The Ad Network Conundrum

What a pickle we find ourselves in when it comes to ad networks.  A recent IAB/Bain & Company study on the industry revealed a few interesting and conflicting facts about these networks that we love to hate: 

1. Usage of ad networks to sell inventory has increased dramatically – from 5% in 2006 to 30% in 2007.
2. The impact of ad networks on prices is dramatic – an average of 90% discount (no, not a typo) relative to the pulishers’ typical prices

So, what does this mean for the major players in the ecosystem? 

Advertisers – They’re obviously happy about the pricing impact ad networks have.  However, many times this comes with significant tradeoffs including blind sites and an inability to have any control over the association of your brand with particular content. 

Agencies – Agencies like the prices, but the most interesting thing for them is the convenience of aggregating impressions to buy from a single source.  However, I would argue that that’s not a particularly long term strategic play – it’s not sustainable (it’s easy to buy from an ad network).  Agencies could add significant value by using tools to streamline their processes so they can efficiently buy highly-targeted sites on an individual basis.  Enter Balihoo Agency Edition. 

Publishers – This is where we hear the outcry regarding the ad networks, they’re feeling the pinch of the pricing discounts.  However, that clearly has not discouraged them from using the networks (given their growth numbers).  My opinion is that Publishers should be looking at other ways to more efficiently and effectively sell their advertising inventory instead of just increasingly relying on the networks – such as Balihoo Publisher Edition. 

You can read more on this topic for yourself at:

AdAge – Ad Networks Drive Down CPM’s

MediaWeek – More Publisher Selling via Ad Nets