Networks: Are We In or Are We Out?

After months of major media brands like ESPN and Time Inc. threatening to pull their remant inventory out of the ad network commodities market, it turns out that most top drawer publishers are making even more use of ad networks this year than last. According to the new Interactive Advertising Bureau numbers, publishers went from selling 5% of inventory through networks in 2006 to 30% of inventory in 2007. Citing supply outpacing demand, the IAB also urged content providers to make smarter use of the inventory to keep CPMs hearty. The research showed that advertisers moving more of their budgets online were looking for the efficiencies and pricing that networks offered. Publishers, on the othe rhand, were not making use of yield management and multiple network vendors. Ads sold through networks were priced at up to 90% discounts, which no doubt will exert even greater pressure on overall CPMs. What is the proper response to this erosion in ad value? It is hard to say at this early stage whether the publisher-branded vertical ad networks will make much of a dent in this trend. Nor is it clear how many publishers really will take their inventories entirely in-house. One ad network executive complained to me recently that the rhetoric from big brands about selling all their own online inventory and rejecting networks is a sham. He claims that many of them continue to use ad networks liberally even as they say that they don’t.

So, are adnetworks in or out? Was the “pork belly” dust up of a few months ago much ado about nothing? Are ad networks and branded media co-dependent? Or, conversely, are the major sites just not leveraging their own inventory very effectviely?