The Coming "Ad Network Shakeout"

Any of you who keep up on the online advertising market through related blogs, articles, etc. have certainly noticed the rapidly developed "ad network shakeout" meme. The story goes like this -- as the economy worsens, companies will continue to decrease their marketing/advertising budgets, and the hundreds of new ad networks that have popped up over the last few years will have to compete more vigorously for the diminishing dollars available, thus resulting in a shakeout where many won't survive.

While I'm in full agreement, and feel their survival depends on technology, targeting and optimization (an ROI differentiation), that's another post altogether. But I did want to note a few smart comments I read recently, made by folks within ad networks. Philip Smolin of Turn notes in this article:

Some media buyers still think of contextual and behavioral targeting as separate ‘silos’ – you choose one or the other, but you don’t use both at the same time. And in fact most advertising platforms don’t enable you to combine them even if you want to. But in reality both are very powerful predictors of advertising performance – you get better results when you combine the power of the two.

Some of our algorithms at Others Online combine the power of both contextual and behavioral, and we've also found this to improve results. Contextual targeting (behavior now) generally outperforms behavioral targeting (past behavior) except when page context is just really bad. And it's just logical to reinforce your contextual targeting with behavior you've seen in the past.

Who’s going to survive? The platforms with unique technology or differentiated solutions that make advertising more effective – they’re going to thrive. Behavioral will be a key component because of its effectiveness in display advertising.

Behavioral has always been about display advertising, and yes it will be key. But what about text ads and other keyword-based (not category-based) targeting? I find it interesting (and exciting) that Others Online is the only company today offering behavioral targeting technology for keyword-based ad inventory.

Another interesting comment made by Joe Apprendi, CEO of Collective Media at Behavioral Insider (link requires password/registration, unfortunately):

It used to be people bought media with a site-centric mentality. It was a legacy of the print planning and buying business. You looked at what sites indexed or reached your target. Today that site-centric mentality probably represents about 70% of the overall display media spending. But there really is a shift going towards this audience-centric buying methodology. Marketers and largely brand advertisers are recognizing that there are alternative ways to reach target audiences. We believe that no matter what the overall demand for display media, there is a shift happening from site-centric buying, which is usually more expensive and the softest area of the display market. It is going from 70% to 50% very fast. A lot of that is reliable behavioral targeting, not absolutely dependent on what site you are running on.

Couldn't agree more. If I'm an advertiser, I'm only interested in reaching an audience with certain product/market-oriented affinities -- otherwise it's just a waste of an impression ("spray and pray"). I hear this a lot from ad networks, and it's frustrating them because most of them have NOT indexed their audience -- they've only indexed the sites in their publisher network.