Calacanis on ad networks - one size doesn't fit all
Jason Calacanis recently wrote a piece discouraging publishers from using ad networks, saying: a) it creates channel conflict (when you have an ad sales force) and b) it lowers the prestige of a publisher’s site, since the advertisers on ad networks are crap. Jason is a smart and successful guy, but I totally disagree.
Ad networks serve as a useful part of the online advertising infrastructure. Publishers should not really on ad networks solely, but not using ad networks at all is simply leaving money on the table. There is only so much direct advertising that can be sold: 1) because of constraints on an ad sales force and 2) because some advertising is not attractive enough to advertisers to pay direct ad sales type of CPMs.
It takes time and money to do direct ad sales. A team of 3 (as Jason alludes to) will not be large enough for a decent size publisher to sell a large amount of its advertising via direct sales. Even with a team of 20, some advertising will go unmonetized via direct sales, which is where ad networks come in. Dodge, for instance, wants to directly advertise on ESPN.com (and will pay for it through high CPMs) but not on the Oakland A’s message board within ESPN.com (but are probably fine doing so at lower CPMs through an ad network).
Some advertising inventory will always go unmonetized if you don’t use ad networks. Even if you use Google AdSense (they tend to take about 30%), the eCPMs are often too low and you are leaving money on the table. A publisher can sign up via an ad network, allow the ad network to promote it within its Sports or Finance category and receive higher CPMs - especially versus it being unmonetized if you don’t use an ad network.
To Jason’s point about AdultFriendFinder or advertising damaging a brand, a publisher can set rules and embargoes around advertisers it does not want on its site - in the old days of “blind” ad networks (Adbrite comes to mind) this was not how they worked, but today things are much more transparent.
So while ESPN might stop using ad networks (which by the way, it used Specific Media, which is part of the reason it lost confidence in ad networks), the concept of an ad network will for a long time serve a useful purpose in the online advertising infrastructure. In a world where inventory is almost infinite (although direct ad sales inventory is definitely not infinite), ad networks help publishers monetize otherwise unmonetizeable inventory. A hybrid approach of direct sales and ad networks (with rules and embargoes for certain advertisers) is the best and most profitable way to go.
