The Ad Network Cleanse: A Response

I read with interest this week’s Publishing Insider titled “The Ad Network Cleanse” by Ari Rosenberg. I actually was at the very same MPA gathering he wrote about, and had the pleasure to meet Ari and talk to him for a few minutes. I can also attest that channel conflict was certainly a topic of discussion that day.

Ari’s article was especially timely as I read it on my iPhone during a break at the Pubmatic Ad Revenue Conference in New York City today. Ad Revenue 2009 was an entire event dedicated to the topic of monetization of the “second channel”: namely, inventory that is not sold by publishers’ direct sales teams. During the keynote, Pubmatic CEO Amar Goel presented some interesting information regarding publishers and secondary channel partners such as ad networks. One of the most important was a statistic from ThinkEquity, who forecasts that the secondary channel will contribute up to 34% of publisher revenue by 2012 - up from 10% today. Even at 10%, that is significant revenue and much higher than the oft-quoted 2% from the 2008 IAB/Bain study.

10-34% of overall revenue is a statistic that can’t be ignored, and also can’t be solved by swearing off ad networks for 90 days and seeing if direct sales teams can move the inventory. A typical publisher has 30-70% of impressions unsold for a very good reason: their in-house teams are focused on doing what they do best. Selling sponsorships and guaranteed placements at a premium to agencies and marketers, which is a time- and labor-intensive task, pays off in highly profitable partnerships. It would not be in publishers’ best interest to have those very same salespeople trying to sell huge quantities of ROS inventory to performance-based advertisers. The overall effects on the publisher’s top and bottom lines could be quite damaging over the long term.

Instead, I would propose publishers think about a strategy that may look somewhat like the opposite of Ari’s on the surface. I suggest the publisher takes a hard look at their business and their secondary strategy over that same 90-day period and ask several questions - all of which will take time to answer and discuss. Do they have a person or team in place on the operations or product side that is qualified to manage yield and optimization? What type of technology do they have in place to do so? How many partners are they working with? What do those partners bring to the table as far as advertiser quality, control and sales policies that support direct sales efforts? Do those networks (or exchanges) daisy chain other networks when serving ads on the site, leaving a trail of belly-fat ads on the site? Do their channel partners bring incremental revenue opportunities to the table? Do they propose ways that the publisher can leverage their data and audience, again for significant incremental revenue?

The opportunities for publishers to drive significant revenue through the secondary channel over the short and long termhave never been greater. However, to maximize results will require commitment on the publisher’s part and a focus on the right kinds of partners. This may not end up being a complete cleanse, but maybe a toxic partner or two (or more) who don’t bring anything to the table will be eliminated at the end. A partial cleanse, if you will, that will pay major dividends in the long term for the publisher’s business.