Ad networks: good or bad? That's a debate that's been raging for years. On one hand, ad networks serve a purpose in moving inventory that isn't being sold in-house. On the other, some argue that they do more harm than good by devaluing that inventory.
Some big online publishers, including ESPN, have already ditched ad networks. But now the online media industry is set to watch as the largest online publisher to date says sayonara to ad networks.
According to AdAge, CBS Interactive, whose properties collectively receive 60m visitors each month, will be announcing today that it too is ending its ad network relationships. AdAge quotes Neil Ashe, CBS Interactive's CEO, as stating "We are prepared to take a step back on revenue if we have to, but over time we will monetize at a much better rate than ad networks do".
Although there's evidence that the display ad market is picking back up, the global economy is still pretty soft, so Ashe's willingness to risk lower revenue in the short-term says a lot about how some big publishers truly feel about ad networks. No surprises there really. By their very nature, ad networks place downward pressure on ad pricing. And as AdAge points out, the technology that once belonged solely to ad networks is now available to publishers, making it easier for them to build their own networks. The net-net: many publishers have few good reasons to work with ad networks anymore.
It should be noted that CBS Interactive isn't ending its relationship with all third parties:
Mr. Ashe said CBS will also pull its inventory from some, but not all, online ad exchanges. CBS will continue to offer inventory to Yahoo's Right Media Exchange, Google's DoubleClick and demand-side exchanges such as Publicis Groupe unit Vivaki's Audience on Demand. "What we are careful not do is open our inventory to third parties that may have data interests not aligned with our own," Mr. Ashe said.
That's an important point, given that much has been made about the value of the data that third party advertising companies (like ad networks) collect and who really benefits from it.
In the end, of course, it's all about the bottom line. In theory, cutting out ad networks would seem like a logical long-term strategy for improving yield and boosting profits, especially for larger publishers. That's the bet that CBS Interactive is making but time will tell if it's a bet that pays off.
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