Vertical Ad Networks and Ad Exchanges

With new vertical ad networks launching (almost) daily and confusion about the role of Vertical Ad Networks, Performance Ad Networks and Exchanges, Adotas published Adify's analysis and analogy to help advertisers and agencies create a balanced, high return portfolio for their online advertising spending.


Over the last twelve months, there’s been a lot of attention on a new category in the online advertising ecosystem – the ad exchange. Acquisitions by Microsoft (ADECN) and Yahoo! (Right Media) and new offerings from Doubleclick reinforce that there is a real role for ad exchanges. It is a mistake to overstate this role, especially in reference to other parts of the advertising ecosystem. Historical analogy demonstrates exactly what the strengths and weaknesses of exchanges will be – can drive prices lower but require very knowledgeable buyers staying informed about all the factors influencing “asset” value. Vertical Ad Networks seem to be launching daily and the reason is that a quality vertical ad network is like buying into a mutual fund, rather than directly on an exchange. The vertical ad network builder is the mutual fund manager and drives value for themselves and their advertisers by tracking all the details and complexity in managing the publishers to deliver a high performing publishing community that efficiently and expertly reaches your target audience.


The United States economy has fluid capital markets facilitated by multiple exchanges – NYSE, NASDAQ, Chicago Mercantile and more. Individual investors are welcome to purchase equities (and options) on these exchanges through their licensed brokers. Yet the majority of individual investors, holding investments in their 401Ks, IRAs and brokerage accounts, have better risk-adjusted return from mutual funds – leading to a proliferation of mutual funds to address every segment and risk profile investors might have.


When an advertiser wants to maximize the return of their advertising investment, they need their Agency Media Planners & Buyers to create a balanced portfolio mixing direct investment in large on-target sites + reach to engaged, targeted audiences through vertical ad networks + broad reach from low cost remnant networks. The share of voice and audience engagement is highest on the premium, topically relevant sites of Vertical Ad Networks while the reach is highest through direct investments and remnant networks. This is the appropriate balance for high return online brand advertising campaigns where audience engagement is critical.


For example, if a major car manufacturer wants to reach safety-conscious Moms with a campaign about their minivan’s safety ratings and features, they might buy on a major news portal – and access a portion of the 5.5M unique visitors that reach that portal. If they added a targeted, premium vertical ad network for Moms to that campaign, they’d add another 4M unique visitors – for an unduplicated reach of 8M unique visitors a month. Already, the premium network is adding more efficiency to the media buy. Then factor in that only a portion of the 5.5M unique visitors on the destination site are moms and they may be on many different pages of that site which dilutes that 5.5M into a much smaller number. But the 4M in the premium vertical ad network are on mom-related sites and are much less diluted. So, the probable value of that blended campaign is much higher than the campaign that only accesses the destination sites.


Traditional performance ad networks and newer behavioral networks add reach to a campaign, but the vast majority of their inventory is unsold inventory from the large destination sites – so this is an excellent complement to the destination buy in order to reach more of the 5.5M unique visitors on that destination site. That said, according to comScore, the duplication between performance and behavioral networks and networks powered by Adify is less than 5% of the sites and 10% of the impressions.


There are no better advertising mutual fund managers than the knowledgeable editors and entrepreneurs extending their reach through the creation of Vertical Ad Networks. Mark Elderkin, of the Gay Ad Network, is arguably one of, if not the, leading authority on reaching the online Gay and Lesbian audience. Martha Stewart’s taste and editorial prowess is legendary – why wouldn’t you want to leverage her to reach your audience? Robert Kadar in Health, The Guardian Editor-in-Chief in travel, Forbes Editor-in-Chief on Business – these experts and more are working for you doing the hard work of selecting, monitoring and optimizing performance of publishers in your advertising mutual fund – your vertical ad networks. When you evaluate these alternatives for increasing your reach, you must consider the editorial expertise as well as the numbers – quality counts if you want a strong return on your brand advertising dollar.


You rely on informed and well-incented experts for your financial portfolio. It’s no different with your advertising portfolios. Exchanges are potentially part of that equation for deploying your advertising investment dollars but the continued fragmentation of the Internet creates meaningful value for advertisers who leverage skilled, well-incented advertising mutual funds for every campaign. Those advertising mutual funds are the emerging category of vertical ad networks.

The Long Tail Starts Wagging the Dog

"Why does a dog wag its tail? Because a dog is smarter than its tail. If the tail was smarter, the tail would wag the dog."

Wag the Dog. (2008, March 1). In Wikipedia, The Free Encyclopedia. Retrieved 01:14, March 8, 2008


AdAge.com recently announced that for the first time in four years, Avenue A/Razorfish saw a shift in their ad dollars from portals - down to 19% from 24% - to smaller sites and blogs of the Long Tail. Just as was seen in the past in other media channels, such as television and print, large, mass-appeal properties are beginning to lose their efficacy to engaging, niche sites. With this admission from a prominent agency, the question that should be heavy on the minds of advertisers and agencies is – if the Long Tail is starting to wag the Internet Dog, how are you going to grab some Tail?


AdAge.com’s article implies that many advertisers are indeed trying to grab some Tail, but they haven’t quite figured out how to best get the job done. Jeff Lanctot, Vice President of Media and Client Services for Avenue A/Razorfish, pointed out that spending on smaller sites was accomplished not only through ad network buys, but also through direct buys. While ad network channels may provide reach, they are not known for their quality or transparency and they source most of their inventory from the unsold impressions of the large sites. On the other hand, as the Long Tail grows, how can advertisers and agencies be expected to sift through millions of niche websites to find one worthy of a direct buy? And to complicate matters further, even if they do find that needle in the haystack, that particular publisher may not even know what an insertion order is. With the speed of technology and constantly evolving ad types, part-time and hobbyist publishers will likely never get past Adsense if they go it alone. So while both ad networks and direct buys can admittedly get you a piece of the Tail, they are hardly safe and scalable methods of doing so.


Figuring out how to tackle that tricky Tail isn’t about taking risks or doing all the dirty work yourself. It’s about leveraging the expertise and efforts of category professionals who have made it their full-time job to bring together the best of the Long Tail under a brand reputation – Grab some Tail!

Comparing Apples to Oranges with Google AdSense CPM

Publishers are often striving to optimize their earning potential, and they face difficult choices while evaluating different ad network partners. If they’re considering the possibility of joining a premium ad network, or evaluating the performance of the networks they’re currently using, it’s critical that they compare performance metrics consistently across networks. If they have to make “apples to oranges” comparisons, they may form an inaccurate perception of which network is delivering real value for them.


Of all the performance metrics they’re likely to compare, eCPM (effective cost per thousand impressions) is perhaps the most important. But which eCPM measure are they using? The industry standard practice, shared among virtually all ad networks and ad industry associations, is to use Ad eCPM. For example, if a publisher has an Ad eCPM of $1.00, they’re making an average of $1.00 for every 1,000 times an ad is displayed on their site.


Here’s the challenge: the popular remnant ad network AdSense uses a different metric that they have named Page eCPM. This metric calculates a publisher’s revenue based on the sum value generated by all the ads they have on a given page.


If a publisher’s site has more than one ad per page (as most sites do), their Page eCPM will always be higher than their Ad eCPM. In fact, the non-standard Page eCPM metric typically runs 100% to 200% higher than the widely-accepted Ad eCPM metric. Thus, if the publisher is using AdSense to monetize their leftover inventory, they should be careful when they compare. They may get an inflated perception of how AdSense has been performing for them.


How can a publisher get an accurate understanding of their true AdSense eCPM? There is a way to find Ad eCPM in the AdSense interface, but it requires a little digging in the data. Here’s a hint: it can’t be found in the Account Overview.



The publisher should log into AdSense and click on Advanced Reports, under the Reports tab. Down the left side of the screen, they will see “Show Data By”. Below it, they should open the drop-down menu and select “Individual Ad”. From there, they can adjust the date range and other preferences, and then click “Display Report”. The resulting report will show Ad eCPM in the second-to-right column.



It can indeed be disappointing to view the true remnant eCPM, compared with the eCPM a publisher thought they were earning with AdSense. But there’s no reason to despair. AdSense is a very efficient seller of last resort. There’s no reason not to continue using AdSense, or another remnant network, to monetize leftover inventory. But publishers deserve the opportunity to participate in high-eCPM buys from brand advertisers too. An Adify-powered premium vertical network can bring that opportunity.

Intra-network content syndication with Adify Widget Share

What distinguishes a vertical ad network from a performance ad network? Three things:


1. Unique, high quality websites with passionate, engaged audience that cannot be efficiently reached directly by advertisers
2. Premium Rates
3. Publisher control over ads AND advertiser real-time visibility into sites


Great vertical ad networks become MEDIA NETWORKS that serve their visitors when the network makes visitors aware of other quality content of interest. These networks drive traffic around their network and monetize it through premium quality advertising. The publishers in these networks are part of a loose confederation of experts and thought leaders on particular topics.


Today (March 25, 2008) Adify unveils Adify Widget Share - our content syndication platform to enable Adify Network Builders to syndicate any kind of web-ready content – HTML, Javascript, Flash, iFrames, RSS, JPEG, GIF, etc. – within their community of invited and accepted publishers. Some networks are creating badges signifying membership in their exclusive community. Some networks are creating widgets of real-time RSS headlines of new information across the network – such as the RSS widgets IDG has created for their new IDG TechNetwork that can be seen at Datacenterknowledge.com and Datacenterlinks.


Many of Adify’s innovative Network Builders are building and syndicating widgets to deliver quality content throughout their networks and increase traffic to all their publishers. In addition, the debate over the role of ad networks (and the differences between networks) raged as Forbes and IDG unveiled new vertical ad networks (powered by Adify), Martha Stewart spoke of the responsibility of brand stewardship as part of her vertical ad network and ESPN opted out of all remnant ad networks. It’s clear that all ad networks are not equal. Some of the industry watchers are noting that Vertical Ad Networks are a compelling value proposition that publishers, advertisers and media companies need to consider. We expect that Adify Widget Share will further differentiate Networks Powered by Adify and extend the value of Vertical Ad Networks.