Research for Econsultancy's 2009 Online Advertising Networks Buyer's Guide published this month has shown there is plenty of innovation within the display advertising sector even if there are too many ad networks without a distinct USP fighting for market share.
Fuelled by controversy around ad misplacement and behavioural targeting, debate continues to rage within agency client-planning meetings, internal buying departments and industry conferences around the value of ad networks and their levels of efficiency.
The truth of the matter is, as with any aspect of online advertising, the age-old idiom applies: one marketer’s meat may be another marketer's poison. Using ad networks may or may not be beneficial to your objectives.
As many analysts and industry insiders are quick to point out, although the rates of inventory may be decreasing and the market growth rate has stalled, it’s not all doom and gloom. In fact, there is a sense of renaissance in the sector because innovation is blossoming.
Examining the reasons behind display’s current weaknesses, the core issue lies with the industry-standard payment model, that of cost-per-thousand (CPM).
In effect, this is an offline advertising format that was applied to the internet in the 1990s, and which has not really changed since despite other areas of online consistently evolving and adapting.
In a roundabout way, this highlights the ongoing problem that many offline media organisations have failed to acknowledge until very recently: traditional advertising models such as display video simply do not work as well on the internet.
As Jakob Nielsen is quick to point out:
When people go online they know what they want and how to do it... This makes them very resistant to highlighted promotions or other editorial choices that try to distract them. Web users have always been ruthless and now are even more so.
Unless there are attempts to target or engage the consumer, using a CPM model - especially without any targeting - isn’t enough. Happily, at a time when change is needed, various companies have grasped this, including both well-established organisations and start-ups.
Last week, Pricewaterhouse Coopers predicted that at the current rate across Europe, the revenue growth prospects of display are rated even lower than newspaper circulation or terrestrial television.
But I distinctly get the impression they’ve failed to take into account improved technology and practices, let alone the fact that Google have taken it upon themselves to get involved in a way that is likely to raise the value of display significantly over the next couple of years.
New developments include not only better targeting and ground-breaking interactive video and display formats, but also new payment models such as CPE (cost-per-engagement) which has been pioneered by VideoEgg.
The tired status quo of ads being sold by quantity is replaced by ads being sold based upon their quality and effectiveness, something which is long overdue in the world of online display advertising.
Network behavioral targeting is already fairly commonplace and as user acceptance of a personalised experience spreads, it’s more than likely this will intensify unless "opt-in" legislation wreaks havoc.Optimisation technology, whether this comes from the advertiser, the publisher or an ad network itself, is bringing considerable benefits for all stakeholders including, most importantly, the consumer.
So, despite the controversy surrounding ISP-reli ant behavioural targeting technology such as Phorm, the targeting of users based upon a number of different factors is likely to increase.
Another development which is helping to increase investment in online display advertising is the increased ability to understand how display ads are influencing the customer journey, and how display advertising should be used most effectively in combination with other channels such as paid search.
So, although it may seem that display is on a downward spiral, in reality, it is evolving and will survive, as will the best ad networks and best technology companies. As online display advertising becomes more measurable, transparent and accountable, it will become more financially viable and a good investment once again.
For more information about the developments in display and online advertising, download our new Online Advertising Networks Buyer's Guide 2009, which includes a valuation of the ad networks sector, a SWOT analysis and examines trends in the marketplace as well as giving guidance about how to select the most appropriate network or networks. The report is UK-focused but relevant globally.
Networks profiled in the report: 24/7 Real Media, Ad2One, Adconion Media Group, Addvantage Media, AdLINK Media Group, ad pepper media, Casale Media, Consilium Media, Eyeconomy, Fox Networks, Indoor Media, Media Initiatives Group, Microsoft Media Network, Oridian, OTP Media, Platform-A, Specific Media, TradeDoubler, Unanimis, Utarget.Fox, ValueClick, VideoEgg, Yahoo! Network.