The 'Gold Rush" For Ad Nets is On; But Crowded Space Brings An End To Remnants' Low Prices

This story was written by David Kaplan.
A prolonged economic downturn could turn out to be a upturn for advertising networks, at least in the short term. But, as the space gets more crowded with companies selling remnant, or unsold inventory, the fortunes for many such ad nets could change. As the NYT illustrates, many ad networks that focus on remnant ad space charge as little as $4 CPMs versus the average $40 CPMs commanded by portals like Yahoo (NSDQ: YHOO) or MSN. Meanwhile, the suddenly trendy vertical ad nets offered by major media publishers don't offer the promise of cheap prices; instead, promising greater placement on top sites and like-minded affiliates.

While the low price is the key for remnant ad nets, improved targeting has helped support their use. But as ad nets proliferate, expect low prices to rise, diminishing their primary selling point to advertisers. David Hallerman, an eMarketer senior analyst, tells NYT: "These are the gold rush days now for ad networks. And that kind of counters the appeal of ad networks for advertisers' agencies, which was to simplify the purchase of ads. And that's why it's unlikely that a great number of ad networks will survive."

Doubt has steadily grown with remnant ad nets' popularity. JupiterResearch finds only 23 percent of online advertisers using remnant networks believe they are more cost-effective than individual sites; many hope to decrease use in the near term. The ones who do survive, will do so as a result of consolidation, most likely by the big players who have already done a lot of buying over the past year - namely *AOL*, *Google*, Yahoo and MSN. And what will the landscape resemble after that? JupiterResearch president David Schatsky: "After acquiring ad networks and ad servers to round out offerings, the near future of online advertising will look somewhat like pre-cable TV, with an oligarchy of powerful conglomerates controlling prices, audiences, and thus advertisers. Much of the premium content on branded websites will remain beyond their grasp, but relationships with such sites will continue to strengthen."

By David Kaplan