BUSINESS BLOGS
BUSINESS BLOGS
category: business
24 Dec 2007

Initially, my post was to be called “Ad Networks + Content = High Margin Business” but that is not as direct and brutally honest as “Why are ad networks such low expectation mofo’s?”  Hey, it’s a fair question, no?  Let’s consider the facts.

Compared to the Top Media Properties:

Ad Networks have bigger reach.  One reason is that they slice across the web and aggregate audiences.

Yet if eyeballs equals revenues which in turn equal value, then why is it that the value of ad networks is by and large tiny compared to Web giants?

Google = $215B
Yahoo! = $30B

then… ad networks:

Blue Lithium = $300M
Right Media = $800M
24/7 Real Media = $680M

aQuantive fetched $6B and Doubleclick $3.1B, but aQuantive is a lot more than an ad network and Doubleclick is anything but an ad network.

Why is that?  The reason is simple: Low quality content, long tail inventory, low expectations, basically.

Marshall Kirkpatrick makes a pretty interesting prediction, which I think would be a very strong combination. On Read Write Web’s end of year 2008 predictions, he says:

2. Most ad networks will start producing their own content to advertise against; and some content companies today will get acquired by ad networks.

Brother, I’ve contacted every single ad network imaginable and proposed to combine our rich library of high-quality video clips and partner with their serving platforms to reach targeted audiences everywhere (no, I did not call them low expectation mofo’s in the emails, in case you are wondering).

I can’t understand why they content themselves to target low-end impressions on long tail inventory for bottom-barrel CPM businesses when they can reinvent themselves and leverage high-yield video content (or even text content) and generate far higher margin revenues?

Ad networks are fundamentally in the check writing business, 2007 was a great year for many (aQuantive, 24/7 Real Media, Double Click, Right Media and Blue Lithium) but many others remain. For those, to stand out from the clutter, partnerig with rich content seems like a good strategy to take. Will it happen?

Don’t count on it, why?

The Web was built by programmers and techies, financed by products of semiconductors, PCs and what not, these people do not really get media, content and dare I say it, advertising.  Ad networks is an extension of that, but usually you can actually eliminate the financiers… the media guys entered the picture too late, and by then, it’s a lot of “more of the same”: connect eyeballs with dollars, sign a check to the publisher.  Ad networks need to think big and realize the only thing differentiating them with the ad portals is the quality of the content they are intermediating.  Stop being so lazy, stop thinking small… content is king.

Who gets media, content and advertising?  Big, old, traditional Media.  Why don’t they own the Web?

That’s another post for another day.