The future of online advertising networks in the UK
A review of the latest ComScore data for the UK market indicates Advertising.com is now the UK’s largest ad network, reaching 89.8% of the UK online population (26.9 million unique users) . Advertising.com is followed by Media Brokers reaching 73.5% of the active online population (22 million unique users), VC Media 68.4% reach, Blue Lithium 67.5% reach, EuroClick 63.3% reach, Casale Media Network 61.5% reach, Tribal Fusion 60.8% reach, Adviva 59.6% and 24/7 Real Media with 44.3% reach.
According to E-consultancy 2007 Online Advertising Networks Buyer’s Guide, UK online ad networks now account for up to 25% of UK display advertising spend. Additionally, the guide claims that the 40-plus online ad networks operating in the UK made an estimated £120 million (approximately $236 million USD) in revenue during 2006.
While advertising networks continue to battle for total reach, the future of advertising networks in the UK will not be determined by the size of their inventory but by the quality of their inventory.
The shift in the value proposition of advertising networks will be driven by: 1) increased demand for “declared” behavioral and contextual ad inventory, 2) the growth of cost per performance based agreements 3) publishers bringing their online sales functions in-house and 4) the launch of a “piggy backing” or open container conversion tags. The combination of these four factors will undoubtedly in time, bring the demise of the large majority of ad networks in the UK.
The most recent and significant of these factors is the advent of a “piggy backing” or open container conversion tags. The term “piggy backing” refers to the ability of a single conversion tags to hold third party tags, effectively serving as a universal tracking counter providing unduplicated conversion counts from multiple sources of media inventory. In theory, for instance, if a user clicks an ad with Ad Network #1 today and then the next day clicks an ad for Network #2 and converts from the ad with Ad Network #2, the network generating the last click will get credit for that conversion, as opposed to both networks. This is especially valuable when working across cost per performance programs, where payment is based on the total number of conversions.
The ownership of ad-serving tracking technology and a media network has been a recipe of success for ad networks. Networks such as Media Brokers have benefited from the technology heritage of its’ parent company aQuantive, leveraging hundreds of customers using third party ad serving platform ATLAS DMT for tracking on-site advertising activities. This “dual play” has allowed DrivePM to offer unduplicated cost per performance agreements on their ad inventory, attracting large shares of direct response budgets. While other networks such as Blue Lithium and Adviva have joined the “dual play” offering (by adding a proprietary tracking solution to their media network), the issue of double counting and the logistical issues of implementing additional tracking tags on client sites, have limited growth. Having said that, the majority of advertisers are not aware or account for the duplication created by utilizing multiple conversion tracking technologies.
While these “dual play” entities such as aQuantitative where quick to provide unduplicated counting between display and PPC activity, they have been slow to embrace piggy-backing. On the other hand, “single play” entities (which do not own a media network) such as Doubleclick (which recently purchased Tango Zebra) have taken the lead. Doubleclick was the first ad-serving company to launch a piggy-backing open container tag – Floodlight. Doubleclick claims the Floodlight tag removes duplication of conversions across sites and ad networks.
What Doubleclick fails to clearly communicate it that Floodlight in its present form, will only remove duplication from click driven conversions. With 40% to 60% of conversions being driven from post impression activity, Floodflight fails to deliver on the promise of true unduplicated tracking across multiple media sources.
The reality is that the sources of quality media inventory for ad networks to buy from, is limited. The proliferation of ad networks in the UK has exasperated the issue of chain buying. Chain buying occurs when multiple ad networks buy inventory from the same sources. In a trading environments in which ad network inventory is purchased on a blind basis and on a cost per thousand (CPM) payment model, the success of ad networks in based on the reach and influence of their media buying and commercial teams “buy low, sell high” approach. Under this trading environment, the value of the inventory is mostly driven by the efficient reach it can deliver. However the new trading environment, lead by the adoption of “piggy backing” will force ad networks to focus on the quality of their inventory – taking a closer look at the behavior, content consumption and upstream behavior of their audience.
In the new world of piggy backing, the rules of “conversion attribution will become essential. If the “last click always wins” over an impression or a click, the value of “click elicited” media might increase significantly.
In theory piggy backing is the answer to the prayers of direct response advertisers. However it is plagued by issues such as the inability to unduplicate impression driven conversions. Another potential issue is the length of the impression and click window across multiple ad networks. Finally, another issue is the charges companies such as ATLAS DMT plan to charge third party networks for gaining access to the conversion tag on the clients site.
Ad networks that provide a more sophisticated approach to monetizing their inventory and audiences will remain in a strong position. However it is clear the UK ad network market will evolve significantly during the next few months leading to better quality inventory for those buyers savvy enough to find it.
Posted in Opinions
May 4th, 2007 at 11:15 am
I certainly agree that the emergence of universal ad tag technology is going to play a significant role moving forward. “Piggy Backing” is going to be an essential part in seeing the true capabilities of an Ad Network.
Not only will their optimisation techniques be evident but so will the true quality of their inventory. Many networks can drive substantial volumes in cost per performance programmes, but looking deeper into the quality of response’s is going to be equally as important for clients.
With the open access universal ad tags provide networks, It will be interesting to see how much extra scale clients will achieve. It will be as interesting to see how networks utilise this access. I certainly believe “Quality” reach will become increasingly important and with this, transparency between networks and agencies/clients will be key.
In terms of de-duplication, ad serving companies such as Atlas and Doubleclick will have to find a solution for ad networks to see both de-duped post click and post impression data. I certainly agree that this is a current in-efficiency that universal as tag technology has.
July 9th, 2007 at 9:23 pm
Any healthy marketplace should be evolutionary – particularly one so involved in a new-media industry such as online advertising. With more than thirty online ad-networks currently operating in the UK it is also clear that some serious consolidation may well take place over the next couple of years as a part of the Darwinian process of progress.
I agree with both previous posts on this thread – and would also welcome change and a move towards ad-networks with a more sophisticated approach. Quality competitive ad-networks must differentiate themselves from the established competition by offering access to a high-quality targeted audience attractive to advertisers keen on both direct response and branding. This will allow them to fully compete for any increased spend with the enormous portals and giant blind networks that simply rely upon sheer critical mass to gain results.
This audience access can be achieved by researching and ultimately entering into honest and reciprocal relationships with publishers offering premium content – and then targeting their user-bases via cutting-edge ad-serving technology based upon user profiles and behaviour. These higher levels of relevancy and user-driven personalization of the advertising delivered is key to progress – not purely the visibility on any performance, although this is obviously also key.
Any technical issues surrounding measurability may still remain and is a challenge for all involved, but if smart ad-networks can start getting the basics right regarding audience quality and targeting and worry less about sheer volumes, then their differentiation and survival will be assured. Simply work hard to serve the right message to the right audience in the right way and then concentrate on the service levels to all parties involved by being fully transparent and you will surely succeed.
Another key point is that dynamic ad-networks can help to develop talented independent publishers by allowing them to fully commercialise their growing websites in innovative ways and introducing them to higher-value advertisers that they could not approach themselves. This empowers those publishers to fulfil their promise and afford to keep developing sites that can benefit us all – thus also resulting in advertisers gaining access to diverse growth sites that would otherwise remain undiscovered.
In that way quality competitive ad-networks can be a key element of the growth of the marketplace, the range and quality of audiences available within it and the improvement of the ad-delivery to those audiences – rather than simply being seen as a necessary evil for publishers that would rather not or cannot sell their own advertising space.
If that can be achieved and overall online ad-spend does continues to increase, then it is dynamic growth rather than purely survival that the competitive ad-networks should be confident of. This may well result in the demise of a large number of networks in the UK… and rightly so – if we are to be truly progressive.