Santa Barbarian at the Gate

Musings on a barbarian's interests

A friend’s reaction to the ESPN ad network announcement

David Garrison, the CMO of Indaba Music had these thoughts in response to ESPN’s announcement to do away with ad networks.  I had asked for the ups and downs from a vertical consumer play’s point of view:
There are a bunch, but a few below just off the top of my head.  This is a very real decision for a startup and depends entirely on its specific situation, although there are common factors.  Glad to give more details if it’ll help.

As you might guess, you can build an easy calculation based on percentages and CPM rates which lets you weigh the immediate revenue opportunity against positioning issues and brand erosion.  My POV is that for many startups, selling the entire banner ad inventory isn’t going to be the deciding factor in their success.  

As sites grow, it’s important to remember that this isn’t necessarily an either/or decision.  Whatever you do, always stay away from blind networks – you’re wasting your money on them.


Pros

Ease of execution.  Doesn’t require sales or significant service.  Brings in relatively consistent revenue.  Sites usually don’t sell all their space (e.g., your piece claims 20%-70%) and this is a good way to up utilisation.
Immediate revenue.  Revenue flows faster than if not associated with a network.
Reach.  Gives a good sales person more time to focus on strategic campaign development and the chance to connect with partners you might not otherwise.
Credibility.  With the market generally (“we have brand X on the site”), with advertisers (most experienced digital marketers will ask whether you work with a network) and with investors (implies structure and a more stable revenue source).
Insights.  Giving the ad networks access may result in interesting connections or insights based on heavy analysis that you might not have arrived at.  Some say that this alone means it’s worth always having an experiment running with a network.
Benchmarking.  Gives you a sense of your relative value, although for many sites (e.g., 2nd- and 3rd-generation social networks) this is biased data. 

Cons
Brand control.  It’s hard enough for a small brand to protect their positioning.  Ad networks don’t really give a damn about who they place, as long as it performs (that is, after all, part of their value proposition).  Even if an advertiser buys category placement, it’s not site-specific.  The degree of control is something that’s still being worked out in the market, but the problem won’t ever go away.
CPM rates.  Generally lower than you’d negotiate on your own.
No relationship.  A site doesn’t really have a relationship with its advertisers.
Customer control.  Advertisers also have less input into the placements.  That means your relationship’s driven toward an executional one, rather than a strategic one.  This is a big factor for many sites’ (e.g., Indaba) decisions.
On Mar 24, 2008, at 6:30 PM, Hodges, Sam wrote:

        The battle begins…….
        
        ESPN Turns Off Ad Nets        Moves to protect brand, content; other publishers mull

        mike Shields >> mshields@mediaweek.com
       
        MARCH 24, 2008 –
       
        Top Web publishers are planning a revolt. Even as more prominent sites experiment with selling remnant inventory through online ad networks, and in some cases ad exchanges, ESPN.com is saying thanks, but no thanks.
       
        The site recently cut ties with Specific Media and several other unnamed ad networks, and is taking the bold stand that ad selling that relies heavily on arbitrage and algorithms is not for them.
       
        “We’re heading down a path where it no longer suits our business needs to work with ad networks,” said Eric Johnson, executive vp, multimedia sales, ESPN Customer Marketing and Sales. Sources say that ESPN would like to rally support from other publishers behind this move and ultimately tamp down ad networks’ growth. Turner’s digital ad sales wing is rumored to be considering a similar move, though officials said no decisions are imminent.
       
        “Turner, like a lot of media companies, is currently reviewing all of its media practices, and ad networks are certainly a part of that process,” said Walker Jacobs, senior vp of Turner Entertainment New Media Ad Sales.
       
        ESPN’s decision crystallizes a philosophical debate in the online ad sales industry that has intensified since the Interactive Advertising Bureau’s annual meeting last month when during a keynote address, Martha Stewart Living Omnimedia media president Wenda Harris Millard gave her now famous warning against selling Web inventory like “pork bellies.”
       
        Two sides have formed—those who want to protect traditional, direct selling of premium content brands and the math-loving crowd that favors automation and data. The math lovers make the traditional sellers nervous.
       
        “There is a genuine concern about commoditization of brand inventory by some of the networks,” said Millard in an interview.
       
        Of course, there’s a reason that online ad networks, which rose to prominence in the late 1990s by aggregating inventory across thousands of smaller Web sites, are playing a bigger role in Web publishing. Most large sites are swimming in avails they can’t sell. Insiders estimate that a range between 20 percent and as much as 70 percent of inventory can go unsold at a given time. Thus, ad networks offer a monetization alternative.
       
        But some sites, like ESPN, see networks as profiting on their brand investments and their user data, while also threatening their own marketer relationships. Many just think using networks devalues the power of content.
       
        Several publishers, in conversations with Mediaweek, privately applauded ESPN and hoped that others would follow suit. However, in this accountability-driven, quarter-by-quarter climate, it’s hard for any publisher to walk away from revenue, even if it’s not huge.
       
        “Not all inventory is created equal,” said Peter Naylor, senior vp, digital media sales, NBC Universal. For example, Naylor said iVillage’s Horoscope section generates a lot of traffic but doesn’t attract many endemic advertisers. That’s why he turns to networks. According to Pam Horan, president of the Online Publishers Association, most publishers do just that.
       
        For example, MTV Networks recently inked a deal with Microsoft to let the software giant sell its remnant inventory. Nada Stirratt, executive vp, MTV Networks Digital Media (a former top sales exec at ad net giant Advertising.com), said that ad networks “absolutely have a place for high-frequency, low-value impressions.” Plus, she likes tapping into Microsoft’s tech expertise and is comfortable with the numerous safeguards the deal offers.
       
        So can ESPN change the model? “It won’t have the desired impact,” said Adam Kasper, senior vp, director of digital media, Media Contacts, unless the top 10 or so Web sites followed suit. ESPN is “essentially fighting technology. That’s a hard thing to do.”
       
        

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One comment on “A friend’s reaction to the ESPN ad network announcement

  1. Jason Rakowski
    March 25, 2008

    Good Layout and design. I like your blog. I just added your RSS feed to my Google News Reader. .

    Jason Rakowski

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This entry was posted on March 25, 2008 by in Uncategorized.
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