Tuesday, August 12, 2008

To ad network or not to ad network?

That is the question ...

Two good articles of late that I think illustrate the benefits of selling your inventory via CPM and not giving into the short term revenue temptation of remnant networks

Conde Nast bucks Ad Network System, revamps Sales Strategy - http://www.clickz.com/showPage.html?page=3630482

Good article on how Conde Nast is focusing on verticals within their sales teams. For a company like theirs, it makes sense. Conde Nast is about quality not quanity, to remain viable they can't play an eyeball numbers game, they need to extract yield from premium content and context.

""The brands that we do business with are used to buying content. They value the context and they understand the price; you have to pay for that."

On the other hand you have this article ...

Ad Nets Accounted For 30 Percent Of Publishers’ ‘07 Sales; Premium Price Erosion?: IAB, Bain - http://www.paidcontent.org/entry/419-ad-nets-accounted-for-30-percent-of-publishers-07-sales-but-eroding-pre

In the past year, ad networks accounted for 30 percent of major publishers’ online sales, compared to five percent in 2006.

It also talks about how remnant inventory may account for 25% of inventory sold, but only 2% of revenue (due to the rock bottom prices). "Publishers’ desire to reduce their unsold inventory levels appear connected to greater use of ad networks and, therefore, to lower CPMs."

Here's the dilemma. Speak to local publishers about ad networks and they will tell you it's completely not a focus at all for their business and only accounts for <10% of their revenues. sure, it might only account for 10% of revenue but it accounts for a lot higher % of inventory - and that's what really hurts ... as not many premium advertisers want to be seen aside performance advertising. This then impacts the CPM you can charge ... which lowers your yield, increases your reliance on performance and so on.

It's not all bad news, as the article states that better targeting will lead to higher CPMs in future once/if rolled out. This may require consolidation though. And better targeting I'd imagine.

1 comment:

Jason Baer said...

This whole ad network scenario is a short-term boom and a long-term bane.

Given that you can buy solid inventory at a fraction of the cost, why wouldn’t you use ad networks almost exclusively, especially for test campaigns when you’re trying to optimize creative and call to action?

But ultimately, this whole model is unsustainable. Sites cannot continue to sell an increasing share of their ads at a couple bucks per thousand, and the increasing competition is going to cause ad network failures and consolidation SOON.

I just put up a blog post with more detail on how this is going to shake out.
"Ad Networks Are a House of Cards - But a Great Deal"

Jason Baer
Convince & Convert - digital consulting for agencies