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.