Survival of the fittest

Traditional online ad networks are under increasing pressure and need to evolve to stay alive. Five industry specialists discuss the issues.

Lion

MW: A comScore report in September showed that nearly all of the top 10 UK ad networks are seeing encouraging growth. As brands renew their confidence in online display over search, are ad networks looking increasingly attractive?

Alex Tait (AT): While an ad network can bring reach and scale to a campaign, there could also be transparency and control issues that outweigh the benefits. There is also the question of whether the media arbitrage practice that is at the core of the ad network provides the best value to brands and publishers. As the buy side trading desk model becomes increasingly relevant, it will be interesting to see how the ad networks evolve to remain competitive.

Jacklyn Low (JL): At Sportingbet, we’ve always approached the use of ad networks with a degree of caution and will probably continue to do so as performance from this channel has been incredibly varied for us. Transparent networks will remain in our plans, but I am expecting to see a shift in blind network budgets towards ad exchanges/real time bidding models this year. It would be interesting to see how ad networks plan to reinvent themselves. We’re also putting much greater emphasis on data and attribution modelling with the help of our media agency, Agenda21, to gain a better understanding of the true value of the various channels and suppliers.

Matt Simpson (MS): Agencies gaining direct access to exchanges via demand side platforms (DSP), buying retargeting through other means as well as social, mobile and video gaining traction have all put pressure on budgets previously allocated to networks. The top network players have got significantly better at what they do and agencies have consolidated spend into fewer networks. This gives the appearance of a healthier sector.

Julia Smith (JS): For brands, ad networks offer the ability to target a vast audience efficiently. In addition to extensive reach, ad networks and, increasingly, real time networks, offer the ability to target individual users based on a number of behavioural and contextual data points.

Linda McBain (LM): We are cautious about the use of banner ads. Their performance is extremely varied. However, with improved targeting and better understanding of the consumer providing us with more control of our spend we hope to see increased benefits.

MW: What advantages are brands currently seeing by using ad networks?

AT: Compared to traditional site placements, ad networks often provide greater reach and more cost-effective pricing, but some would argue that it is hard to tell how much more cost-effective it is, given the lack of transparency in the ad network model.

JL: As we are a global company, ad networks provide incremental reach and robust volume at lower cost, so it’s a good way to test new markets. Since ad networks tend to invest much more in technology, they’re also far better at things like segmenting traffic by IP, frequency capping and optimisation which minimises wastage in a way which individual sites are not able to do.

MS: Everyone has been talking about data for some time now, but what is less well known is that there is a lack of good usable data. Some networks can provide unique data pools that expand our reach into critical target audiences giving our clients greater volumes of sales.

JS: It simplifies buying. Negotiating rates and managing and creating campaigns takes a lot of time and effort. Running a campaign with an ad network will dramatically reduce the amount of work you have to do. Increased ROI is another key advantage.

LM: They have traditionally been good for brand awareness but are still to prove themselves in terms of direct conversions and ROI.

MW: How is brands’ use of ad networks changing, particularly in light of the rise of video ad networks, and how do you see this evolving?

AT: The easiest place for a traditional ad network to fit in is in the lower funnel; performance buys. The relatively cost-effective coverage that an ad network provides is a natural fit for campaigns whose budgets are closely tied to sales. As more video inventory becomes available through networks, we may see a shift towards video ad networks getting some branding budget.

JL: Ad networks expanding into a range of media formats is a good thing. It makes targeted video advertising more accessible in terms of pricing, but also offers a degree of tracking. That, coupled with attribution modelling, means we can be more confident in the value of video ads. If we can open up the inventory we can buy each format on its merits.

MS: Clients, via their agencies, have started removing retargeting from their ad network buys. This is to identify the true value being delivered by a network. Agencies will work harder and more collaboratively with fewer networks to establish the incremental benefit that can be derived from their reach and unique data. Video will become a more common component of these buys and as attribution tracking and analysis becomes the norm, networks could well find themselves being used more obviously to move people through a buying cycle.

JS: Ad networks started off as being a tool for increasing campaign efficiency and extending a brand’s reach, but this has diversified. Ad networks have now invested in building out technology to strengthen their offering. It’s no longer a case of one-size-fits-all and more brands are working with ad networks to deliver both direct response and branding campaigns.

LM: In terms of video ads there are potentially huge opportunities for charities in this area. Video content allows charities to reflect the emotion and real-life stories needed to help engage the donor and potentially lead to a donation which can be very difficult to achieve through traditional online banner advertising.

MW: In April, Google began revealing ad performance data from its display network. Do you expect to see more ad networks sharing CTR, CPC and CPM results?

AT: Many agencies argue that the DSPs and trading desks are more transparent (although the margin the agency makes is often not). I think it will become increasingly important for ad networks to be more transparent as they compete more for the same budget.

JL: The more transparent a supplier, the easier it is for us to evaluate how likely the investment is to deliver a reasonable return. For me, those who share data show a sense of confidence in their offering, but also a willingness to work in an open and cooperative manner, which in itself goes a long way.

MS: Transparency is critical for advertisers. We have gone through many years of growth in the online sector, but with huge parts of it essentially hidden from view. I expect Google’s move to continue a general trend towards more data being shared, which was started previously by the like of Specific and Collective.

JS: While there are more calls on ad networks to be transparent, brands need to be aware that this is not going to happen overnight. Ad networks were built around offering a lower CPM or CPC because the inventory was blind. If transparency is what the industry is now after, surely that is worth a higher price?

LM: The more transparent a network, the better. As a charity we need to make the best use of our budget (Save the Children works with Agenda21 to help manage its digital media planning and buying) and therefore the more initial information we have the better, as we can be sure that we are choosing the most effective advertising options for our objectives.

MW: Nick Hugh, Yahoo! Direct Response senior director EMEA, recently said that “consolidation in the ad network space is inevitable”. How will this affect brands?

AT: Given the amount of competition the ad networks will continue to face from platforms, it is unclear whether consolidation will eventually mean increased prices for advertisers. However, the individual amount of service and attention each brand gets from a network may be affected.

JL: There is only so much valuable inventory out there and the fewer duplicate ad networks trading this, the better it is for buyers. The major ad networks will probably stay fairly resilient and those that go under may be replaced by more advertisers and agencies who wish to get closer to the buying.

MS: Consolidation feels like common sense when we observe the huge duplication in audiences, placements and sites being offered and so over time it does feel like this is where we are going, but I do not think it poses a problem for advertisers.

JS: Ad networks involved in both the buy and the sell side need to adapt their businesses to match the changes in digital media buying through the increased use of technology. With the growth of supply side platforms (SSP) and real time networks, those that remain as traditional ad networks may struggle.

LM: The key benefit for brands is that the ad networks that will survive are the ones developing their own proprietary technology and offering sophisticated media solutions. And with such a fragmented online landscape, only added to by the ever-increasing number of publishers and sites, advertisers and agencies are finding it harder to find the right environment. So, fundamentally, ad networks can sort through the growing number of sites and target those that are suitable and most applicable.

MW: Real time bidding (RTB) has altered the way ad space is bought. How do you see this changing brands’ use of networks?

AT: This technology certainly has the potential to bridge the gap between the buy side and the sell side and make the process more efficient. As the technology is adopted by brands and publishers it should put pressure on the arbitrage model of ad networks, and get them to come up with ways of demonstrating value beyond the ability to aggregate inventory.

JL: The advertising industry has long been thirsting for a better integration of brand knowledge and buying expertise and RTB goes some way to solving the problem of having too many middle-men. It makes perfect sense for advertisers to get closer to the source, and this will put some pressure on ad networks to demonstrate how else they can add value.

MS: Networks are likely to start working closer with agency DSPs to secure unique inventory pools. These will be accessed at the right time on a real-time basis, but almost certainly not by bidding. The only way bidding would come into play is if the networks set up an auction among agencies and advertisers for pots of inventory. This is unlikely now that agencies are using their own data to inform what they buy.

JS: The use of RTB in ad trading has made it easier for money to flow through the chain, and buyers are already seeing higher ROI. By buying real time inventory through real time networks and SSPs, brands should expect to see increased effectiveness and conversion.

LM: It looks as though RTB will help manage risk as it will allow more control over bids and placements, therefore allowing us to optimise our online campaigns much more effectively. This can only be a good thing for our ongoing campaigns.

MW: The Online Behavioural Advertising Framework (OBAF) has been launched to protect the online ad industry from the revised e-privacy directive that came into force in May. How important is this in protecting the reputation of brands?

AT: It is very important. Brands anticipate third-party ad networks signing up to the OBAF and ISBA encourages its members to only deal with those networks that have signed up. The problem will be the ad networks that don’t sign up. Privacy will continue to be a big issue not only for networks but also agencies and advertisers.

JL: Brand reputation will always be of huge importance, so any additional amount of protection is more than welcomed. Our preference is still to work with transparent ad networks where possible, as it mitigates some of the risk. So many ad networks today are reliant on retargeting to boost performance, so I think the e-privacy directive is something they are studying very carefully.

MS: With a lack of transparency comes a lack of trust. For ad networks it continues to be an imperative to show that they’re doing everything possible to protect advertisers from inappropriate placement and contentious use of data. Privacy concerns are only going to get worse over time, so initiatives like OBAF and its support from the major networks is very important.

JS: Self-policing of our industry will be the key to ensuring that the changes to privacy policies do not impinge on our ability to trade effectively. The IAB Regulatory Council works closely with ad networks, and everyone is vehemently trying to ensure that the outcome is balanced and fair for buyers, sellers and users alike.

LM: Charity brand reputation is of the upmost importance, so the more protection offered to both us and the consumer, the better.

VIEWPOINT

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Nick Hugh

Nick Hugh
Senior director
Yahoo! Direct Response, EMEA

The vast majority of brands are using advertising networks today for three key reasons/ First, and most important, is the ability to buy audiences across multiple sites with scale. Networks also offer a bespoke service where performance is optimised by both people and machines to meet the intentions of the advertiser. And finally, networks offer a one-stop-shop providing an end-to-end solution.

Whether ad networks are becoming more attractive to brands depends on whether they add value. The best networks offer a proprietary audience, inventory and data, and can leverage those assets to the benefit of brands. For example, central to Yahoo! Direct Response’s (DR) proposition is the Yahoo! user base giving us proprietary inventory and data, which when blended with third-party data and inventory significantly improves our ability to serve relevant and engaging ads to our users. At Yahoo! it’s the science that enables us to engage with our core audiences effectively and in the most relevant way, the art that allows us to use the creative canvas in the most interactive ways and our unique ability to offer scale.

Furthermore Yahoo! DR leverages the extensive suite of tools in the Right Media Exchange to drive performance for the brands running on the network. This is an increasing trend and today, more than 200,000 buyers and sellers use it to buy and sell ads. The Right Media Exchange allows members to buy and sell media in real time on an auction basis, and sell to all major networks and ad agencies.

Brands will benefit from this consolidation, since one of the big issues brands currently face is so much choice, leading to multiple ads running over multiple networks. These networks overlap and are often buying and reselling from the same supply sources, always paid on a last-click/view basis, so everyone is competing for the same set of users. So consolidation through exchanges in the long term should lead to more cost-effective performance.

Real-time bidding is another factor changing how brands use networks, but it’s only as good as the data you have in your network. Our position as a leading ad network, with our own audience and data, combined with over 100 data partners and even more supply partners, puts us in a very strong position.

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