I frequently get questions from journalists, students, etc., I usually post the answers on the blog and then send them to the interviewee. Enjoy.
I am a student from Germany. During my studies I am doing a research on the topic “US Advertising-Networks”.
During my research I came across your blog and noticed your expertise on this topic, I would be very thankful if you could help me with my research by just briefly answering the following questions. In return I would be happy to end you my gathered results, which you can use for you blog as well.
1. Which ad-networks do you think are currently the most relevant players?
2007 saw a change in the landscape in that a wave of consolidation hit the space. For more on that, see our recap of M&A deals in 2007. The implication is that the independence of ad networks, and how they are used going forward, will impact who becomes the most relevant ones. The ones to look out for include:
Advertising.com has forever been the largest one, and with AOL moving towards becoming an ad network via Platform A, I think it will be interesting to see what happens there.
Right Media was bought by Yahoo! and I think they will help Yahoo! monetize the long tail inventory within Yahoo! properties and allow Yahoo!’s sales force expand the reach they offer advertisers by opening up inventory away from Yahoo! properties. As such, Right Media might have the most explosive value.
Yahoo! also bought Blue Lithium, who has historically been the most premium ad network in terms of ad network, so I think the combination of Yahoo! + Right Media + Blue Lithium will remain very interesting.
The biggest independent ad network suddenly becomes Tribal Fusion. Tribal Fusion is a wild card, because their parent Exponential could leverage its own balance sheet to make acquisitions and totally shift its complexion, or it can be shopped around to the usual suspects as a very large, independent ad network. Casale, Specific Media and TrafficMarketplace all have similar dimensions as Tribal Fusion and are technically in play.
I think video ad networks like Tremor Media and Broadband Enterprises will be the ones to watch. You can also add companies like Brightroll, Yume, Scanscout, as well as Video Egg. This is a very competitive space, one could argue that there is a mini-bubble in this space. The challenge really will boil down to the valuations and VC expectations of these companies. The online video advertising space remains nascent, and trying to grow these companies too quickly will backfire, but not jumping on opportunities can prove fatal given VCs uber-high expectations, too.
Other Pay Per Click text ad networks such as AdBrite, Kontera might try to ride Quigo’s wave but ultimately, trying to make noise in the text based ad market is hard because Google is proving to own this market. Of course, to anyone but Google, owning these companies is interesting, which is why AOL paid $300M for the Israeli-based company Quigo.
2. Which kind of model is going to take hold on the market? For instance performance-based advertising, display advertising, exchange models?
There are two schools of thought. One says that online being targeted, tracked media will encourage the dominance of performance based advertising. That is not wrong, but the flip side is that marketers will be willing to pay display-based advertising to get better placement. So I think you will see a combination of display, branded advertising on the best real estate on the best sites and most niche, targeted sites… with performance-based pricing on less desirable inventory, such as social networking sites with racy content. Ultimately, as more and more global ad agencies and Fortune 500 advertisers shift ad dollars to the Web, the sheer demand for advertising online will both tip the balance towards display pricing.
This is not a zero-sum game, both models will continue to thrive…
3. Do you expect niche businesses like AdBrite or Vibrant Media to exist on the long run or are those providers going to be integrated into the bigger networks, as for example Quigo was aquired by AOL/Advertising.com?
Ultimately, consolidation hits all industries after a rapid period of innovation. Invariably, shareholders also want exits and a return on their investment. So combining these two macro level forces, yes, you will see more consolidation. But, this does not mean that independent networks will not thrive. The ad networks are at a crossroads, some will even get bold and move into new businesses.
This is something I covered just yesterday, here.
4. If they will co-exist, which will be the advantages of the smaller networks?
There are a lot of small advertisers that will not be able to meet the minimum CPC prices or daily budgets of the large ones, so the need for small networks will remain. Moreover, if you are a niche network - the way Quigo was - then I think you will do fine.
5. Do you expect more exchange modells as RightMedia to being developed?
Yes. The massive rise in value will encourage many more Right Media clones, especially independent ones.
6. Do you think that in the future advertisers will only work with exchange modells without using classic networks?
No, advertisers will always want to balance simplicity with choice. Over time the use of networks becomes a must and something else becomes experimental. I’d say all advertisers should include ad networks in their mix, but other types of efforts will pop up, such as (for example) pay for call, or sponsorship. You are seeing a lot of flat-fee deals, for example, because some CPC prices have experienced hyper inflation. These things work in cycles.
7. Which of the current technologies such as behavioral targeting or social ads do you expect to establish?
I have covered BT’s limits here. Social networking advertising is also more hype than substance right now. Marketers in 2007 shun the hypothesis of advertising on social media sites, and I think 2008 will only reinforce that. Admittedly, as a producer of professional content, I am biased, but the truth that belief of mine precedes the bias. It is because I don’t think that advertisers will embrace user-generated media that I produce professional video content, and not the other way around.
8. Do you expect new technologies or trends to evolve?
I do think eventually more and more advertising will be locally-driven and this will only further pull dollars away from radio and newspaper advertising.
9. What do you think will the online advertising market look like in 3 years?
Wow. Three years is a long time. In 2004 (three years ago), a lot of things were different and frankly, there will be more change. Anyway, I think more and more marketers will use the Web because the Web is tracked, targeted and timely. An advertiser can turn a campaign on and off in a timely fashion, so there is much less waste online. We all hear about how tracked and targeted nature of online ads will draw more dollars from offline, but I think the third T - timeliness - is almost as important.
Other things we have covered include the blurriness of lines between technology and media, software and advertising. This was manifested by the MSFT/aQuantive deal, and the WPP/247 Real Media deals.
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Posted By: Ashkan Karbasfrooshan | Dec 27th
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December 30th, 2007 at 8:05 am
Hi Ashkan,
thanks again for your quick expert response. Helps me a lot on my research!
December 30th, 2007 at 8:06 am
…when you are talking about AOL, what exactly do you mean by “Platform A” network?
December 30th, 2007 at 10:13 am
AOL bundled it various ad platforms into one unit:
http://www.timewarner.com/corp/newsroom/pr/0,20812,1662789,00.html
December 31st, 2007 at 1:25 pm
ah, i get it!
but do you have a clue why all of the sudden yahoo appears in the comscore data for november? especially ranked at number 2?
when you compare to the list from octobre, yahoo! isn`t listed as an ad-network?
why is that?
January 1st, 2008 at 5:33 pm
Great question, I noticed that too but think it has to do with a) deals closing and b) the time it takes for yhoo to ask comscore to roll up the stats.
But, you gave me something to blog about… coming soon.