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According to the 2010 Display Advertising Study conducted by Advertiser Perceptions on behalf of Collective Media, the number of advertisers planning to increase their spend this year on site-specific ad buys is greater than the number planning to increase their spend on ad networks.
The study, which was based on interviews with 420 advertisers, found that nearly half of the advertisers interviewed planned to spend more money this year with "spending increases limited to vertical content and video sites". While ad networks are also set to be the recipients of greater spending, the number was closer to a third of respondents.
The logic is obvious: many advertisers still get a good feeling buying inventory from content sites because they 'know' what they're getting -- and they probably won't lose their jobs buying from well-known content brands. Furthermore, and perhaps most importantly, advertisers still largely believe that specific sites give them access to their target audiences. Supporting this, the study found that 74% of advertisers cited "targeting" as the primary reason they make site-specific buys.
The only problem with site-specific buying, of course, is economics. Advertisers, particularly those with big ad budgets, can't get to the scale they need with site-specific deals. They're just too inefficient. Which is why a greater number (40%) of advertisers with annual budgets greater than $10m plan to spend more on ad networks this year.
But soon, advertisers may not have to choose between site-specific buys and ad networks. According to the study's authors, "We expect the next wave of this study to show a marked increase in audience data as the single biggest differentiating factor among ad networks."
In other words, ad networks may not be able to match site-specific buys, but by collecting and using audience data, they can give advertisers the same level of targeting advertisers believe they're getting when they buy on specific sites. Interestingly, the 2010 Display Advertising Study found that "the ability to target precise audiences based on 'user data' has risen to be the number one criteria in selecting a media partner."
If accurate, this is probably not good news for publishers, and it may provide publishers an even greater incentive to avoid ad networks altogether. After all, if advertisers come to believe that they can reach specific audiences through ad networks at costs lower than what they'd pay through site-specific ad buys, they may have far less of an incentive to do those site-specific deals. If targeting (read: audience) is what it's all about, why pay $10 CPM for an audience when you're convinced you can buy the same audience for $3 CPM through an ad network?
In my opinion, momentum in audience-driven ad buying should give publishers good reason to reevaluate their relationships with ad networks. Many publishers essentially hand over their audience data to ad networks for free. As ad networks and advertisers get savvier about using it, publishers giving away the farm may find themselves going hungry.