Unless you read (the quite wonderful article) Email - Then And Now, you might know that I began life as a media buyer for an ad network. While I don’t buy today, I still remain in contact with several relationships I formed during that year of buying and two and a half years in the ad network space. Perhaps it was because it never came up – both internally as well externally in my discussions with the publishers, but I never questioned that value that ad networks added. Granted, a sales position doesn’t often lead to incredible impartiality, but I would think that were there something insidious about the role of ad networks, it probably would have come up.
Do a search for articles and posts on ad networks and what comes up are discussion boards trying to determine the best one to countless interviews and stories on new features. Except for the occasional quibble regarding late payment or bad experience with a small unknown contender, the majority of the coverage has been positive. It’s been so boringly within range, I almost though Ari Rosenberg’s recent article was an April Fool’s Day joke mistakenly sent six weeks early. Titled “Just Say No to Ad Networks,” it takes a globally negative stance on ad networks. That it hasn’t been picked up and discussed in the blogosphere, seems curious. (Note to Media Post, who published the article, Permalinks would be nice as Jeff Hirsch of ValueClick who wrote the rebuttle “ValueClick: Say Yes to Ad Networks” looks bad for his link pointing to a different piece.) Below, you’ll find snippets of the main points from Ari’s article and my thoughts on that point.
Ari’s main point is the following: “The problem you (the online publisher) choose to solve with ad networks is the issue of unsold inventory. Too much supply is bad for business. So you invite ad networks to vacuum up your monthly overflow and, in exchange, you split the change they find in between the seat cushions. In addition, this monthly absorption empowers a greater sense of scarcity for your dedicated sales force to communicate, in an effort to increase CPMs for the inventory they sell.” Unfortunately, it’s this very context that is incorrect. Publishers do not invite in ad networks in order to increase scarcity and drive up CPMs for the inventory they sell internally. Publishers invite ad networks in order to make more money. A publisher’s job is content creation and attracting users. Ad networks provide additional working capital so that publishers can continue to run their business.
Just Say No to Ad Networks lists three major issues with using ad networks. Number 1 is “Ad networks connect your site to less desirable creative. When are publishers going to realize ad creative is part of the picture they paint for their readers to admire?” I have to agree with Jeff Hirsch when he says that publishers should always make sure that non-offensive creative is running on their site. But, I would like to take a step back and look at the situation for the 10,000 foot view. Ad networks on the whole tend to be a microcosm of what runs on the net. The overlap between ads running on the major ad networks and sites like Yahoo, MSN, Weather.com is higher than you might think – LowerMyBills, NexTag, Ad Sense, Online Education, Vonage, Verizon, etc. Advertising and ad networks are not about painting a picture for readers to admire. They are about making money. You can’t both dislike the fun incentive ads and the innocuous Google ads. If so, run nothing. Remember, ad networks are merely facilitators, connecting the fragmented advertising world with the fragmented publishing world. They increase online advertising efficiency by connecting buyers and sellers that would not and often could not (e.g. scale) find each otherwise.
The second point raised by Ari says, “2. Ad networks connect your site to lower prices. CPMs for inventory resold by ad networks often dip below a dollar. Most ad networks sell "blindly," so advertisers are unaware of which sites they will appear on within a defined category.” In many ways this contracts a statement he made to back up his first point, “You cannot tell me a banner or skyscraper filled with Google text links enriches the appearance of your site.” Even if you agree with that subjective aesthetic analysis, objectively, Google connect publishers with CPMs that blow veteran ad network guys like me away. In fact, thanks to Google, countless sites can call themselves businesses. I’d actually argue that rather than connecting sites with lower prices, they connect sites to higher prices. Ad networks cannot afford to act fat and happy. They must constantly strive to increase yields because they know they are the definition of replaceable.
Number three on his list of problems caused by ad networks states that, “Ad networks connect your site to diminished value. Clients buy sites blindly when purchasing inventory sold by ad networks, so how much value do they place on the quality of a site's content? Ad networks further perpetuate the sense that unless a reader acts when seeing an ad, nothing of value has occurred.” Regarding the statement on content, I would like to meet one buyer on a network that ISN’T worries about the content of the sites on the networks. About the only ones might be some of the less sophisticated advertisers on Google, who don’t understand the exact nature of the content network. Regarding his statement that they perpetuate some myth, then why do companies like Advertising.com make so much of their money today on advanced options like behavioral targeting? As for the big piece of ad network revenue that comes from direct marketing – that mirrors life where companies often have no choice but seek an action on their ads. That ad networks play risk arbiter doesn’t speak negatively to them, the companies, or the methodology as a whole.
I applaud Ari for his well-written but slightly misguided article. He is probably right that showing fewer ads might lead to greater performance on the ads that are shown. Unfortunately, that increase in performance does not cover the increase in cost necessary to cover the lost revenue. The ad network business is anything but fun and sexy. It’s a brutal business with high complexity and equally high stress. They are the path to replacement where their customers only want them for so long, but in the end everyone wins because of it.
-- Jay
So why haven’t more people commented? One hypothesis – finding the original article is a challenge for even the most advanced searches. And, now with the link changing, it’s even harder. So, here is the full text.
Just Say No to Ad Networks
by Ari Rosenberg, Thursday, Feb 16, 2006 3:45 PM EST
Networking connects you to something you would not connect to if you hadn't joined the"network." This is exactly the function ad networks perform for online publishers. In exchange for the rights to sell their inventory, online ad networks connect online publishers to advertising revenue the publisher would not have otherwise met.
However, before you sign on or renew agreements with companies that harvest inventory you have grown, which includes Google--a company that appears as many things and yet most closely resembles an ad network--you should consider the money you lose with every dollar you make leasing out your inventory to a third-party seller.
The problem you (the online publisher) choose to solve with ad networks is the issue of unsold inventory. Too much supply is bad for business. So you invite ad networks to vacuum up your monthly overflow and, in exchange, you split the change they find in between the seat cushions. In addition, this monthly absorption empowers a greater sense of scarcity for your dedicated sales force to communicate, in an effort to increase CPMs for the inventory they sell.
So what are the problems with how this problem is being solved?
1. Ad networks connect your site to less desirable creative. When are publishers going to realize ad creative is part of the picture they paint for their readers to admire? You cannot tell me a banner or skyscraper filled with Google text links enriches the appearance of your site. Worse, I recently alerted a friend who manages the sales of a mid-sized educational content site that a medium rectangle on his home page was promoting a site to help his readers "get laid." He was irate and promised to fire one of the ad networks he was working with, but the damage had been done. The ad had both offended readers and cheapened the look of his site. How could it not?
2. Ad networks connect your site to lower prices. CPMs for inventory resold by ad networks often dip below a dollar. Most ad networks sell "blindly," so advertisers are unaware of which sites they will appear on within a defined category. However, media buyers are not blind; when they see an ad for Lower My Bills, Endless Pools, or an ad offering readers a chance to tease their brain with an IQ test, buyers immediately sense they can purchase inventory from your site at a lower rate. How can they not?
3. Ad networks connect your site to diminished value. Clients buy sites blindly when purchasing inventory sold by ad networks, so how much value do they place on the quality of a site's content? Ad networks further perpetuate the sense that unless a reader acts when seeing an ad, nothing of value has occurred.
Those who defend the practice of using ad networks will say that running these kinds of ads on your site is no different from magazines running classified ads or television stations selling infomercials. But this argument does not hold up, because, unlike infomercials that run at odd time slots, or classified ads that run in the back of the book, online ads bought from ad networks often run in the same positions as ads bought directly from a site at higher CPMs. Besides, infomercials and classified ads do make content properties appear cheaper.
A house with a backyard containing an overflowing dumpster, a rusted swing set and a shed so full its doors can't close will bring down the value of any neighborhood, regardless of how expensive the zip code. Ad networks shove low-valued products into your content neighborhood, and the rent they pay will cost you far more in sales in the end. If you don't build your revenue plan to count on ad dollars from ad networks, your site will run fewer ads. This will make your site more appealing to your readers, while increasing their attention to the ads you have sold. How can it not?
Ari Rosenberg is a media sales consultant. Prior to starting his company, he was the vice president of sales at IGN.com. He can be reached at ari(at)performancepricing.com.
