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A colleague asked this the other day in response to an article from
Even the larger sites that do have the resources for ad sales staff and have the luxury of being in premium verticals cannot always sell all their impression inventory and this is where the ad network and/or ad exchange comes into play. Most all publishers turn to ad networks to fill remnant impressions at some point.
On the advertiser side, ad networks / exchanges offer the advertiser the ability to run ads on premium publishers at prices pennies on the dollar of what they would have to pay running directly. Advertisers are also able to find strong performing sites and channels of aggregated sites that they might now have thought of. In this way ad networks deliver value to both advertisers and publishers.
Now this value proposition between ad networks, publishers, and advertisers works pretty well until an advertiser or an agency finds their brand clients ads running on a porn site. This was not as much of an issue in the past with direct response ads – sure ad networks and (DR) advertisers did not condone this practice; but it wasn’t going to get anyone sued and when these publishers were identified they were terminated from the responsible ad network.
In 2008 the game has changed, we are seeing more and more brand advertising coming online. Now advertisers and agencies are demanding full site disclosure from ad networks in order to protect their brands. What the advertisers may not know is that most all premium publishers have NDA’s in place with the networks they work with to protect their rate card. If an advertiser can buy inventory indirectly on premium sites for $0.50 – $2.50 CPM – why would they spend $5 – $40 CPM on a direct buy? The answer is they won’t. So at the end of the day we have advertisers that need to protect their brands and ad networks that need to protect their premium publishers.
So are networks / exchanges on the brink of extinction?, yes they are. At least the ones that do not provide a safe place for their advertisers and do not provide transparency to their partners. This does not have to be full site disclosure but ad networks need to provide their advertisers the ability to gain insight into where ads are actually running and publishers with transparency into what ads are running on thier site.
So there are a few different kinds of display ad networks out there. This would include: general banner ad networks, advanced targeting ad networks, and exchanges.
The Ad Network world is certainly in a state of flux and these definitions are changing – but the general banner ad networks business model concentrates on performance type CPA (DR) offers. What this means is that they serve a whole lot of ads with a whole lot of offers for “Free Florida Vacations”. These networks are shall we say more liberal with the types of advertisers and publishers they work with.
The advanced targeting networks business model concentrates on highly targeted Brand type offers. This type of network generally offers very high CPM (high for remnant at least) but lower fill since they are only able to monetize qualified traffic. These networks generally are more restrictive in terms of the advertisers and publishers they work with because they need to be to work with premium partners to command premium rates.
The exchange is where all these networks collide; and indeed most all ad networks participate in some way with exchanges be it with MSN, RightMedia, and/or DoubleClick. It is in this marketplace where premium ad networks can be exposed to the more flexible policies of the general banner ad networks if they are buying and selling inventory. This issue is much worse when it is the exchange in questions policy not to provide adequate transparency between the advertiser, network, and publishers partners.