Sitting in on the Upstream Sellers Forum in New York, the topic at hand is the role that Networks play in the online world today. The session was moderated by Doug Weaver, who actually is a very good moderator and justifies his very high salary.
The panel was made up of some of the top thinkers in the online network space. The panelists included: Russ Fradin (CEO Adify), Anand Subramanian (CEO ContextWeb), Bill Wise (GM Right Media), Bill Matthews (Tacoda).
The panel started out talking about a very complex chart around what Ad Networks do and where they sit in the market. This graphic was displaying all the components of the Ad Network space. The chart included:
- Rep Model
- Arbitrage
- Exchange
- Enterprise
- Vertical Ad Networks
- Ad Creation
Digging into this chart it was clear immediately that there is a distinct difference between the Ad Networks (Glam, Martha’s Circle, and FM Publishing) and the Exchanges (Right Media, ADSDAQ). The main point of differentiation was really around the primary objective of each.
What the panel explained was that exchanges are more of a platform that does not take on risk and doesn’t really own the sales effort or responsibilities associated with actually monetizing the inventory. A network is responsible for selling and ensuring the inventory is sold to the right advertiser and at the appropriate rate and is looking out for the best interests of the publishers that are a part of their network.
So digging into some of the details, ad exchanges allow the market to define value and focus on management of supply and demand. If you look at many of the exchanges out there they really are technology and methodology focused models, and it is really a black or white model, with very little grey area. The inventory is much more commoditized within exchange, though there are protections, the trend it to devalue the differences across the publishers within the exchange.
Now Vertical Ad Networks are really focused on the grey areas, with a primary objective of quality and value for the publisher community. It is about finding the right audience for the advertiser and provides them the flexibility and controls to create a complex marketing plan online. Vertical Ad Networks are focused on ensuring the sites that are a part of the network grow and retain their uniqueness and quality and value.
So that is the difference, the exchange is a lot like Google and Right Media where the volume can help drive down prices for advertisers and squeeze pennies out of CPMs and ensure the buyer is buying the lowest rate and getting the most out of their dollar. The vertical ad network provides an open and transparent approach for professional marketers to use their experience and knowledge to build and execute their marketing campaigns.
Digging deeper into the ad network and exchange business the discussion flowed towards the elephant in the room, which is around the big Double-C, Channel Conflict! The room is filled with over 100 of the top online publishers and influential interactive players. Almost everyone in the room was clearly worried about channel conflict, price degradation, brand control, and so on and so on.
What role does the (remnant) Ad Network play in the pricing squeeze and/or really creating a channel conflict issue? Though most of the panel agreed that the market had changed and the remnant sales teams are less shady and are more willing to protect the sites they run on, the advertisers are not stupid and use open data sources to find out where the ads will end-up.
The challenge posed from the panel to the audience was ‘will you take the next step if you are so worried and close these channels, at least for your high value inventory?’ Russ told the audience that they needed to take a close look at what the real important drivers of their business are and make some hard choices.
Finally, the panel spent a lot of time talking about the future of networks. There were plenty of questions of where the trends were headed and if the future was 1000’s of networks? The answer was that there already were 1000’s of networks and that is not what the big brand publishers should worry about, and the real worry was becoming obsolete. The real future of almost every publisher in this room is becoming obsolete online because of fragmentation.
The whole panel jumped in to explain, what we already know very well, which is the big sites are not growing anywhere as close as the growth in the category. Every site on the web is not growing anywhere close to the overall growth of the sites in their category, because of fragmentation.
There was a big discussion about the fact that Ford Motors this year spent $100MM of their online budget with an ad network. People were amazed and upset that ad networks were getting such big spend from the big brand players. Why were the networks stealing our revenue said one publisher under his breath. A lot of people were worried about channel conflict, losing budgets, fragmentation, loss of audience, and even
The panel talked about how the publishers in this room have to start taking control of their own destiny. They have to leverage their assets today, such as brand, content, and sales resources to start to aggregate your own network of high quality sites. It is critical now, so that you are prepared for the inevitable, which is the trend of fragmentation and the big publishers not bringing value to advertisers at enough scale any longer.
It was clear in the room that most of the people believe that building your own vertical ad network is the real solution to all these problems that are coming hard and fast at them everyday.
Finally, the panel reinforced to all the publishers in the room that they needed to take a close look at the alternate sales channels they are leveraging today, while also taking over their own destiny within their category.
To finish it up, Todd Teresi from Yahoo! said the best thing of the day. ‘You all need to stop complaining about all your problems you have control over. You can control the channel conflict. You can control the loss of revenue to ad networks. You can control the fragmentation. It is all solved by building your own vertical ad network and you better move fast!’
