As ad network growth surges, a vertical focus takes forefront
The number of online advertising networks, companies that aggregate and sell advertising inventory on behalf of a group of publishers, has continued to grow in recent years. But is there room in the market for all of them? Experts in the space say maybe.
“Last I heard, there were 300 ad networks. That sounds like an insane number,” said Bill Wise, the general manager, marketing technology solutions for Yahoo. There's still room in the market for a lot of ad networks to be valuable and successful, he notes, but 300 may be too many.
The online space may not have room for new ad networks that simply aggregate audience on a horizontal basis, Wise said. Those taking a vertical approach are more likely to succeed. “Where they're concentrating on a particular audience and they're becoming experts in that audience, I think that's a great strategy,” he said.
Last year saw much acquisition activity in the space, with Microsoft buying aQuantive, Yahoo adding Blue Lithium, and WPP buying 24/7 Real Media.
While acquisitions have slowed, funding certainly hasn't, he added. For example, Brand.net recently announced it had gained $10 million in Series B funding, while rival ad network Turn, Inc. received $15 million in Series C funding.
Many people have been “jumping in” to the business, admitted Ken Sonenclar, managing director at media investment bank DeSilva + Phillips. “Seemingly, if you get the right ad network together and aggregate the right audience, you can make money,” he said.
Barriers to entry are also relatively low, as they are in many of the aspects of digital publishing, Sonenclar said.
Sonenclar sees remnant networks suffering, since these networks don't give visibility to advertisers about where their ads are going. “There's definitely been a push towards transparency,” he said.
Networks that survive will be able to get the right eyeballs on trusted content, said Andy Ellenthal, CEO of quadrantONE.
Cree Lawson, founder and CEO of Travel Ad Network, agreed. “It's finally starting to resonate with the market that you plan media differently when you're marketing baby food than where you're trying to sell cars or vacations,” he said.
Lawson anticipates that the ad networks that win in the space will be the ones providing value beyond lower cost per thousand page impressions (CPMs) and optimization. “I think the future of networks is specialization,” he said.
Networks that deliver the right ad to the right audience at the right time at the right price will do well, Sonenclar anticipates. “There's a fair amount of competition and I think you're going to see very quickly that ad networks that don't have any special value to add become victims to the overpopulation of ad networks.”
In this economic market — as ad spend slows — ad networks will need to be unique and offer differentiation, Wise says.