ceo at mbites media
29 June 2004 19:20pm
You're an online publisher. You have ads on your site. But some of those ads are being served by a company whose parent is a competitor. Not only that, but the parent company has a site which is a direct competitor in your category. What do you do? Strip out the ads in a fit of indignation, or shrug your shoulders and take what share of the revenue you can glean?
It's a dilemma many publishers will face in the coming weeks and months as the market starts to absorb the implications of AOL's acquisition last week of Advertising.com for $435 million in cash.
Not unlike Yahoo's purchase of Overture, AOL's acquisition will enable it to deliver advertising beyond the confines of its closed network out to the wider Web. The deal positions AOL against Google and Overture, hitches AOL to the rising start of paid-for-placement search, and will increase AOL's advertising audience to 140 million unique users per month.
Moreover, AOL has effectively bought itself a new advertising system which will include behavioural targeting and online video commercials.
The deal couldn't have come sooner. Ad revenue at AOL fell by 40 percent in 2003 as it finished multi-year ad deals, while it has struggled to incorporate new ad formats and paid search.
According to comScore MediaMetrix, Advertising.com mainly buys CPM inventory from 1,500 Web publishers and resells this to nearly 800 advertisers on a cost-per-acquisition or pay-for-performance basis.
It typically competes with ValueClick and 24/7 Real Media, who also aggregate inventory and sell it on to advertisers. But, of course, those companies are not in turn owned by major publishers.
Crucially, Advertising.com will continue to operate as a stand-alone entity, much like Yahoo! and Overture. No more AOL/Time Warner merger death-wish nightmares for them.
However, despite the apparent arms-length relationship, some publishers will have a problem accepting ad deals from a firm whose parent is a competitor.
Especially larger publishers.
MSN and Yahoo! are both AOL competitors who have deals with Advertising.com. So, just as Overture's partnership with MSN unwravelled after its purchase by Yahoo!, expect the same to happen to Advertising.com.
In the mid-to-small publisher market, however, in most cases, publishers won't bat an eyelid. The web is capable of holding a million tiny threads together and there is plenty of inventory to go around. What matters is which advertiser relationships you allocate your best screen real estate to. Will Google AdSense go on your splash page or just your deep-link stories?
The 'small pieces loosely joined' nature of the web is blurring the lines between competing publishers, as leviathans like AOL and Yahoo look to eat into Google's cutting-edge lead in the advertising space.
It's an interesting time to simply stand back and watch, while these elephants play tag. Just don't get trampled...
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