Commentary
Why Ad Networks Make the Most Sense
- by Ari Bluman , February 24, 2006
The author's opening statement was 100 percent correct: online ad networks connect online publishers to advertising revenue the publisher would not have otherwise realized. This is why, for instance, many of the country's largest brand advertisers and Fortune 500 companies have been buying media online for years through reputable online ad networks even though they theoretically have the means to do this in-house.
These companies realize that ad networks do so much more than provide a blind conduit between content and inventory--they provide the necessary audience reach, technology scalability, targeting capabilities, quality assurance and performance needed to deliver the right message to the right audience and thereby generate maximum ROI for the advertisers, and increased CPMs for the publishers.
Audience Reach. It is widely recognized that even the best single-site sales forces sell no more than 40 percent to 50 percent of their ad inventory, which leaves a large portion of their inventory unsold. An ad network with broad audience reach can tap into other sources to find relevant advertisers that match the entire spectrum of the site's audience.
For instance, it's not unusual for a site to receive 50 percent of its traffic from outside the United States. If a publisher's sales force only targets U.S. advertisers, it will have difficulty selling ads to reach this audience. How many in-house publishers have the ability to simultaneously sell impressions in Canada, the UK, Germany, France, South Korea, Australia, Spain, and Japan?
Scalability. Scalability is another primary reason why publishers turn to ad networks to manage their inventory--they either don't have, or don't want to, support the manpower and technology needed to effectively manage the complexities of the fluctuating online advertising market.
Consider that, in order to fill up its inventory at premium CPMs, an average site serving 13 ads per user per day would need to sell ads to more than 300 advertisers, and run schedules every day of the year. Now consider sites that have a higher ad frequency to user ratio of 50, 100 or up to 1,000 ads per user per day--the resources needed become astronomical, more than any publisher could possibly handle.
Targeting. Behavioral targeting (BT) is quickly becoming the most respected tool in an online marketer's arsenal, because it enables advertisers to reach their desired audience anywhere within the BT network-- ypically with better results and at a lower cost. And while one could argue that this benefits publishers more by filling otherwise unsold inventory, advertisers don't particularly care how or where the message is delivered, as long as it reaches the desired audience and delivers results.
For instance, retargeting, one of the most effective forms of BT, has been shown to increase click-throughs, conversions and sales by reinforcing a marketer's message each time a user returns to a site or travels to other sites within that same BT network. Our extensive studies show that marketers generate 12 times the number of conversions when consumers return to the site as opposed to those who click on an ad during the initial visit. In addition, we've seen a fourfold increase in click-throughs and conversions when marketers employ BT to engage visitors who return to that site or go to other sites within a BT network. Only an ad network of impressive reach and scale, powered by the most current targeting technologies, can produce these types of values for advertisers and publishers.
Quality assurance. All ads have a value regardless of a click and an action at a specific moment in time; however it's quite understandable that a publisher would not want to diminish its value by serving ads that its user base would find offensive, or cause media buyers to negotiate lower CPMs based on undesirable or filler content. Clearly, since the Internet bubble burst, there are ad networks out there that are looking to play arbitrage so that they can make the largest profit possible on every piece on inventory that they buy and sell.
Publishers need to look at a network's pedigree and capabilities before signing on, including length of time in business, past and present client base, client longevity, revenue-sharing model and the ability to deliver quality through broad audience reach, scalability and audience targeting. Publishers should consider only those ad networks that consistently deliver this level of quality assurance, and are willing to share the risks and rewards as partners.
Performance. Borrowing from the old adage of a "tree falling in the woods," if a network runs an ad on a publisher's site and nobody clicks on it, where is the value? Publishers who rely on advertising as a significant portion of their revenue don't have time to wait for people to click through whatever ad appeared next in the general rotation. Instead, they must continually look for ways to improve operational performance and ROI. Ad networks can enhance a publisher's profitability by streamlining campaign management and increasing the CPMs of lower-tier inventory, which can free up the sales force to pursue premium CPMs for their top-tier inventory.
The bottom line is that reputable ad networks provide value-added services that are well above and beyond what most advertisers and publishers could possibly achieve on their own. I don't know of many organizations that could absorb all of the technology and personnel costs necessary to effectively manage multi-faceted, global online advertising operations and still generate a profit. Ad networks with a broad reach, scalable technologies and proven methodologies can deliver significant results for advertisers and publishers, and will continue to do so as networks continue to drive innovation in ad delivery, analytics and behavioral targeting technologies.
