity for the networks. “We have in excess of a billion impressions a month in Skyscraper inventory,” says 24/7 Media’s Tifft. He says the new IAB formats and the Unicast Superstitial are getting significant play on the network. “They’re making a material impact on the bottom line in a very positive way.” Richy Glassberg, chairman/CEO of Phase2Media, says one-third of the sites in his network use the new IAB formats. “We help sites figure out how to use the units so we can go out and sell them,” he says.

Advertising.com has developed its own new format, floating ads, which it introduced last month. The ads, based on DHTML technology, appear in the center of the browser, then float to another location where they remain until clicked. The floating is a branding technique, since the movement promotes brand recall. Thinkkitchen.com, a new website affiliated with Lechters, a kitchenware retailer, is using floating ads.

John Ferber, cofounder and CEO of Advertising.com, says not all networks create their own formats, because they are “sell side” networks that sell advertising to agencies, which have their own creative departments. “We’re neutral and do a lot of creative work for clients,” he says.

“It’s critically important to continue to innovate and develop new types of formats,” he says. “Other media like TV are advancing their tactics, and we want to be more aggressive, too, because it attracts clients. New formats are more efficient because they produce results at a cheaper cost. The cost of serving the ad is the same and the cost of buying it might be more expensive, but since it generates more response it creates greater efficiency.”

Engage Media has bolstered its analytics by developing a software product called Value Track that clients can use to generate their own reports. It’s part of a suite of analytic products that allow advertisers to understand impressions and clicks. “They know what happens after [customers] click, how many pages they go to, did they sign up, how much they bought, how long did it take, and did they come back,” says Tom Rothels, Engage’s executive vice president.

Cybereps merged with Interep Interactive, a division of Interep, the radio rep firm. The merger enables Cybereps to conduct integrated campaigns, including one for Warner-Lambert’s Lubriderm that combined online and radio advertising. “We saw some things happening in the dot-com world, and we needed to adjust to offer something bigger and better,” says Bill Kopco, vice president of marketing. “Since there’s been a downturn in online advertising, we’ve partnered with other media to provide advertisers with other opportunities that will integrate their media message.”

The downturn has hurt online ad networks because there are fewer sites for which to sell ads, and the crumbling market has caused online ad prices to drop sharply. “Rates for CPM and CPC have gone down by as much as 50 to 60 percent since the beginning of the year,” says Michael Weiner, president/CEO of Go4Media. “It’s a washout now.” Weiner faults the largest networks, DoubleClick and 24/7 Media, for causing prices to fall. “They have to show profit to their investors, so they’re driving the market down to get a bigger share,” he says.

Despite the downturn, many network executives see a glimmer of hope. “The market is softer than we’d like it to be, but we’re seeing interest among brick-and-mortar clientele. We’ve signed numerous clients like Ikea, Amex, and McDonald’s,” says L90’s Bohan. Engage Media sees new pricing policies as a means to succeed. It’s testing CPA deals, which Rothfels says work well for financial services clients. “Credit card companies spend a lot on direct mail and know how much it costs to get a new user that way. We’re saying, let’s see if we can get a customer at a lower cost online. If they see they can get new customers for less, they’ll spend unlimited amounts online.”

Meanwhile, BURST! Media, a network that represents small single-topic sites, is upbeat about the current situation because “specialty content is big now,” according to CEO Jarvis Coffin. He claims to get 20 to 30 applications a day from sites eager to join the network. “Our traffic has tripled; we serve 1.5 billion impressions a month,” he says.