Bermel Interactive

In a previous blog post, I gave a brief overview of display advertising’s evolution from stand alone publisher sites to ad networks. This one takes a look at a 3rd element, the ad exchange.

Difference between ad networks and exchanges:

Ad Networks. The 300 to 400-plus ad networks today aggregate ad inventory from a number of publishers for sale to advertisers or agencies. In this scenario, the ad network manages the buying and selling of ad impressions which might include it’s own set of sites. For example, Martha Stewart Living – once thought to spurn ad networks – launched their own network a couple of years ago called Martha’s Circle which includes ads from MSLO as well as from related niche sites. If you wanted to buy a Halloween package from Martha’s Circle, it might have included Smitten Kitchen, Matt Bites or any other food-related sites. The main benefit to the buyer is efficiency, through single point of contact and typically lower pricing for an audience than had the buyer had to conduct individual buys with multiple publishers.

Ad exchanges are similar in that they provide access to huge amounts of media impressions in a marketplace often described as the advertising equivalent of a stock market exchange. (Click on the link for more about the stock exchange analogy.) In this scenario, there are more parties at the table: advertisers, agencies, publishers and ad networks who have open access to find and buy ad impressions at attractive prices or sell their own using the exchange platform.

Let’s say Martha’s Circle has sold out some of it’s inventory. A ‘seat’ on the exchange let’s Martha buy additional impressions to sell to customers or if there are a glut of impressions, to offer them on the exchange for someone else to buy. Unsold inventory accounts for about 40 – 50% of all ad space, so you can imagine how happy publishers are not to leave reams of money on the table.

Remnant stigma

Typically networks and ad exchanges have been associated with remnant inventory – the leftovers after the premium positions have been sold. The inherent bad rap will take some time to fade at least in the minds of brand clients (myself included) though it helps that reputable industry researchers like ThinkEquity say remnant is “more accurately described as display advertising purchased without specific guarantees as to placement.”

And why should you care if you are able to reach the audience you want at a great price that provides a good ROI on your investment and gives transparency as to the audience reached and the price per impression?

Real time

Ad exchange platforms auction ad impressions in real time. They match buyers and sellers to use the supply of ad impressions available, giving buyers control over the price they pay at a given point in time. It’s all spot market, but in the future, who knows? Perhaps it becomes a model for upfront buying, too, allowing advertisers to get the benefit of both desirable impressions and secured cost advantages.

Who’s Who: (US-centric, top 2 mentions only)

Right Media Exchange – owned by Yahoo. Yahoo is also working on their next gen display ad platform called Apt that will bring together the Right Media exchange with it’s 800+ network of newspaper partners.

Google recently announced a revamped platform for the Double Click Ad Exchange that will enable AdWords and AdSense advertisers to participate. By bringing the discipline of search to display, Google believes they can grow the display ad market. Apparently the top 25 ad networks agree as they have signed up to participate. As with so many Google announcements, their entry into the ad exchange market signals emergence of ad exchanges in the display eco system.

So what does this mean for advertisers? More choice, more complexity but better efficiency and improved transparency. Reduced reliance on publisher-based media buying. It’s all about the audience and the data. Changes the media buying role to portfolio management, requiring a new set of skills to capture and make use of the data. Goes back to the stock market analogy.

For publishers? Potentially more dollars in pockets as impressions are better ‘monetized’ but also a potential lack of control they previously enjoyed.

For ad networks: Competition, but also the opportunity to get more from their inventory with scale.

“We have all these conversations about networks vs. exchanges vs. premium publishers, and all the tension between them. And there is some tension. But to the extent you can combine, open, liquid exchange marketplaces and proprietary innovation, you can start to strip away a lot of the efficiences that have accrued.”

- Mike Walrath, Yahoo senior VP and founder of Yahoo acquisition Right Media Exchange

Clearly, the way online advertising is bought and unsold is changing. Whether you think this is good or bewildering, to take advantage of the change requires a better understanding of how to leverage all parts of the buying and selling equation(s).

What do you think? I’d love to hear from you.

The flood of news and information about marketing today is voluminous, making it challenging to
keep up and on top of everything. I do 3 things in an effort to stay abreast of what is going on:

Subscribe to weekly summaries to know what is happening in marketing. My two favorites are:

1) Mediapost has online roundup of daily news, and the ability to subscribe to specific topics such as search, email, video, gaming, metrics, social media.

2) Smartbrief provides succinct excerpts on a variety of industries. I subscribe to the IAB (Internet Advertising Bureau) Smart brief as well as Smartbrief on Social Media.

Read business books for a deeper understanding of new marketing approaches.

Do so with the following discipline: On the inside front cover, write a 1-line summary for each chapter. On the inside back cover, jot down the quoteable quotes you might want to use later with the page number on which they appeared. I can’t take credit for this as it comes from Tim Sanders, author of Love is the Killer App. It’s time consuming, but if, like me, you’re apt to remember something if you write it down, it’s very helpful. I haven’t read Crush It by entrepreneur Gary Vaynerchuk, but that’s next on the list. (Click on the link only if you want to read a review.)

Attend online webinars to learn how to apply new marketing approaches. Aural learning is a nice break from reading, and there are a ton of online webinars available. If it’s social media you’re learning about, Awareness Networks has a terrific series featuring thought leaders in social media. Hubspot, another Boston-based company also offers a series of webinars including a program called Inbound University, a series of webinars that culminate in an Inbound Marketing designation for those who achieve the 75% minimum score. Read more…

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.