Yesterday's OMMA Publish conference in New York City was at full capacity as publishers came to swap stories and look for solutions in a down economy. One panel, ably moderated by MediaPost's Joe Mandese, struck at one of the core bones of contention: how to deal with ad networks.
The panel, with the linkbait title, "Fire Your Network: The Great Debate," showed how publishers still see ad networks as the enemy for effectively causing conflict with their direct sales channel as well as making incremental revenue from data generated, in part, by publishers. Joining Mandese was Richard Frankel of Rocket Fuel, David Koretz of Adventive and BlueTie, David Roter of ESPN, Alan Schanzer of Undertone Networks and Walker Jacobs of Turner Broadcasting System, Inc.
Jacobs crystallized the large publisher's thinking for the crowd. And surprisingly for some, he thinks ad networks aren't all bad:
There is most definitely a valuable place in the ecosystem for ad networks. Particularly those that are helping small and mid-size publisehers save costs and [its an easy way] to put together sales organizations, easy way to gather valuable audiences whether its sports or any other category. I see great value in that.
It's interesting. You just take a look at the business model, though. The question is: should we perpetuate our own demise? - [particularly] when you look at the business model and how most of these ad networks have made a lot of their money.
To Alan's (Schanzer of Undertone) point, they're not all the same. But, you realize these are guys who plug a few computers into the wall and have some phones. They don't own and operate anything. And, it's an arbitrage model.
You realize the only insights that are informing the decision engine - the audience profiles on the IPs that they're building - is insights from advertisers which are their clients. So a telecommunication company buys ads, people click on it: [The ad networks says] "This person is in-market for a cell phone. I could go resell it to their competitor."
And then insights from their publishing partner: "Oh, this is a golfer because he was on PGA.com" and now they're classified as a golfer and can be resold via an email site that the ad network was able to arbitrage.
That's the straight inventory arbitrage that's happening. And that, I think, goes to the holding company's concerns in that they're bidding up their own competitors.
When you look at the positioning most of these [ad networks] have, if you go to their websites, they all talk about how it's Comscore 200 and it's only the best brand and only the best environments. And you wait, and look at it.. and you say - Wait a second, if they're saying that big media doesn't matter and brands don't matter and it's all about putting together the little [websites] and having a viable alternative to guys like us. Great! - but that's not their positioning. What they're actually doing is using our brands to justify the buy that they're bundling a bunch of garbage with."
Later, Jacobs disputed the notion that online ad networks are like outlet malls adding that there are no corollaries in traditional media for what is perceived as remnant inventory online.
"There is a fundamental difference in what the product is and how you access it [between online and traditional remnant]. There's a physical difference in where you put the outlet mall as opposed to the retail store [in the offline world]. Often times, the outlet itself has different lines and is not the same quality compared to what you get in the retail store. In television, a lot of DR stuff is late at night. In print, [remnant] is the small ads in the back of the book. Each of these examples has a remnant marketplace but each has different advertisers, different budgets and different products.
The fundamental problem with online is that it's a perfect substitute. If you're an online marketer you can buy premium inventory x for 10 cents on the dollar. It's the same thing [compared to a premium, direct online buy]. Until we can get more sophisticated about dfiferentiating what we're selling, I think it's a sort of bogus argument [that ad networks are like outlet malls]."
And, there's that troublesome word "premium," again. In our opinion, premium is not only available through large publishers - it's everywhere, long, mid, fat tail.
We argue that any impression - whether above the fold on CNN's home page or in Gmail next to your significant other's latest outdoor dining idea - is premium if you can provide the right insight which brings the advertiser media, publisher placement and consumer together at the right time.
Since premium is potentially everywhere, and audience is important to advertisers, large publishers are in a bind. Ultimately, publishers will need to let advertisers see, and buy, their inventory per impression and in real-time (RTB) through the ad exchange. This technology is now coming online - as is the liquidity which will help increase the bids. By letting advertisers see the audience, big pubs can compete in this new, audience playing field. And, big brand publishers should take heart. Brand marketers will bid higher for audience + big brand site. With real-time bidding, things should get better or stabilize for publishers. RTB unlocks the differentiation Jacobs is looking for.
Still, as yesterday's conference showed, other publisher monetization solutions will likely be necessary such as subscription models and other micro-transaction opportunities.