Publishers and their Relationship with Ad Networks

| Ad Networks

ESPNMike Shields at Mediaweek wrote an interesting piece today regarding ESPN and their decision to pull back from using networks.  When I spoke with Mike on Friday regarding this I told him I’m not completely surprised, and here is why: 

  1. Everyone is reading that ad networks are growing and increasing in clout.  This is not exactly what publishers had in mind or what they expected, so naturally one reaction is to pull back and reevaluate.  
  2. Many networks simply misrepresent the inventory they have, or worse, act as though they are the external sales force for a website.  This is not the role of a network working with major publishers, and is something that unfortunately happens more often than not.  I wouldn’t be surprised if ESPN’s decision bubbled up when a sales person felt he or she missed, or indeed did miss, a buy because a network inappropriately represented themselves to a client.
  3. I wrote about the publisher ad network model earlier this year in iMedia and continue to believe that this is a bad idea.  I am sure some analyst at ESPN is looking at the 20% of their inventory going to networks, and modeling out what revenue would look like if they simply discounted their premium CPM’s and cut out networks completely.  The problem is while the CPM might rise for this 20%, there will undoubtedly be a serious revenue strain from their core 80%.  The inventory needs to be segmented; otherwise this approach will absolutely backfire and cost a publisher more money in the end.

So what is a publisher to do if they feel a change is in order?

  1. Start or join a consortium?  I am sure there is plenty of talk within the IAB about starting an ad network.  Many people are watching Quadrant One to see how it develops.  Again – I don’t think this will work because these consortiums have rarely worked and networks have evolved into being more than just an aggregator of websites.
  2. Join an ad exchange? Unfortunately this causes publishers’ inventory to be completely commoditized, they lose control of their brand, and their CPM’s drop.  If exchanges were as great as they claim to be, then Undertone would be out of business by now.  It’s hard for me to be diplomatic when it comes to exchanges – I just don’t buy their value proposition when it comes to the major websites (I do think they are great for very long tail inventory).
  3. Be more selective? This, in my opinion, is the most effective solution for major publishers such as the ones Undertone works with, and it is very simple. Much like advertisers and agencies are beginning to hold network upfronts to select a few main partners, publishers should do the same.  Why sell your inventory to just any network, when you can limit the networks you work with and then begin to assert more control.  Carefully select a group of networks and enter into a deeper partnership where both you and the network can benefit.  That is how to most effectively drive up the CPM on your 20% of inventory going to networks, rather than just walk away from the revenue.

While contrary to what many might think, I applaud ESPN for their decision.  If networks are not working for them then they have every right to pull back and revaluate how and if they work with these companies.  I do not believe this is the beginning of an overall trend, because the network revenue opportunity is too big for publishers to walk away from. Not to mention the continued growth in the use of ad networks by advertisers’ and agencies’
is a powerful dynamic that is hard to ignore.

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