There has been a proliferation of online
ad networks over the last decade. There are three distinct generations
of ad networks, and they have each excelled at a different part of the
value chain:
First Generation: Controlling Inventory
The first generation of ad networks were built on their ability to
aggregate and control inventory from a wide array of websites. They did
a terrific job of building publisher relationships to be able to bundle
together wide reach (even within a channel) and offer this as an
efficient way for advertisers to buy ads. In some cases, this first
generation of ad networks integrating themselves directly into their
publisher sites by supplying their ad server or other elements of their
advertising infrastructure. Most of the biggest ad networks are good at
doing this.
Second Generation: More data
The next generation of ad networks came up with the innovation of
third party cookies. They dropped pixels on their publishers pages in
order to be able to track users across all of the sites in their
network, and to start to target advertising based on recognizing a user
when they showed up on different sites.
Third Generation: Better Targeting Algorithms
The third generation of ad networks pioneered behavioral targeting.
Not only were they able to recognize a user across their network, but
they could begin to predict which users had a greater propensity to
click on a particular ad based on their past web surfing behavior.
Together, these three elements represent three of the four core competences of ad networks:
Aggregating Inventory
Aggregating Data
Targeting
Sales
We’re starting to see a few changes in the market that are going to
serious affect the relative importance of these factors. Firstly, the
ad exchanges (Right media, doubleclick exchange
etc) are rapidly commoditizing access to inventory. Networks with
publisher relationships as a core competence may find that this is less
of a competitive advantage going forward.
Secondly, a new generation of startups including Lookery, BlueKai
and others are commoditizing data. Ad networks and advertisers can now
buy fairly detailed demographic and behavioral data on users, and
simply watch for those users to turn up on media that they control.
They can even buy cheap impressions from the ad exchanges and enhance
this with the data that they bought.
This places additional emphasis on the two other core competences of ad networks, targeting and sales.
Performance ad networks who have targeting as their core competence
are going to be safe for a while. Performance advertisers don’t care
how your “black box” targeting algorithm works, as long as you’re able
to hit their CPA targets.
However, this is less true for brand advertisers. A “black box”
approach to targeting brand advertising (unless there is a performance
component to their campaign that they can measure) simply isn’t going
to work. Advertisers won’t just trust your algorithm. As a result, the
targeting that they are looking for is typically not algorithmically
complex, but simply a re-purposing of demographic or behavioral data
(e.g. women 18-35, auto intenders). For brand ad networks, algorithms
are not going to be a differentiator.
That leaves sales. It is somewhat obvious, but sales must always be
the core competence of the fourth generation of an ad networks.
Would love to hear readers’ thoughts.
(For more from Jeremy, visit his blog)
(Image source: yieldbuild.com)
