I find it fascinating that we have two trends occurring right now in the online advertising space which are working in opposite directions. First, we have consolidation of ad networks and ad platforms happening as fast as companies can get the deals done. AOL bought Quigo in the latest move in the Battle of the Online Advertising Superpowers. But at the same time, we now have individual publishers and social networks starting their own vertical ad networks all over the place. Myspace and Facebook have both announced such efforts in the past week.
Why do we see two trends which seem to be moving in the opposite directions? We have consolidation and fragmentation all in the same general space!
First, it’s clear to see why consolidation is occurring. It’s become quite obvious that advertising is an already huge and growing business on the web, and the major internet players all want to own as much of that pie as they can get. Beyond that, some of the biggest challenges for both advertising and publishers is all the options that are out there today. If you’re an advertiser looking to buy online, who do you go to? There are hundreds of ad networks, multiple ad platforms, different ad serving options, etc. Yahoo!, Google, Microsoft, and AOL all want to be an advertiser’s “one stop shop” for advertising. The more complimentary assets they can cleanly integrate the closer they are to that goal.
On the publisher side, it’s pretty much the same thing. There are multiple ad serving platforms, ad exchanges, and lots of ad networks who are happy to try and fill your inventory. How do you figure out which options are the best? How many internal resources do you need to manage it all?
So if advertisers and publishers can both benefit from consolidation, why do we see so many new ad networks/platforms being started by publishers? In the case of Myspace and Facebook, they’re trying to become much more than publishers, and really they already are. But both companies are trying to make the step up to becoming more than what they started as, just as Yahoo!, Google, and AOL have done before them. None of those companies started out as advertising powerhouses, but they’ve all become that over the years.
Also, as consolidation occurs, it’s hard for the major players to customize and be as flexible as sites may want them to be. Myspace and Facebook are both building ad platforms that have sophisticated targeting based at a social networking audience. None of the major players really have that functionality today, so they had to build it themselves. Beyond that, we also have major publishers like MarthaStewart.com starting up their own ad networks in their own vertical categories. This seems like a natural evolution and even though it feels in some ways like it’s fragmenting by creating more ad networks, it’s actually more of a movement towards consolidation since they’re aggregating publishers in the space to make ad buying easier.
That’s what this all really comes down to for me. One of the major reasons search advertising has worked so well is that it’s the easiest form of online advertising for advertisers to buy today. You can go to Google and Yahoo!, set up quickly, buy some text ads on their search engines, and drive a lot of volume. The rest of the online advertising world hasn’t been as easy and what I DON’T like about what Myspace and Facebook are doing is that it feels like it’s not going to make anyone’s life easier as an advertiser. It feels like two more ad platforms that as an advertiser I’d have to learn, test on, figure out how much money to spend there, etc. Chances are they won’t be that similar to use, so it just made my life harder.
This doesn’t mean they shouldn’t have launched their ad networks for their own sake, but it will be interesting to see what kind of advertiser adoption they can get. Ease of use and providing volume will really be the two things they need to make their networks a success. One thing I hope they’re both considering, is using APIs or some other type of partnership to tie into the advertising user base of the major players. Why not tap that market and make it a win for everyone?