KnowVertical Blog

Living In the Network Age

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!’

Creating a Vertical Media Community...

We talk a lot about the financial aspects of a vertical network, but don't dive much into the other drivers for publishers to join and engage in the community of sites.   The main drivers for sites to join a vertical media network today is really built on three things, Money, Fame, & Power.

The first driver and probably primary for the majority of sites that join a vertical network, is money.   Money means high CPM buys from good quality endemic and brand advertisers.   Many of the sites in a vertical network may be making good money already though Google AdSense, but there is still an opportunity to extend and grow their revenue through a top tier national sales team selling their site to Fortune 500 advertisers online.

The second driver is fame.  Fame is really important to the network ecosystem, as it is not only a great way to establish and build your brand for the network, but it also provides for a real hook or sticky application for the sites to stay as active members of your community.  Fame really means the association or prestige of being associated with something better and/or more important.   

Some tactical examples of fame show up in everything from displaying a badge on the site with the network logo, all the way to syndicating video or content in a bisynchronous manner.  What this means is you are out providing access to very high quality content and widgets, but in a controlled manner that is only available to your member sites.   Providing tools, widgets, content, etc... to these sites as a premium to their site is seen by most publishers as a significant benefit of being associated with your brand.   

The simplest version of fame is to provide a badge to your member sites.  A Web badge is a small image used on websites to promote web standards, products used in the creation of a web page or product, or to indicate a specific content license that is applied to the content or design of a website. The "Powered By X Vertical Ad Network" on your website is an example of a web badge.

A common-usage standard for web badges are 88x31 pixel and 80x15 pixel (also known as Antipixel[citation needed]) images typically in GIF or PNG image format composed of a small graphic to the left with text on the right typically using the Silkscreen font. Web badges may however come in any size or configuration.

Standard dimensions:

• 36x13
• 80x15
• 88x31
• 110x32
• 120x60
• 120x90
• 125x50
• 180x60

The badge should be worn by all sites on at least their home page, if not elsewhere.   The badge serves a couple of purposes, the first being the fame and prestige of being in the network.  The second is so advertisers feel comfortable that the sites are high quality and vetted because they are wearing your logo and brand.  The tertiary benefit is the lift in traffic and/or Page Ranking. 

The badges many times have direct links from the site to your main site, which then provides more linking power to your main portal.   Remember the SEO benefit must be implemented correctly and should be as clear and direct linked as possible, given the way most search engines work.

Most badges fit into standard formats on the sidebar, most fall into 120x90 or 120x60.  You can do many other sizes, but these are the standards. A few examples of badges that fit best practices can be seen in current networks and across service and brand websites.

- Aral Balkan Brand Badge

- Aral Balkan Brand Badge 
- Know H2O Badges
- Website Designers List Badge

Though the fame bucket can be broad, a few good examples of fame can be seen across the web today through tools and/or widgets:

- Divine Caroline provides pregnancy tracker tools, podcast directories, rss feeds, and content widgets to sites.
- WMC local news provides weather and news widgets to sites. 
- DeSmog Blog provides a tracking widget for the global carbon footprint.
- Last.FM provides a music quilt widget for associated sites.
- WeShow provides a TV programming video widget 
- Epicurious Recipes Widget  

These are just a few ideas that might be helpful as you think about what types of widgets you want to develop, support and deploy to your network of sites.  The most important thing to remember as it relates to content syndication and widgets is the fact that in the network world the distribution is limited to your member sites.  Unlike viral widgets like ClearSpring, where the majority of the widgets sit on MySpace an FaceBook, these widgets only show-up on the sites in your network that you have approved and/or accepted into the network.

The final benefit, or value driver, is power.  What power really means is traffic.  Sites all see traffic as power, as traffic really provides longer term value to the sites through more visitors, more readers, more subscribers, thus more revenue and more opportunities.   There are a handful of methods that work to increase the power driver for your network sites, but the best is through repurposing their content on your own website/property or providing a feed of the RSS feeds across the network.

There are a handful of networks that are combining the Fame and Power, but pushing out widgets that include cross content from other sites in the network, thus driving more traffic.

A few live examples of these include, but are not limited to:

• Tech Dispenser Widget
• Blogroll Business Widget
• WPNI Blogroll Travel RSS Widget.
• Washington Post Overall Widget  

Additionally, providing an active list of sites and links to these sites is another great benefit for members of the network to potentially reach additional audiences.

Washington Post Directory - http://www.washingtonpost.com/wp-adv/blogroll/directory.htm
Martha Stewart Directory of Links - http://www.marthastewart.com/most-popular?lnc=c479cf380e1dd010VgnVCM1000005b09a00aRCRD&rsc=navigationcorporate_Homepage_Homepage

Overall, there are plenty of best practices that you can be using to build out and engage with your publisher community.  Going into this relationship with more than just the money in mind is the first step to ensuring a long term, durable network asset.

Establishing Formal Terms with your Community

When you build your vertical author community you will want to establish specific terms with your member sites.  Most of the terms and conditions that are important to your network will be around ensuring your protection and establishing consideration with your partners. 

If you remember Business Law 101 you will remember COAL.  Consideration, Obligation, Acceptance and Legal.  Consideration is the bind between you as the network operator and the members of the network.  This bind could be based on content syndication, search links, video, or just ad representation.

Because you will be out selling the network of sites and representing your blogs and websites with large Fortune 1,000 advertisers, these terms will ensure you are protecting your brand and your advertiser’s brand.  It is very important that you require standard terms for all partners because you are going to be a premium network and need to have standards.  That being said, many of your relationships with the  larger sites will be more comprehensive and custom.

When you design and build your vertical network, it is very important to prioritize the details of your relationship with your partner sites.   Some of the most important terms focus around exclusivity of ad sales or content; content syndication, ad placements, and/or custom ad placement terms.

There are many resources out on the web that can help you write your terms and conditions with your publishers.  Why not start with the terms for other vertical communities to get a sense of what they are requiring from their networks.  Some of the best or most comprehensive terms include the Glam Publisher Network Terms; AdMob’s Term Sheet; and even Ad.com.

You also can check out the IAB Standards library, where there are plenty of examples of guidelines and term sheets that could help in preparing your network terms.

The idea is to create a relationship that scales and is healthy for all involved.  The one thing that many vertical builders forget is that the members of the networks want the formal terms just as much as you do.  The terms give them a point of clarity around the relationship and help them in ensuring they are fulfilling their commitments.

There are many points to consider when creating these T&C’s, from the simple rules around ad placements, to the use of content and even control and transparency.   If you are working on building T&C for your network, download the 14 Tips - Vertical Ad Network Terms and Conditions cheat sheet.

You will be glad you thought this through, the more time you spend up front, the better you will be in the long run.

Starting at the Top of the Curve...

There are many sources for finding potential blog partners for your vertical ad network.  Of course  going after the top 10 in each category based on traffic is going to be an important step, but in reality this step is not going to differentiate your network.  The problem is that most of these larger blogs are big enough to either sell their own ads already, or have more leverage than you are going to want to give up across your whole network.

The real value in your network will be the sweet spot of sites in the middle of the curve.  You can call these the shoulder or torso sites, as they are not the head or the tail.  These sites are big enough to be pretty good quality and have enough traffic to make a difference for an advertiser, but not too big that they are going to want the world to work with you.

Finding these middle sites is the hard part, and without a rich database of sites, by category/niche, you have a long road ahead of you.

But that being said, you can start with the top blogs to get a sense of what is in the category and what is considered high quality content.   There are plenty of resources out there that will give you a good sense of the top blogs by category, and though these will be less valuable to you longer term, they are important as you start to build your network as they will get you started. 

Some of the good resources to find the top sites in a category are though editorial reviews, such as the CNet Blog 100, or at the Blog focused search engines, such as Technorati Most Popular.  These sources, along with about 20 others, are great catalogs of good blogs in the top of the web curve.  Again, these are not going to make you or break you, but they will help get you started.

Added Value – Network Publishers…

Building a vertical ad network takes more than just money.  You have to offer the market more on all sides of the equitation.   What does that mean?  It means that as a vertical ad network operator you have to be in it beyond the goal to arbitrage or squeeze the most out of a CPM.   Publishers are expecting more from their partners, especially the smaller publishers.

Bringing additional value to your publisher partner is key to building a great advertising network.  You will be asking a lot of your publishers and in return you need to give them as much as you can.  The value to the publisher can be broken into three main forms.  Money, Fame, and Power!  If you are going to build a vertical ad network today, you should think about offering all of these to your publisher partners to make it work.

Let’s break them down a little to better understand what that means and how you can make this work for you.   First and foremost is money, cash, moolah, trump, greenbacks.  This is pretty straight forward as it relates to paying for the ad space or inventory.   The types of sites you want in your network, aka quality content, will want more than bottom of the barrel remnant pricing or even a few cents above.   These sites want to see that you are really bringing them value and that their association with you is paying off through the types of buys that they are getting on their site/blog.

We have done plenty of studies with bloggers and website operators to know that the old adage that ‘Cash is King’ is only true to the extent that it is a requirement to be in the consideration set.   Beyond being a base requirement, it is not the only part of the deal.  If you go into the market thinking you will just buy the inventory for $1 and go sell it for $2, you are going to build another big crappy network that really provides no value to anyone.  Remember that the way to make a vertical ad network really work is to sell multiple tiers and to lock in the right inventory and leverage a sales team to sell it for what it is really worth to the market.  This is how to provide real monetary value to your publisher partners.

The second value you need to offer to your publishers is fame.  Fame comes in many ways, but in reality this is what a lot of bloggers are looking for these days.  Fame is as simple as a listing in a directory of partner sites or republishing a posting on your property to promote the partner site.  Your publisher partners want to be recognized for their hard work and effort.  They want the intangibles that come along with validation that the hard work they have put into their blog has been worth it.  These publishers want to be a part of an exclusive group and be seen as elite or special.  You can provide the sites fame value through offering some great benefits.

Some of the fame oriented benefits to consider when building a vertical advertising network focus on allowing the sites to identify with a premier brand or identity.  First of all make sure your network is seen as exclusive.  You aren’t going to let every site into the network of course, so make sure your partners know this.  It has to be clear that these sites are important to your success; regardless of how big they are or how much revenue they drive your top line.

Badges are great ways to create a fame value for your sites, while also bringing you many benefits.  By adding a badge to all your network sites you are promoting your network on many great sites, while also have great SEO benefits and tracking benefits.  You can read a lot more about badges on our recent post.  The badge can be as simple as a static graphic, animated image or even a sidebar ad space (such as a 125x125) which could always be replaced with an ad if needed.

Fame comes in many other forms.  Consider highlighting or republishing some of your networks sites recent postings.  Write about a member site or member blog editor on a weekly or monthly basis.  Think about the employee of the month concept.  Give them recognition for being a part of this great network.  Intangibles are great and though you can’t give your members a great parking space in the outside parking lot, you can give those great benefits and fame. 

Last but not least is Power!   Power comes in many ways, but in the online world power equal visitors.  New visitors, old visitors, new subscribers, rss feed readers, or even that ever valuable links.  Focusing on power can make the difference between a good network and a great network.  If you can drive real traffic to your member sites, increase their overall readership, and increase their search engine metrics, you will have a partner for life.  The best part about all the benefits of fame is this only helps your network.  By increasing the number of readers and the rankings the more valuable your network will become. 

Always remember that power is one of the most difficult components of building a network and might take the most time and resources.   But because of the network effect any and all power your partner sites gain will be inherited and passed on to you as it is a living thing that feeds itself, thus the network effect. 

The assocation and living energy between Money, Fame and Power is best analyzed and described in detail within ''Dematerialism and Energy', published August 4, 2007 - read more here.

Chapter 1.  Toward a Rational Social Contract - 'Thus we can form a commutative triangle among (i) negotiable fame, (ii) negotiable influence together with other types of power, and (iii) wealth.  That is, negotiable fame can be converted into wealth and power, including negotiable influence; negotiable influence and other types of power can be converted into negotiable fame and wealth,; and wealth can be converted into negotiable fame and power including negotiable influence.  The situation is as shown in Fig. 1-2 below...