media

Death of networks. Life for one or two exchanges.

By tripfoster ⋅ October 25, 2008 ⋅  Email This Post ⋅  Print This Post ⋅ Post a comment

A recent post on Silicon Alley Insider relates what a lot of us in the industry already know: There are to many online ad networks.

Most people quietly agree that for Brand advertisers still focused on brand awareness and impressions, the networks are a fine place to buy “long tail” inventory. Its a cheaper place to buy and often times its easier to buy from the networks vs individual sites. However, while the movement to network buying helps advertisers and agencies, it kills publishers. Networks turn non-premium inventory into fungible goods. This obviously hurts pricing for these publishers.

Publishers have rushed to networks to sell out inventory so they can continue to keep the lights on (and further their reliance in the CPM model). The problem for publishers is that the CPM model wont work on the web any longer…its dated and there is no scarcity on the web to maintain pricing levels that publisher seek to keep. This sets off the need to eventually change up how these publishers get compensated for their ads.

Eventually these publishers will turn to performance based pricing (CPA, Revshare, CPL, PPC, etc). This will in turn hurt the relevance of the 300+ networks. Eventually, publishers will only use the networks for an even smaller percentage of ’spot market’ remnant display inventory. There simply wont be enough inventory for all of these networks.

Further, as the remaining CPM products continue to be treated as fungible and less inventory exists for impression based pricing, networks will conslidate. Look to the more mature financial markets for what will happen. Once goods are fungible, better regulated and mature, the big networks (exchanges) get more powerful. Today we have two winners in ths country for equities, the NASD and the NYSE.

Eventually, I feel this will be the case for CPM based display ads. There will be one or two major networks for all CPM inventory that publishers dont want to price on a performance basis.

So who do you think the winners will be?