Online Ad Networks Back in VogueThe rebound of the online advertising market has brought about a simultaneous revival of the online ad network.
Conducive Corp. yesterday became the newest online ad network business. The New York company, which powers a merchant paid listings program for eBay, unveiled a direct response ad network called adMarketplace that shows graphical ads tied to Web page content. Conducive is working with about 60 publishers, including some in the travel, dating and finance areas.
Conducive joins a crowded field of networks competing for publishers' so-called remnant inventory, the ad space their own sales teams cannot sell. Many publishers use contextual listings networks, such as Google's AdSense, or graphical ad networks like Burst Media and Fastclick.
Since its launch in February 2003, AdSense listings have expanded to thousands of Web sites. It has attracted competing contextual listings networks, including programs from Overture, Kanoodle, Quigo and ContextWeb, which serve direct response text listings based on the content of individual Web pages. Tacoda Systems recently rolled out a text listings network that serves ads based on consumers' prior Web browsing behavior.
"We've seen a lot of the contextual companies try to expand into the network space," said Jim Waltz, Conducive's CEO/president. "It doesn't really translate well to the needs of content publishers."
Graphical ad networks also have seen a revival. Fastclick, for example, secured $75 million in venture backing last month. AOL paid $435 million in June to buy Advertising.com, a direct response ad network that buys ad space on an impression basis and sells it to advertisers with cost-per-action or cost-per-click pricing.
Online ad networks fell out of favor during the dot-com downturn when ad prices dropped dramatically. DoubleClick, which was the biggest player in the space, decided to jettison its media business in 2002. At the time, the move saved DoubleClick from mounting losses, letting it focus on technology products.
However, DoubleClick's decision was shortsighted, as ad technology has become a commodity product while ad demand and prices have climbed.
Waltz, who was an executive in DoubleClick's media business, said ad networks still make sense for publishers. He said graphical ad units, rather than text listings, are a better fit for Web publishers, which have content more like magazines than directories.
"We're trying to bring personality back into advertising," he said.
Google has started to dabble in graphical ads. It began offering image ads to AdSense publishers in May, and it soon will let advertisers use animated images. Google executives have said image ads are a key initiative in broadening its advertiser base, including advertisers with branding objectives.
"Not that they weren't an ad network before, but they sure feel even more like an ad network now," said Gary Stein, an analyst with Jupiter Research.
Google's ad system determines whether to display an image ad over a text ad based on relevance and performance. Google does not reveal how many AdSense publishers have opted to display image ads.
Like AdSense, adMarketplace scans Web pages for key concepts and keywords. It then matches ads that bid on categories and keywords. The minimum bid for advertisers is 30 cents.
For example, adMarketplace would classify a Web page about travel to Jamaica in its travel category, with the subcategory air travel, and matching the keyword "Jamaica." AdMarketplace puts advertisers in a queue based on their bid prices, with the highest bidder getting the first impression. Bidders on the same category are given subsequent impressions, by order of their bid amounts.
One change to the network model that Waltz has instituted is to bring a measure of transparency to the bidding process. AdMarketplace's auction system ranks advertisers based on what they bid and lets them view the rankings and competing ads.
"Some would say it's scary, but most advertisers find they like it," he said.
Waltz estimates remnant inventory represents about 20 percent of most Web publishers' sites. With new technologies letting marketers target offers to consumers based on Web page content, behavior and other factors, he thinks the market for ad networks will grow.
"There's a power you can't duplicate when you're an individual publisher," he said.
Jarvis Coffin, CEO of Burst Media, said the various ad networks would compete for real estate based on the tools and return they offer publishers, who are likely to try several alternatives for the ad space not sold by their own sales teams.
"To this point, when people think of ad networks, they're perceived as this blunt media reach instrument," he said. "Going forward, successful networks will provide a much more nuanced service."
The proliferation of ad networks, and Google's willingness to give publishers a large percentage of revenue, could force ad networks to offer deals extremely favorable to publishers, Stein said.