End of story right? All the rest of us should just pack it in and forego fighting for the scraps that fall off the portals' table? Not just yet.
"Part of the challenge for portals is that people are starting to approach the Internet in a different way," reported The New York Times on Aug. 20. "A new generation of Web users has grown increasingly adept at finding what it wants online and is less reliant on portals for guidance....Thousands of smaller Web sites, like blogs, news collectors and niche content sites, are also attracting growing numbers of Internet users and advertisers."
Perhaps the Times reporter was just avoiding using a cliché, but what he's referring to is "The Long Tail." Although a number of highly successful e-commerce companies like eBay and Amazon are classic examples of the value of The Long Tail (the Internet's infinite sales and distribution opportunities) most ad dollars are going portal.
Why? Because it is easier to place an order with a single phone call or email? Perhaps. Because no one ever got fired for reporting they bought Yahoo? Maybe. Because they aggregate enough audience to reach most prospective buyers? They'd like you to believe that.
But on the Internet, big does not mean better. At the end of 2006, eMarketer reported that U.S. Internet users spent 61% of their time online outside of the top 20 domains, which includes most major social networking sites and web portals.
eMarketer then published a report earlier this year that advised marketers against spending the bulk of online ad dollars on large sites. Backed by research from Media-Screen, the report said that (user) interest in brand advertising on smaller sites is greater than on larger sites. Their study found that small, long-tail Web sites are indispensable to consumers -- and they provide a new way for brands to position ads where users want to see them.
Interest in the products and brands advertised on smaller sites is greater than on larger sites: According to the study, 42% of sites with less than 1 million unique visitors a month advertise products of interest to their viewers, vs 39% of sites with more than 1 million visitors."
Thanks to the advent of ad exchanges, it is possible to buy audience at vast scale in a single call or email (or in some cases just sitting at a self-serve online dashboard); spend at a rate that is not pre-determined by a portal, but rather set by demand in the marketplace, be sure your ad appears in a contextually relevant place AND, with some exchanges, be able to very effectively reach The Long Tail consumer.
The marketplace is interested, as we can tell by the recent acquisitions of Right Media by Yahoo!, DoubleClick by Google, and ADECN by Microsoft and the launch of our own ADSDAQ. Ad exchanges pride themselves on openness and efficiency. They speak to some major concerns of publishers and advertisers, including security, transparency, and pricing control. But not all ad exchanges are the same.
There are more quality Long Tail publishers than ever before, and yet most ad exchanges focus on selling remnant inventory only from larger publishers. This is because they're convinced that advertisers perceive the Long Tail as a scary place, yielding wasted impressions.
But the opportunity exists to show them that it is a clean, safe place where a good number of new customers have been loyally hiding. From a business perspective, ad exchanges focused only on connecting advertisers to the most visited sites -- the fat head -- are leaving money and inventory on the table.
What benefits do ad exchanges provide for The Long Tail? Pricing control for sure. Historically, advertisers have controlled pricing in order to outbid each other for publishers' premium inventory available on highly-trafficked sites.
The marketplace will demand ad exchanges allow advertisers to target their customers on millions of single topic sites, while publishers and advertisers share pricing control in a free market.
Ad exchanges have the potential to be the most efficient way to reach The Long Tail. Ad technology, such as contextual technology, can help create value and open the market to publishers of all sizes.
As the ad exchange model takes its place within the online media options by demonstrating efficiency and value, it is essential that all publishers and advertisers participate and benefit.