As online publishers try to keep pace with a growing market while also eliminating waste, more of them are willing to outsource parts of their ad operations and sales.
This move toward outsourcing could be hastened by Internet advertising's development of new methods to reach consumers by tapping into Web habits and demographic information. While publishers have focused on driving ad sales, new outsourcing options offer the possibility of thinking strategically about how best to deploy inventory to wring the most revenue as efficiently as possible.
Large Web publishers are finding it useful to outsource ad operations. Trafficmac, a New York-based firm, has deals with Microsoft's MSN, iVillage and The Economist to manage their ad trafficking and inventory management. "You have to take the smart marketing people and get them out of the grunt work," said Mike Leo, CEO of Trafficmac.
Outsourcing is also arriving in ad sales, driven by the desire to avoid waste. The biggest beneficiary of this trend is likely to be second-generation ad networks, which are bringing sophisticated targeting technology to give advertisers the targeted audiences they crave on a mass scale.
Scott Howe, general manager of aQuantive's DrivePM unit, which resells leftover ad inventory at the 100 most-visited Web sites using targeting technology, said Net publishers in the future will act like airlines that maximize the yield on their seat inventory through tech systems and third-party liquidators. Google's widely deployed AdSense program introduced publishers large and small to how outsourcing can tap into large pools of advertisers their sales force cannot reach, with market forces deciding inventory allocation. And other such networks are popping up to offer similar options for inventory.
"The future is about managing multiple sales channels," predicted Dave Morgan, CEO of Tacoda Systems, a behavioral-targeting firm. "In the world of eBay, Google and Overture, we've learned that if you can bring more buyers to the table, you have higher sell-though and higher prices."
While high-end sites refuse to outsource any ad inventory, many small- to medium-size Web publishers are outsourcing ad sales entirely, turning to ad-rep firms with established agency relationships and track records. "Most Web publishers, when they get into the ad business, have no idea of the depth and personnel requirements," said Mitch Lowe, CEO of Jumpstart Digital Marketing, a San Francisco rep firm for auto sites like NADAGuides.com.
Lycos, for instance, has 24/7 Real Media handle its portal's ad sales, while deploying its sales staff on prominent sites like Wired News. Auction giant eBay sells its own advertising, but has turned to Jumpstart to handle sales for its auto section. When Universal Music Group decided to run advertising on the Web sites for its labels and artists, it chose to outsource sales to Gorilla Nation Media, a Los Angeles rep firm.
With attractive, mass-reach destinations sold out, many media buyers have turned to the so-called "long tail" of niche sites that offer quality content but small audiences. "It's extremely hard to deal with hundreds of sites that all identify their audiences similarly," said Nick Pahade, evp and managing director of WPP-owned Beyond Interactive. Ad-rep firms can help package together small sites to ease the process.
Brian Fitzgerald, president of Gorilla Nation, said more publishers would follow the outsourcing model, particularly as companies like Universal dip their toes in online advertising. "Since brand dollars are back in the mix, everyone wants a piece of that pie," he said.