Guest Comment: Why Ad Networks don’t care about publishers
- Added:
- Sep 29, 2008
Are ad networks undervaluing their publishers' websites? Austen Kay, Director of W00t!media, looks at why the traditional model for ad networks is ripe for change.
Just like any business sector, there are winners and losers in the digital marketplace. Will an ill wind blow for the mass of emerging tech players? Will, for example, social network apps really become the pot of gold many people have predicted?
Who knows? I, for one, am not in the mood for speculation. That’s probably better left to companies like TechCrunch and self-styled industry gurus.
What I do know is there is a continued, fundamental imbalance in the advertising model that favours the big ad networks over the smaller publishers. Surprised? I didn’t think so. But I think it’s worth fleshing out why this is and making the case for a change in the way that advertisers value the many varieties of publisher out there, depending on the goals they have.
Over the past few years, the predominant choices for “smaller” publishers to have advertising displayed on their sites have been affiliate marketing/CPA; Adsense/PPC or similar; or ad networks.
Affiliate marketing and AdSense are for a specific type of publisher; one that only exists to climb the SEO ranks and generate as much traffic as possible, regardless of the quality of their audience or the content being viewed. If you are an independent publisher but aren’t in that group, then you have a couple of choices:
1. You try and sell your site to advertisers by yourself;
2. You turn your inventory over to an Ad Network or Sales House.
However, here are a few stark truths about Ad Networks and the current marketplace:
Ad Networks are the bane of the independent publisher
They don’t value smaller publishers at all
They simply exist to make money for themselves and advertisers by competing with search and affiliate marketing for direct response budgets
Ad Networks aggregate impressions across multiple publishers to offer advertisers low cost traffic which, in turn, allows them to hit their CPA targets. This model makes no distinction between the value of one publisher’s audience or content vs. another. Everyone is lumped together at the lowest common denominator price.
Yes, behavioural and other targeting models recently developed by Ad Networks do allow for distinctions in traffic quality, but I’ve yet to see any meaningful value trickle down to the publishers. Net CPMs to publishers in 2005 tended to average £0.50-0.75 at best. Now they struggle to climb above £0.30, regardless of the targeting technology applied.
Ad Networks do not offer premium representation. Unless you are a really big player, Ad Networks won’t sell inventory on your site at its full value. Why should they? It’s much easier (and profitable) to take a single £50k booking for 50m impressions at £1 CPM than broker five deals at 2m impressions worth £5 CPM each.
Most Sales Houses will offer premium representation as part of their service to recruit publishers. Unfortunately, as the majority of these so-called “sales houses” operate a network model, this is usually nothing more than lip service and is rarely borne out. Admittedly the publisher will see a healthy volume of banners...just very little at decent rates.
It’s getting worse. Anyone with half an eye on the market can see the bigger players are looking to consolidate their position, either by acquiring or decimating the competition. Similarly, media agencies are doing their jobs by continually pressuring rates downward, in search of better efficiency for their clients. Most agencies now have a “Head of Trading” whose job is to negotiate CPMs down by agreeing volume commitments over the long term. We’ve heard first hand from media buyers who have been pressured away from buying “interesting, independent” sites in favour of pushing more (low cost) traffic through established players to make up the agency commitments.
The economy isn’t helping either. With many of the staple clients of networks facing financial difficulty it’s inevitable that networks will offer even more competitive deals to advertisers, meaning even less money for publishers. But there is another more curious twist to the economy’s effect on the web. Many of the ‘tier 2’ ad networks are VC funded or have undergone some form of M&A. The founders will have their eyes on a lucrative payoff that requires huge, continuous growth over the next 2-3 years. This means the sales marketplace has become much more aggressive – another development that only serves to push CPMs lower.
In summary, while ad networks absolutely have a place and are great for direct response campaigns, they are not so great for publishers. They are designed to offer scale and value to advertisers while simultaneously trying to hide the fact they offer publishers a raw deal in a maze of tech jargon and empty promises.
They also aren’t great for brand advertisers. The ads they serve will rarely be seen by the right type of user in truly relevant context and will be restricted to display formats vs. more interesting solutions such as sponsorship and ad-funded content.
So what’s the solution?
Current buzz words around the industry are “engagement” and “interaction.” The push marketing model is dead (apparently). Moving forward, brand advertisers will be looking to influence key opinion formers via meaningful interaction online, at an increasingly granular level. To do this they need to establish better relationships with publishers in order to fully understand their audiences.
In our opinion, there needs to be a new generation of vertical-specific, non-network driven sales houses that are genuinely committed to the marrying the needs of the publisher with those of brand-driven advertisers seeking targeted placement and innovative solutions.
If we continue to treat every impression and publisher equally and lump them all into the ad network model, the majority of content rich, independent websites (that often have a fiercely loyal but relatively small user base compared to the portals etc.) are going to end up with CPM’s of pennies at best and will inevitably shut down.
It will leave the ‘advertiser friendly’ web quickly on course to be a combination of dreary, sanitised product from the portals and zero-content, SEO-driven affiliate sites. And that sounds awful.
The trade off is that publishers, at some point, will need the courage to switch off the ad networks and replace them with a dedicated sales team, either in-house or external, that really values both them and their content. Major sites like ESPN are already doing this and I genuinely hope that independent publishers follow suit.
by Austen Kay
Director of W00t!media
