Ad networks could grow mobile advertising
August 18 2008 - 12:21 pm ET | Colin Gibbs | RCR Wireless News
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Online ad networks are booming as publishers scramble to place marketing messages on a glut of unsold advertising space. And that may be good news for their mobile counterparts.
The use of ad networks — companies that essentially serve as inventory clearinghouses, connecting advertisers with publishers that have space to fill — surged six-fold from 2006 to 2007, according to a recent report by the Interactive Advertising Bureau (IAB) and Bain & Co. The networks accounted for a mere 5% of total ad impressions two years ago but delivered nearly one-third of all online ads last year.
The companies found two reasons for the sudden increase: large marketers are ramping up their online ad buys in general, and — perhaps more importantly — a lack of adequate pricing tools and inventory management discipline sparked growth in inventory.
“Online publishers are producing more inventory than the market demands, and risk devaluing the premium nature of their brands, particularly in light of ad networks’ growth and their dramatically lower pricing,” noted John Frelinghuysen, the Bain partner who authored the study. “Building more effective relationships between publishers and ad networks is critical. In the longer term, both parties will benefit from gains in ad-networks CPMs (cost per thousand impressions).”
While the study didn’t address mobile ads, there are strong parallels between the recent findings and wireless marketing. Pricing and inventory-management tools in the nascent, more fragmented world of mobile are even less finely honed than in the online arena. And mobile is awash in unsold inventory, with unsold space on everything from the least expensive locations (specifically, social networking sites) to the priciest, high-profile mobile Internet destinations.
And while the entrenched online players grapple with their home turf, many have thrown up their hands and walked away from mobile for now. While AOL’s Platform-A has made mobile a key component of its cross-platform strategy, other traditional Internet players have grown frustrated with wireless, according to Bob Walczak, founder and CEO of Ringleader Digital, a New York-based mobile advertising firm.
“The online guys are trying to figure it out,” said Walczak. “I think the problem is that they’re employing online methodologies in the mobile environment, and it just doesn’t work one-to-one. There are no browser standards (on the traditional Internet), you have to deal with device libraries, screen sizes, you need to be able to target by carrier…. We’ve worked with several different networks online, and they come back and say mobile is too much of a pain in the ass.”
That may bode well for pure-play mobile ad networks AdMob and Millennial Media, among others. Big-name publishers are having trouble selling their own mobile inventory, and may increasingly offload the task to networks that have a pool of advertisers ready to spend on wireless. While the middleman may result in lesser per-ad revenues — not only does an ad network add a link to the value chain, it often offers discounted rates compared to in-house prices — it could result in increased overall sales. But those increased revenues will come only if the ad networks can find enough marketing dollars to keep pace with whatever new inventory is funneled their way.
“There’s a ton of inventory in mobile; the fill rate isn’t 100% anywhere I’ve seen,” Walczak said. “Everybody’s fighting for the same dollar from brands looking to jump into the space. It’s very competitive, but because it’s not as proven, agencies aren’t jumping as aggressively into it yet.”
August 19, 2008 08:57 am
The frustration that online advertisers feel vis-ŕ-vis the fragmentation of the mobile space is justified. The mobile ad ecosystem -- comprising network operators, ad servers and ad networks -- has recognized this frustration and begun to standardize ad campaign formats. The other cause of frustration for media buyers is the lack of established metrics in the mobile ad space. Not so long ago, the online Internet was facing the same challenges, and much progress has been made over the last five years. On the positive side, mobile internet usage has reached an inflection point and is growing at an unprecedented rate. This evolution will be accelerated by solutions that provide personalized and relevant ads based on contextual, behavioral and demographic targeting. As media buyers become comfortable with mobile ad formats, recognize the granularity of targeting that is possible, and see detailed metrics, media spending on mobile ads will grow. Network operators will play a critical role in this evolution, as they are significant mobile content publishers through their portals, hold the key to effective ad targeting in their subscriber traffic, and stand to gain significant new revenue by sharing mobile ad metrics with media buyers.
August 18, 2008 02:09 pm
The cold hard fact is that some players in the industry are using mobile as an extension of the Internet and it just does not work. Of course there are some similarities but the difference far outweigh the similarities. The same issues that make mobile “a pain in the ass” should also be looked at as an opportunity. People ignore irrelevant and intrusive ads. Ads that do not fit the screen will be ignored, ads that do not speak to me directly will be ignored and ads that are just too in your face will also be ignored. What does that leave? It leaves me as a person who wants to be looked at as an individual. I chose my phone because I like it, and so if you are serving up ads then you should be serving an ad to me and not to everyone else, if you are serving up an ad, for heaven’s sake try to work with the wireless carriers to learn a little about me before you start piping all sorts of ads that have no bearing on likes and dislikes. Finally give me features in the ads that I can use. One click emails, click to call, surveys that will reward me for my time or at the very least will not take up too much of my time.
August 18, 2008 02:09 pm
Leonard, pls note the words "my bet". Best Regards, Tarang
August 18, 2008 02:09 pm
Leonard, pls note the words "my bet". Best Regards, Tarang
August 18, 2008 02:09 pm
Great more advertising that I will have to ignore, pretty much the same way I ignore them everywhere else on the internet and television, there has to be a reason Tivo which allows a consumer to by pass commercials and software like Noscript which can be setup in such way as not to allow ads on web pages are so popular.
August 18, 2008 12:51 pm
good article but did anyone ever heard something "new" from the so loved online ad world? Mobile rocks and will be big.Best, Vince itsmy.biz
August 18, 2008 02:09 pm
Tarang,you neglected to mention that your firm is an investor in AdInfuse. Very professional...
August 18, 2008 02:09 pm
I agree with some of the comments here regarding the eventual potential of mobile advertising. Mobile is a very compelling given its unique targeting capabilities, is always with you and is highly personalized. Also, there are lot more targeting data (demographics, behavioral and location) available on mobile. Unfortunately most mobile ad networks are treating mobile as pure extension of online and failing to take advantage of unique benefits and capabilities of mobile. That’s reflected on their poor sale-through-rates and low-CPMs. My bet is on AdInFuse, a premium mobile ad network. AdInFuse has built a terrific platform that spans all ad formats (WAP, Video, etc), does personalized targeting and offers the most creative mobile ad units combing these capabilities. They have access to some of the best publishers and brands in US and Europe. Worth keeping this one on your radar….