The ad network space has not seen too much activity with respect to investment / acquisition activity. Advertising.com sold several years ago; Fastclick went public then sold to Valueclick. Turn.com raised a decent amount to launch. Several deals have taken place in the Web 2.0 space around newer mediums – podcasting, RSS, and blogs – but, by and large the traditional ad network space has operated fairly status quo. That changed two days ago when Yahoo became the second major media company, behind AOL, to make an investment in an ad network. They purchased a stake in Right Media, a deal that hit the wires the same time as their purchase of rich media technology company AdInterax. Both seem like solid decisions for Yahoo.
With Right Media, Yahoo has a platform for better managing its remnant inventory and potentially opening it up to Right Media advertisers as well as Right Media inventory to Yahoo advertisers. And, according to reports, with AdInterax, Yahoo now has a set of tools that allow advertisers to create their own rich media ads. Combined, they can better monetize their inventory and expand the number of advertisers able to spend money with the media company.
Thinking about the ad network space, I do not envy any just starting. It’s a highly competitive landscape that takes considerable resources to achieve significant market share. In the traditional sense, what you have is a more or less finite amount of space – banners, leader boards, etc. and a large number of companies trying to gain access to that space. They approach the problem head on- how to match advertisers and users more effectively than the next company.
Right Media realized the difficulties of growing a business that way, and that lead them to open up their technology to become what I like to call Atlas 2.0; instead of simply offering ad serving to publishers and advertisers; they opened up their system so that networks could share inventory and advertisers, and in the end sell more impressions. The technology behind it is a lot more complex, and it sounds good in writing – the idea of billions of impressions at auction daily.
What is so amazing, though, is the number of companies that can call themselves ad networks, but they took a different route than that of Right Media, Fastclick, etc. These companies created ad inventory by taking a Blue Ocean approach to the problem. One of my favorite examples in this is Eurekster. They have a network of some 25,000 sites, and it’s growing every month. They did this without any media buyers, too. In a classic Web 2.0 move, their growth came by focusing not on ads but by building tools that add value to web site owners. A few good write ups, some well-connected site owners during beta, and today, they have created a product that sees more than ten million search queries per month. Not Google, but not insignificant either.
Eurekster and others have accomplished their feats most amazingly, in my opinion, by not competing with the traditional ad space. Eurekster’s publishers still run banners and other ad units. They simply made room for what Eurekster offered. Eurekster is part of this new breed of ad companies, networks really, that grew not by competing for space but by creating it. This new ad unit doesn’t really have a name; it’s not a banner per se. The closest description might be the now popular term widget or badge.
What makes these widgets / badges so powerful though is their close ties to the content. As opposed to traditional ads, the widgets, i.e. web site add-ons often created by third parties (an example is RockYou, which is well known to users of MySpace), do not have the typical limitations of ad units. If you have more than one, no problem. Having more than one is often a positive. They speak to your personal brand and can prove valuable to users. That is the appeal to me. Inventory creators like ThisNext not only have a chance at making money, but they add value to me. I respect Fred Wilson (avc.blogs.com), which means I value the products that he chooses to share on his site. The same goes with his music. I wouldn’t have started listening to the Arctic Monkeys were it not for him. And, I wouldn’t have known about them if he didn’t have a certain widget on his site.
We are witnessing some great advances in advertising networks and advertising in general. By focusing on the users, companies are creating new ways to market. By creating new environments, such as the game Second Life, there are new places for commerce that didn’t exist before. By leveraging the notion of network, we now have peer to peer commerce, but in a non-pushy way such as that found in multi-level marketing. By solving problems, companies such as YouTube have helped invent a whole new type of ad and ad adoption. What all these companies tell us is that we can look outside the banner, outside the search click for ways to reach more users.
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