Ad Nets Brace For Programmatic Shakeout, Will News Corp. Be First Of Many?

The party is over for third parties, and ad networks are bracing for the loss of some of the most valuable inventory in the exchange-based media marketplace, as News Corp. takes its secondary inventory back in-house with the launch of its "global programmatic advertising exchange." The move will be felt by some of the biggest ad networks in the business, including names like ValueClick and Undertone.

News Corp.'s plan is another in a long list of moves this summer that suggest that ad tech consolidation has begun, but its significance is much deeper than that. For one, it shows that News Corp. is willing to adopt programmatic across all its properties, both online and mobile. Interpublic has made known its goal of automating 50% of media buying — and made strides toward that goal yesterday by striking a deal with five media giants — but News Corp.'s plan represents the first time a major premium publisher has truly put a stake in the ground and claimed programmatic.

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In doing so, the company has closed its doors to third parties that touted their premium inventory, perhaps making it even more premium than it was before. That quality of inventory has been the holy grail of the programmatic space, and News Corp.'s decision to nix the third-party ad networks is bound to set precedents.

"I believe media companies now require both a DMP (data strategy) and exchange," said Skip Brand, Martini Media's founder and CEO. "My opinion is that these are not nice to have, but must haves. Those media companies that have soft elbows are doing great digitally. The hard elbows and being competitive worked in the old media world," he said, adding that he "loves" the new exchange.

So what are the repercussions for the shunned ad networks? Eric Franchi, co-founder of Undertone, doesn't seem too concerned. He said he's not worried about missing out on premium inventory "until it's a trend," and he wasn't ready to call News Corp.'s decision an industry trend.

"The reality is, you are talking about one publisher. And yes -- the publisher is representing lots of publishers, but there's lots of high-quality media companies that have all different kinds of partnerships," he said. "There's a ton of available inventory out there -- and a lot of high-quality inventory."

Franchi pointed out that he "can't remember" the last time an announcement like this had been made in the past five years. He commented that when announcements similar to this one had been made in the past, "a lot of those publishers re-engaged with partners in the marketplace -- Undertone included. With private marketplaces and private exchanges, a lot of them aren't necessarily driving the revenue that publishers are expecting them to [because] there's not a lot of buyers of that inventory. It's still fairly early," he said.

While Franchi appears confident that News Corp.'s decision to bring everything in-house doesn't "materially affect [Undertone's] business," just because publishers re-engaged with ex-partners in the past doesn't mean it will happen again. History does repeat itself, but the programmatic space and exchanges were mostly ideas just five years ago, so News Corp. is truly forging its own path.  

That path -- one that they have not only set themselves on, but the entire programmatic premium space as well -- is not well defined. The "how-to" is in their hands, at least for however long other publishers let them take the journey alone.

16 comments about "Ad Nets Brace For Programmatic Shakeout, Will News Corp. Be First Of Many?".
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  1. Jay Sears from Rubicon Project, August 21, 2013 at 4:57 p.m.

    One of the distinctions here needs to be private deals (still really about ad tech land) vs. direct order automation. It's now about the buyer and seller and enabling each one vs. the tech in the middle.

  2. Bob Gordon from The Auto Channel, August 21, 2013 at 5:51 p.m.

    This situation is the perfect example of "Live by the sword Die by the sword. AD networks have pushed for an automated way to sell space, without the interuption of humanity...now see where it got you...every publisher with the means to do it themselves will, without the schmooze there is no reason for a third party rep to intermediate between seller and buyer.

  3. Jeff Hirsch from CPXi, August 21, 2013 at 6:14 p.m.

    There have always been premium publishers that have worked to hold onto their inventory, and make it all 1st party sold. Some have succeeded and some have not. It's the nature of the business. Ad networks exist to help connect buyers and sellers of media, and add value to the connection. This doesn't change in a programmatic world. There remains a dearth of quality inventory and tremendous, fragmented demand. Moves like this will likely point out ways that all players in the space can find the right mix of selling, technology, and 3rd party partnerships.

  4. chris shirling from New Media Shop, August 21, 2013 at 6:47 p.m.

    Jeff... The ad network business model is about being a bottom feeder. Their "value" was taking advantage of excess inventory and packaging it to advertisers and under-cutting the price on the direct side. It was inevitable that big players like news corp. (and soon the rest) would cut ad networks out of the mix because they really don't provide any value to the process.

    Were publishers silly to allow the ad network business to build up as big as it did?? Absolutely... but as news corp quickly achieves success, all the other biggies will follow and then all the premium publishers will be there as well. All very quickly...

    If there is one good outcome of this is that ad networks will be forced to start paying more to grab the remaining quality inventory.

  5. Brian Quinn from Triad Retail Media, August 22, 2013 at 9:41 a.m.

    While at WSJ.com I never worked with 3rd party ad nets (assume they still don't), so from that portion of the News Corp business there should no impact on nets. And, while I applaud a publisher taking automation "in-house", has anyone really looked at the combination of assets here? TheSun(UK), TheAustralian, WSJ.com.. Hard to see how this group of sites separated by oceans (literally) and vastly different audiences can produce compelling, targeted audiences. Data? There is no real compelling audience data from news sites. A much more interesting story is how retailers like Amazon, eBay and Walmart will use vast 1st party retail data to create targeted audiences at scale, across the web.

  6. Jay Sears from Rubicon Project, August 22, 2013 at 9:54 a.m.

    There are many approaches. What Brian mentions - retail and ecommerce data + media - is very compelling. Our Connect platform facilitates this as well. It's clear direct order automation provides opportunities for the biggest global publishers such as News Corp and those you would not think of as publishers such as Amazon, eBay and Walmart.

  7. Gregory Calvert from eXelate, August 22, 2013 at 10:18 a.m.

    Chris...that's a pretty tough view of ad nets. You make it seem as though ad nets provide no value and are detrimental to publisher revenue. If publishers could sell 100% of their inventory at a top CPM, there would have never been a need for ad nets. Ad Networks are valuable b/c they are able to fill inventory that otherwise would go unsold. Then what options does the pub have...1. drop their own CPMs (hurting the value prop for their direct sales team) or 2. run extra impressions at no cost for their top advertisers as "added value." (which advertisers figure out and begin to negotiate into deals ahead of time, effectively dropping the eCPM) Ad Nets are able to produce revenue for the publisher. If you feel that ad nets undercut pub cpms...you must be fuming over RTB. Some ad networks are better than others, and the two mentioned here - Undertone and Martini Media are some of the best. Ad nets will not be going away (some will), but they will definitely be changing.

  8. Jeff Hirsch from CPXi, August 22, 2013 at 12:07 p.m.

    There are billions of dollars in ad spend going through ad networks Chris. Google is the largest of the group, running a display ad network. In this day and age, networks can not survive if they don't provide value to both advertisers and publishers. Publishers can not afford sales teams large enough to sell all of their inventory and advertisers can not afford media buying teams large enough to buy across thousands of sites. Networks provide a true value in aggregating supply and demand and adding in things like optimization technology, data targeting, attribution assessment, etc. If there is NO value - why so much volume to this day?

  9. Alberto Aceves from Smaato, August 22, 2013 at 2:21 p.m.

    Gregory has an interesting point and lists two options that pubs have. However I am surprised at how many people ignore the most obvious third option, one the would allow a pub to sell 100% of their inventory at a top CPM: scarcity. Show less ads. Improve the UX.

    The basic laws of supply and demand should apply in this ecosystem. MySpace changed our industry by flooding the market with excess supply and since then every site has bought into the notion of placing an ad (or multiple) on every page. Content that could fit on one page has now been chopped into many pages just to show more ads. All at the expense of the user experience.

    Ask your colleagues how many ads they've clicked in the last year and they can count it on one hand.

    Pubs could drastically increase their rate card. (The Superbowl would be cheap advertising if it happened every week.) Only show what you can sell and leverage programmatic premium to its full potential.

    I know this is a bit taboo to suggest amongst this group but it is a very real option that could be considered. I just doubt anyone publisher has the guts to try something "new".

  10. Jay Sears from Rubicon Project, August 22, 2013 at 2:28 p.m.

    Alberto, great comment. The comedy of this is what you suggest is not new at all. It is simply not a focus with many ad tech companies who are focused exclusively on the bottom of the market. The approach has always been in fashion with the very best publishers and our role as technology providers is to enable to publishers to each find their own unique balance between auction and direct orders.

  11. Alberto Aceves from Smaato, August 22, 2013 at 2:36 p.m.

    I agree, Jay. I'll be the first to admit that my comment is a bit "Jerry Maguire" but to say that publishers only have two options is simply false.

  12. chris shirling from New Media Shop, August 22, 2013 at 2:57 p.m.

    Jeff.. ad networks are like those high interest payday loan businesses. Sure, they provide short term value if you really need to pay to keep your heat turned on but in a perfect world, publishers would be looking longer term than this month.

    Many Time Warner properties have long gotten away from ad networks and AOL stopped taking revenue from advertising.com. AOL stopped doing business with it's own ad network because of the revenue losses.

    Ad networks have had one thing that has prolonged their position in the market and that is the recession. It has forced far too many publishers to simply hunker down and look one quarter ahead. Now that is loosening up, companies like News Corp are creating offerings that cut ad networks out of the picture. As quickly as ad networks got going, they are going to take the same decline as most publishers will follow the news corp model. It will allow publishers to properly get the majority of the ad dollar spent as they are responsible for creating the product. Ad networks have bought inventory for 50 cents and resold it for several dollars. Fine as long as that works but eventually, someone is going to figure out how to take that revenue away from the broker and back to the publisher... in this case News Corp.

    Targeted reach was already a challenge for most networks and when the big players leave, what's left are long tail inventory that will be worth 75 cent CPMs.

  13. Bob Gordon from The Auto Channel, August 22, 2013 at 3:47 p.m.

    Hi Alberto;
    As the co-founder and principal I would love to commit to to your third option, lees ads at a higher CPM... wow... I'm in ... point me to a live person that I can speak with and discuss why this is a good idea for the client.

    With billions of ad network impressions at unsustainable CPMs (for a publisher), and no one to talk with at the client, quality editorial sites have a hard row to hoe. suggestions????

  14. Jason Shugars from Martini Media, August 22, 2013 at 4:56 p.m.

    As long as publishers aren't willing to leave inventory on the table, potentially taking a loss, there will always be a way to buy their inventory. Even if it means giving The Rubicon Project (or another platform) a punch of the ticket as you pass through.

    To Alberto's point, the rise of native advertising, both as a buzzword and an actual option, seems to be that viable 3rd option. Publishers can maintain, or even improve, site experience while still commanding existing ad budgets. Less ads at existing budgets. A true win for the publisher and the advertiser.

    Perhaps the future for publishers looks like a combination of well formatted native advertising, data driven real time advertising, and a lack of ads where it doesn't make sense?

    Another interesting question (not to get too off-topic) is how long before native advertising is traded programmatically?
    Imagine a world with data driven native advertising driving the bulk of publisher budgets, and the remaining percentage being data driven standard (yet customized) ad units.

    "Minority Report" anyone? Philip K. Dick would be proud.

  15. Gregory Calvert from eXelate, August 22, 2013 at 8:45 p.m.

    Alberto...I agree with you almost 100%...the only thing that gets in the way is attribution and metrics. Yes. pubs could get more by limiting supply...(De Beers buys diamonds just to keep them off the street and keep prices high). Unlike that, advertisers want a certain metric to be hit: (CTR, Sign-ups, Conversions, Time on site, etc.) and because that exists, and really good 3rd party data can identify someone that is likely to convert for whatever that particular campaign calls for...even those "crappy, remnant, sub par" impressions can be valuable b/c they can drive a conversion. Your point is extremely valid in an absolute branding world, but advertisers that have a CPA target to hit...don't care. So they will buy it for more than pubs can make it exclusive at high CPMs.

  16. John Parikhal from joint communications, August 23, 2013 at 10:59 a.m.

    Fewer ads at a higher cpm would be a dream. Not likely to happen since there is so much inventory.

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