The Ad Network Shakeout

There's a lot of hype about consolidation in the ad network marketplace and for good reason. It's apparent that emerging technologies in the form of buy-side platforms have changed the game. I remember a few years ago when the network landscape boomed, and the trades were jammed with articles about the newest companies on the scene. The boom happened for two simple reasons. First, there was not much risk involved due to limited barriers to entry (i.e., nominal startup capital required). Second, there was the lure of significant revenue potential in an exploding market. This resulted in a crowded landscape of hundreds of ad nets, many of which looked and sounded alike. The buy-side suffered through the confusion because every vendor said the same thing in order to capture dollars. Now, as new buy-side platforms surge in popularity, the role of the network is being challenged. In fact, some buyers believe demand-side platforms (DSPs) and other emerging technologies will replace them altogether. While this is a bit far-fetched, many still wonder what role, if any, networks will play. It is a complex question that can only be answered by evaluating what value they must offer in order to compete in the market. In my opinion, there are five areas where networks can differentiate and add value. 1. Inventory: The foundation for any network is the inventory it acquires and the ad placements it offers on this inventory. When comparing networks, it's important to examine the inventory acquisition models to see if a network truly differentiates itself by offering unique, valuable inventory. Traditionally, it has been acquired in four ways: through ad exchanges, from other ad networks, portals or directly from publishers. Most networks acquire it through some combination of the first three. These are the companies whose long-term prospects may be challenged since buyers can now purchase much of this via DSPs. However, a significant amount of online inventory, especially high-quality inventory, is not available through exchanges. 2. Targeting: Think about it in terms of your favorite Japanese restaurant. There may be dozens around, but you like to eat at a certain one because, in your opinion, the teriyaki sauce is tastier there. A network's blend of targeting is similar to that restaurant. Each network has its own proprietary data it can offer directly to clients, or with the option of combining it with third-party or brand data for exclusive targeting capabilities. Coupled with technology and strong client-vendor relationships, these are the key ingredients in a network's secret sauce. 3. Products: Networks can add value by providing unique and compelling creative units not available through the buy-side platforms. Networks that bring non-commoditized products into the space, such as larger and more sophisticated ads, will have a leg up on standard banners bought in an automated fashion. After all, there is still a growing demand for these high-impact products, especially as more Fortune 500 marketers shift budgets online and marketers look to make bigger splashes with fancier creative executions.4. Research and insights: Research is crucial, especially to large marketers moving money online. By offering research to support what makes a successful campaign for a client's objectives, networks can help marketers make smarter decisions on how they spend their ad budgets and tailor their strategies. But implementing research can be complicated and costly, so there is inherent value for networks that can support it. 5. Service: Agencies are well known for being understaffed and overworked. Mounting on-the-job pressures (e.g., keeping clients happy) mean that vendors need to do more of the heavy lifting. And while automation is a wonderful thing, technology is only part of the story. A good network should be comprised of people with strong institutional and industry knowledge that will empower agencies to give better service to their clients. In the future, this industry will see many mergers and acquisitions. There will be a smaller number of meaningful players. Networks will continue to exist as part of the crowded digital advertising landscape, but I believe there will be fewer of them. In fact, you are beginning to see this already, as some now describe themselves as some form of buy-side platform. The networks that truly add value will not only survive, but also remain relevant. So while the industry may be rapidly changing, the opportunity for a network that can deliver on some, if not all, of the above is tremendous.Michael Cassidy is CEO of Undertone Networks. He can be reached at mcassidy@undertone.com.

Brand Marketing

The Ad Network Shakeout

Michael Cassidy

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Michael Cassidy