I’m back in publisher mode, in the early stages of an overhaul of this website, The Rayno Report. This has led me to look at advertising and sponsorship strategies, which is definitely a can of worms. One of the first decisions to make? Whether or not to use an ad network.
This is not an easy project. There are more ad networks than there are sports energy drinks. Figuring out who does what and how well is really difficult. You would have to become a full-time analyst to understand the entire space.
To complicate things, not all ad networks are even ad networks. There are ad networks, ad exchanges, yield optimizers, and data management platforms. Some of companies in this space combine technology functions, others are focused primarily on managing ad inventory.
The larger, generic “ad exchanges” who are focused primarily on auctioning large amounts of inventory in “real time” to fulfill advertising orders. You also have a wide range of middle-men and specialized technology providers targeting specific themes and markets (mobile, video, B2B, e.t.c.).
The basic decision that Web publishers have is this: Choose an ad network, or sell and deliver your own ads. The former has the benefit of ease of use, oustsourced inventory control, and instant gratification (you can start serving ads in less than 48 hours, in most cases). The latter has the benefit of higher pricing, higher margins, and complete control of the inventory. I found a whitepaper from OpenX which was helpful in understanding the market. Imagine a spectrum of ad solutions that runs from super-broad and highly technology driven (Google) to a niche “rep” network positioned for bloggers (Blogads).
If you wanted to oversimplify, however, the largest quantity of Internet display ads are served by the three largest ad exchanges: Google, Right Media, and AppNexus. AppNexus is considered a strong up-and-coming player that was recently profiled in Forbes magazine.
From a business perspective, this is an interesting space because the flood of Internet advertising is raising all boats. This market is growing like crazy, and it’s very competitive. Take a look at this diagram if you think you can understand it quickly. Think you got that? Have a look at the ad networks just focused on mobile networks. Digital advertising will be growing at double-digit rates for years, and is still in the minority of advertising revenues in general. Googe, Yahoo, Microsoft, Facebook, and AOL — the largest source of online advertising — accounted for about 40% of all digitial spending in 2012, or about $24 billion, according to eMarketer.
I have already made the choice for interim ad-serving. I am trying out Federated Media’s Lijit network. Why did I choose Lijit? A technology friend in Boulder, CO, told me to check it out, mostly. I’ve been unhappy with Google’s ad services in general, and I want an alternative. Lijit in general was very easy to set up but it’s too early to tell you what kind of results I will get.
The biggest tradeoff for a publisher with all of these advertising networks is price, or CPM (cost per thousand impressions). By their nature, ad exchanges and ad networks scale very large, therefore they are in the business of commoditizing the ad market. So you are going to get to scale very fast but at the cost of lower prices for ads.
In the larger scheme of things, it seems that social networks such as LinkedIn, Facebook, and Twitter are gaining mojo, as social apps and individual publishers gain more leverage with individual users on mobile devices. To me this trend makes sense, as the controller of the content, in the end, should also control advertising inventory.
My prediction: LinkedIn, Facebook, and Twitter will continue to gain control in the advertising market and will embark on aggressive programs to develop their own advertising networks — including entirely new forms of ads. They’ll also likely do a lot of M&A in the advertising market, since there are scores of ad network and technology startups.
If you are a small publisher, one strategy could be to ignore traditional Internet display advertising altogether, with all of these changes taking place. TechMeme has been doing this for years. As I’m discovering, with the proliferation of ad networks, the comoditization of the product, and the difficulty in differentiating them, that might not be a bad strategy!
I will likely to continue looking at many platforms, but to be frank, in the end I don’t think it will matter too much as a publisher. The first job of any publisher is to build a strong audience and collect a wide range of data on this audience to present to potential advertisers. Whether or not you have an advertising network doesn’t really matter if you don’t do this first. And if you do this well and end up with a valuable audience, choosing an advertising solution will be a tactical product to optimize your revenue strategy.