IAB or the Interactive Advertising Bureau and Bain & Company had conducted a benchmark study recently and according to that study results that was announced today more and more online publishers have started using ad networks which are considered as sales intermediaries so as to get rid of the excess inventories. In 2006 only 5% of the total ad impressions were sold via ad networks whereas this figure soared to 30% in just a year. You can refer “Digital Pricing Benchmarking Study” from Bain for more information on the study. Bain is one of the global business consulting firms and it conducted this study in coordination with the IAB.
What does this increasing figure signify? There is a under current that is strongly developing alongside the improving search engine optimization techniques. If a company uses an ad network then the results are immediate where as to obtain results via search engine optimization one has to wait for a period of 3 months at least and in Internet time it amounts to three years. So what companies do is to combine their promotional efforts by going to the ad networks to keep the referral levels high and at the same time trying to strengthen their SEO strategies.
The increasing level of the use of ad networks has increased the ad revenue for the publishers in the range of 20% to 30%. This has lead to a situation whereby the publishers are holding excess inventories. This may lead to drastic price erosion.
As part of the study, interviews were conducted with online publishers and these interviews threw additional light on the issue, there were no technological backing such as inadequate pricing tools, lack of inventory management leading to the increase of ad space. All these lead the publishers to find more ways to sell huge inventories of ads that are not sold. As publishers to not have basic information on actual prices and inventory that are sold by the client, management’s ability gets limited when it comes to effective decision making.
The benchmark study is an eye opener that indicates that we need more effective yield management for premium publishers so that strong partnerships between publishers and ad networks can be made. All the publishers have to move to strategic approaches for an effective use of ad networks.
As per the study, higher revenues are possible by using multiple ad networks rather than sticking to a single ad network. We really don’t need a bench mark study to tell us this common sense approach.
Some of the recommendations offered by the benchmark study suggest that both publishers and ad networks have to move forward towards higher realized pricing so as to enhance the positive results of the collaboration. All the publishers should employ more disciplined strategies to handle yield management. Furthermore, close partnership between the ad networks and publishers so as to tap on the revenue generation potential. This benchmark study has a lot to tell the SEO and SEM companies regarding the changing trend among the advertisers and website owners. Unless effective SEO strategies are employed they may soon lose out on their market to ad networks.