Bermel Interactive

By Mary Bermel

While search boasts a better reputation and social media marketing is the industry darling, the $8B worth of spent on display advertising in 2008 is hardly chump change. (In fact, how many bloggers are now happily collecting monthly paychecks thanks to profitable display campaigns running on their sites?) In 2008, 70% of ad spend went directly to web sites, 30% to ad networks. According to some, the split could be 50:50 in 2009.

Here’s a drastically simplified of overview of the evolution to ad networks.

Early days – approximately 1994 to 2000

Simple placements based on content relevance: Car ads on car sites. Ads oriented to the C-Suite on WSJ.com. Personal technology ads on tech-oriented sites like CNET.com

Pricing, though a fraction of offline CPMs, ranged in the mid-teens, though some niche sites command rates in the $100 CPM range before savvy media buyers negotiated healthy discounts.

As the web exploded, planning campaigns became unwieldy. Sure, the portals offer tremendous reach, but gee, smaller sites stood out, pitching and proving themselves with creative flexibility and helpfulness. The number of sites considered for a single campaign swelled. Agencies struggled to sort through and evaluate all the options, never mind deal with operational issues, and clients were sometimes bewildered by too much choice.

Enter the ad networks, connecting multiple sites – literally hundreds, in some cases – that want to sell ad space with advertisers and agencies. Their pool includes the long tail of sites, as well large branded websites who saw that representation would help them sell what their direct sellers had not. Ad networks structured their sites into logical vertical groups (tech, finance, auto, health) enabling advertisers to place their ads in contextually relevant places.

Today, ad networks while maligned by the WSJ, are a standard component of most media plans. Here’s why:

Advantages of ad networks:

Scale. Reach rivals the largest web properties. Ad network Specific Media claims 160 million U.S. consumers monthly across multiple vertical categories. Netshelter, a vertical ad network for tech has 20 million unique U.S. visitors, per ComScore.

Fraction of the price of the most prominent pages on leading web properties. Less than $1 CPM in some cases.

Flexible pricing models giving a pay-for-performance option via cost per lead, cost per action in addition to cost per thousand.

Technology leadership. Niche audiences can be reached in large numbers, thanks to technologies that segment audiences and allow marketers to target them e.g. Early Tech Adopters, Business Travellers, Women. This gives marketers the opportunity to deliver truly relevant ads to the most-likely-to-be-receptive consumer. It’s no longer a ‘spray and pray’ game.

Service. Ad networks have led the way in optimization, letting advertisers refine which ads run where.

Limitations typically associated with ad networks are starting to fade:

Disclosure. Some won’t tell advertisers where their ads are running. The best offer complete transparency. The exceptional let you exclude sites from your plan.

Quality. More and more networks do a better job screening sites on the network and selecting quality. Once all ad networks were considered ‘remnant’ inventory. Today many highlight key brands on their rosters. In fact, in Jan 09, the New York Times suggested as much as 50% of their ad space might be sold through networks.

Net, net, ad networks are here to stay, alongside a myriad of well known and much loved branded websites.

Next up: More on the size and choice among vertical ad networks like Netshelter for tech, Glam for women, Travel Ad Network for travel. Behavioral targeting. Optimization. Real time bidding. So much more to talk about.