Ad networks: Inventory vs. the brand

There’s been lots of talk recently about the value of ad networks, including a recent piece in MediaWeek about how ESPN has decided to opt out of the ad network game. The central question seems to be: Are ad networks a great way to package up unsold Web inventory and monetize it, or do they take traffic away from a brand and potentially interfere with that brand’s ability to market effectively to its audience? It may not help, but I would say the answer is probably yes to both of those questions.

Aggregating space on blogs and other sites that could have value to advertisers makes sense, and that’s presumably why Forbes is setting up a blog network, and why Federated Media is also in that business — which John Battelle talks about in a Q&A here, and why large-scale blog networks like b5media exist as well (in the interests of full disclosure, I should note that I am part of the new Forbes blog network). At the same time, however, it’s not at all clear whether such networks can ever really compete with algorithm-based and search-targeted advertising.

If that’s the case, wouldn’t it be better for a brand — such as ESPN — to focus on building a better relationship with its core audience, rather than running ads from some ad network that may or may not be relevant, and could take eyeballs elsewhere, all in return for a crappy CPM rate? That’s obviously the conclusion that ESPN has come to, and others have as well. To some, chasing the low returns of ad network banners isn’t worth the investment. Others, however, will see it as better than nothing — particularly if it involves inventory that’s going to go stale anyway.

Maybe it’s just the spillover from the sub-prime mortgage meltdown, but in some cases packaging remnant inventory and selling it through an ad network reminds me of the Wall Street practice of bundling underperforming or questionable mortgages together, and “securitizing” them in order to unload them onto outside investors. That kind of strategy works really well — right up until it doesn’t.

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