300 adnetworks in US
This is crazy! I read this number on the WSJ, if I remember correctly. I am not convinced there is enough space to nicely run 300 ad networks in the US. Probably not even in the whole world. There is probably enough room for a dozen or so. Every sort of medium sized publisher that thinks that creating and running an ad network is going to save the day should consider investing the money in enriching their content and improving their products. So they’ll have more impressions to monetize through more effective and efficient ad networks (than their proprietary ones). Scale and liquidity is what drives adnetworks success, and monetization what makes properties stick to them. The ad networks business is a fairly serious and challenging one. You have got all the big players in it (Google, Yahoo, MSN, AOL and a few others).
They have reach and scale, a hungry customer base, platform and technology. Also, even if it is a fairly new market, they have know-how. And you need a fairly good amount of know-how to smoothly -and profitably- run an ad network. Simply aggregating a few publishers (even many) does not make a good ad network. Customers need good and innovative products. All the different types of targeting that make order of the huge amount of data and impressions are not just cherries on the cake. Those products are the key differentiators that make an ad network work and thrive.
Think to the advertisers. Some of them are happy with any sort of impressions. Some others are big brands, and they are concerned with where their banners will end up. Some others just look at conversions. Others again are “spray and pray” type of advertisers. Here one advertiser is concerned with frequency curves, there another one is not. Jim is fond of re-marketing, Ted just wants 20-25 male affluent. Ted may want to pay 5€ CPM for that, but 0 for everything else. There are many different types of targeting and campaign management that an ad network needs to have to satisfy customer needs, and good products is what makes satisfying such needs possible.
So you have 5bn impression per month, and Ted wants exactly those 20millions, and is willing to pay 10€ CPM for them. But just for them. He has no interest whatsoever for the others. How do you deliver them? Products, data and knowledge.
You need good engineers to create the right products that will match the right inventory to your advertisers. And you need knowledge to create such products. Knowledge of the advertisers needs, of the publishers needs, and knowledge of your user base. If you start pulling together an ad network today, you are probably 18 months late. You need time to build up the knowledge you need to build the right products. And to experiment such products, so you can test how well they satisfy the customers needs, and improve them.
If you don’t have the right products, then you’ll need a very strong USP and compelling reason to retain those customers. If it is not strong enough, they won’t buy your ad network, deteriorating your monetization levels. This will expose the ad network to the loss of some publishers. They will be lured away by the other adnetworks’ higher monetization levels, and will leave you with a scale/reach problem that will drive another wave of customers churn.
So, if you have a spare few dollars, why not investing them in improving your property content and proposition, to increase user base, engagement and ultimately impressions? Other ad networks will be competing to monetize your inventory and will probably provide higher monetization levels than what you might be able to achieve with a proprietary ad network.
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