Publishers and Ad Networks Both Lose From ‘Quick Fix’ Approach
By Anna Johnson on August 12th, 2008A new benchmarking study by the Interactive Advertising Bureau (IAB) and consulting firm Bain & Company, indicates that publishers may be underselling their ad inventory as they increasingly rely on ad networks to sell ad impressions.
The IAB sponsored “Digital Pricing Benchmarking Study,” released yesterday, found that publishers sold 30 percent of their ad impressions via ad networks in 2007, up from just 5 percent of all ad impressions in 2006. But while ad networks may be pleased with this massive 600 percent increase in usage of their services, a “quick fix” approach by publishers to dump excess ad inventory onto ad networks may actually be hurting both groups.
Publishers typically see their ad rates cut by up to 90 percent when they sell though ad networks. But this isn’t inevitable. According to the IAB and Bain & Company, if publishers and ad networks developed better working relationships, they could together bring about higher CPMs and greater ad revenues for all.
Publishers and ad networks both achieved increased ad revenues in 2007 – an increase of 30 percent per annum for publishers and an increase of 50 percent per annum for ad networks. But with tougher economic times constraining ad budgets in 2008, such growth levels are far from guaranteed going forward. By working more closely together to manage inventory and ad sales, publishers and ad networks are better able to maintain their revenue growth momentum.
August 12th, 2008 at 11:13 am
This whole ad network scenario is a short-term boom and a long-term bane.
Given that you can buy solid inventory at a fraction of the cost, why wouldn’t you use ad networks almost exclusively, especially for test campaigns when you’re trying to optimize creative and call to action?
But ultimately, this whole model is unsustainable. Sites cannot continue to sell an increasing share of their ads at a couple bucks per thousand, and the increasing competition is going to cause ad network failures and consolidation SOON.
I just put up a blog post with more detail on how this is going to shake out.
\"Ad Networks Are a House of Cards – But a Great Deal\"
http://is.gd/Ste
Jason Baer
Convince & Convert – digital consulting for agencies
http://www.convinceandconvert.com/convince-convert-digital-marketing-blog