Consolidation will strengthen online ad network market


JupiterResearch has found despite negative feelings from advertisers, both independent and conglomerate ad networks will remain major players in the online ad market. The big four—Google, Yahoo!, MSN, and AOL—captured 60% of US online ad spend in 2007. With their wide-scale acquisition of third-party ad network companies in the past year, the major players may be able to offer true one-stop shopping in the near term, as indicated their new report, “The New Ad Network: Managing Relationships During Industry Evolution.”

According to the report, ad networks do provide low-cost reach, however, only 23% of online advertisers using networks believe they are more cost-effective than individual sites, with many hoping to decrease use in the near term. As brand advertisers have increased spending on online display advertising, networks have increased offerings such as mobile and video advertising, full-service creative implementation, targeting, and custom integration with brand name partners’ web sites. As much as one-quarter of all online ad spending flows through networks, and the majority of large advertisers and agencies have a contract with an ad serving company.

“The impetus for acquisition is obvious – for the conglomerates, the potential to improve their portfolio of offerings to both advertisers and publishers as well as overpower their competition theoretically lies in the control of ad servers and ad networks,” explained Emily Riley, Online Advertising Analyst and lead author of the report. “Success will vary depending on expertise in sales and operations as well as across technology and inventory offerings.”

Despite lingering negative reputations, ad networks can be sophisticated partners – advertisers that use networks are more likely than are other advertisers to believe factors such as improved measurability and tools tying online advertising to off-line behavior will play a pivotal role in improved advertising, and ad networks excel at and continue to improve on providing these features.