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Will Ad Networks Usher in a New Media Order?

Posted by: Rob Hof on February 19, 2009

When I proposed the story on how the economy is hitting online advertising, which appears in this week’s BusinessWeek, I had hoped to take it a little further than I was able to do in a relatively short story. Not least, that was because my thoughts weren’t fully formed, and still aren’t. So I’m going to think out loud a bit and hope to get some feedback from people who know more than I.

When I was trying to figure out all the flavors of ad networks, those middlemen between advertisers and Web publishers, I found some didn’t really fit neatly into the middleman slot. Glam Networks, for instance, has some of its own sites in addition to a stable of similar fashion and beauty blogs and niche sites. NetShelter, an ad network for many tech blogs, prefers to call itself a “vertical media network,” and if it added a consumer-facing home page, it would look to all the world’s tech readers like a “traditional” Web publisher like CNET.

So what are these new things, if they don’t fit neatly into existing categoies? I’m wondering if these kinds of networks constitute a new type of media company that is at once a publisher, an aggregator, and an ad network.

Or something else. Consider the professional networking site LinkedIn, which last summer announced an ad network that uses its users’ profile data to target high-value groups such as small business professionals and corporate executives when they’re browsing on hundreds of other sites. Does that make LinkedIn a media company, at least for the quarter or so of its revenues that come from advertising? In the sense that it’s helping gather audiences of like-minded people and showing them ads, it would seem so. Ad dollars spent there might not get spent on Yahoo or, for that matter, on

Media businesses that once encompassed creation and distribution of media as well as ad sales are now being assaulted by teams of independent specialists in those areas. As the Internet has done to other industries, it seems like we’re finally seeing it start to disassemble online media—which even now looks largely like traditional publications translated to the Web—and allow it to reassemble into something new. “Ultimately we’re going to have to completely rethink what media are,” says Barry Parr, an analyst with market researcher Forrester.

Honestly, I don’t yet know what they will be. But it sure seems like they won’t be the same for long.

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Reader Comments

Sam Whitmore

February 19, 2009 09:22 PM

You must be Kreskin. I've interviewed IDG Tech Network and Federated Media in recent days, but haven't published anything yet. You are definitely onto something. It's going to be really hard for established "destination titles" to maintain high CPMs when ad networks can deliver the "target demo" for a lot less.

Rajeev Goel

February 20, 2009 04:25 PM

Hi Rob,
As you point out, the lines between media company, ad network, aggregator, etc. are blurring. The key underlying trend is that advertisers are increasingly able to target the user directly, and decreasingly must buy a web site as a proxy for a certain set of users.

For example, if Under Armour wants to reach men age 18-35, they can now find them beyond and which have a high concentration of this demographic. Ad networks' technology allows advertisers to find these individuals all across the web and put an ad in front of just that user on a particular site.

This leads to the opportunity that Glam and others have exploited in creating vertical networks - they have found a new model to give advertisers the audience they're looking for, without having to be 100% content creation or traditional media companies.

- Rajeev Goel, CEO PubMatic


February 23, 2009 11:12 AM

What we are seeing here with all the new contenders in the online ad media industry is the S-curve of the new trend. Since 10% out of all Ad Budgets have made the switch to digital media, the next 8 or so years will see it climb to 90%. It will make what Google did pale in comparison as this growth occurs and just like every other major industry out there, many have come and gone, and those that survived either became big themselves or were gobbled up in the process.

Mike Sprouse, CMO Epic Advertising

February 25, 2009 10:42 AM

Great story and post. I know for a fact that you're onto something, because I "live in" what you describe every day.

You are correct, in that the classification of ad networks is not "neat". As an example, there are CPM ad networks, performance-based ad networks (CPC/CPA), vertical ad networks, niche ad networks, affiliate networks, branded ad networks - not to mention most of these networks also have their own hosted properties. This is how there are 300 ad networks (in a piece I wrote, I cited it at 314 but that was 4-5 months ago so who knows now).

The difficulty, of course, is that beyond the few public-company examples you cite, most companies that fit into one of the buckets above are private. They don't release formal earnings, but I can tell you that companies like ours and others I know well are doing very well these days (our y/y % comps are healthy, and we're not alone). The entire ecosystem is really an untold story, by and large until now.

I would throw out the idea that most ad networks will evolve into "New Media Companies". Currently, most have their own creative services teams. Their own Tech teams (and technology/optimization plaforms). Their own marketing, distribution, Sales, & product management teams. And like a few of the commentators point out above, most ad networks are better at targeting & technology, have greater reach and can service an advertiser (or agency) better than one single destination site. Especially with outdated (read: too high) CPM economics.

What we are seeing now I don't believe is a short-term shift, its a fundamental change. Consider that the CPM model was one ported over from traditional media a decade or so ago. People thought that the economics of a print page (rather ads that appear on that print page) translated evenly to a web page. I believe what we are seeing now is a market correction, as its entirely possible that the economics of "CPM" were actually NEVER accurate or sustainable. Most advertisers nowadays understand that they can actually measure effectiveness better and are increasingly looking to all types of networks to get "more out of" their advertising buck, which is also causing CPM rates to decline and seem archaic.

Of course, a few of the sources you cite, especially Ms. Millard, are fighting the basis of what has become a dynamic marketplace. I believe she has called what ad networks do selling "pork bellies". I think, rather, there are still some that think the old rules apply when the reality is that from an advertisers standpoint inventory on ESPN might have the same value as inventory on MikesSportsSite - it all depends on who you're trying reach and the economics behind it. Buying and selling ad inventory is not an end game, and there are fewer and fewer "rate cards" which makes some people a little uncomfortable.

As Mark points out, online marketing is still a relatively small piece of the pie. But I do not expect that to be the case 3, 5 or 10 years from now. You're going to have new media companies that are comprised of ad networks, tech, marketing, sales, etc. Maybe even mobile advertising will be in there too, and we will look at brand vs. performance marketing differently than we historically have.

Thanks again for the story.


February 26, 2009 08:15 PM


Very good insight here. "Ultimately we’re going to have to completely rethink what media is" You hit the nail on the head Rob, in explaining that things don't always "fit" when you try to use older media to explain the internet. Example- Google was not considered a media company till last year.

In broadcast there are content creators/owners, remnant ad networks for direct marketing at night, ad rep firms, and the big networks like nbc, cbs, fox etc. who are a combination of aggregator, affiliate, and ad sales force.

Internet Ad Networks are a back fill, when the site cannot sell premium or there is no vertical network to package and sell it for them.

Clearly, Glam Media first, and others now, have shaken the definition of media, and agencies understand and are buying vertical networks.

Good post!


March 19, 2009 09:28 AM

Hi Rob,

Good article. Do you know of a directory that aggregates all online networks, big, small, niche, vertical, horizontal etc...?


Rob Hof

March 19, 2009 10:23 AM

Justin: This guide from Advertising Age isn't exhaustive but it's a good start:

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