Will Agencies “Exchange” Networks and Go to the Market?

I used to think “nexus” was a word I would only use in conversation with my Trekkie friends. But now, it seems we’re fast approaching a nexus point for online ad networks, and William Shatner is nowhere in sight.

Over the last four years, we have seen the birth and rapid assimilation of the advertising exchange across the industry. The ad exchange model, for those of you who are new to this, is a marriage of an ad serving solution for networks with a marketplace. This enables all advertisers and publishers connected to the marketplace to share both inventory and sales, thus increasing their reach and eliminating unsold impressions. The major players in this arena are Yahoo!’s Right Media Exchange and Google’s DoubleClick Ad Exchange.

The real question ad agencies and direct content publishers have to be asking themselves is, why do I need an ad network to have access to exchange dollars? The answer is, many don’t.

The agency business has always been slow to adapt to industry innovations—for really good reasons, mind you. The stakes are much higher when you’re working directly with brands. Quick change is often encumbered by hesitation and vacillating, and this tends to discourage early adoption of new ideas or behavior. With Google’s purchase of DART and the launch of the Next Generation of the DoubleClick Ad Exchange, agencies and advertisers have a system they’re already familiar with and they’re able to increase their reach while either maintaining or decreasing the cost of their previous media spends. The easier it is to adopt, the quicker the uptake. In time, the agencies that take the biggest chances with their media spend and strategy will be the clear winners for both their clients and their bottom line.

Does this mean the ad network will disappear? We don’t think so. As anyone in the ad network business will tell you, the agency and direct advertiser line items only represent one part of their business. The impact will be greater on some ad networks than others. On the whole, they are pretty resilient competitors with a diverse range of revenue options. In the long term, they will take a hit to their ability to brokerdisplay media across non-proprietary, brand named sites. The network(s) that will rise above the feeding frenzy will have either developed vastly superior targeting capabilities, acquired the skills to present their agency clients with integrated media options along side their typical display pitch or built or acquired their own content.

Either way, the line between advertiser and publisher is going to get progressively blurrier as time goes on—and speaking as a publisher and someone who sells media, I’m going to make focusing my points of differentiation an even higher priority than before. Kirk out.

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Chris Patheiger is a Vice President of Business Development at Redux Media, a leading international online publisher network of top-quality, specialty websites and media representation firms. Chris is responsible for Communications, Sales and E-Publisher of the Redux Blog. He can be reached at chris@reduxmedia.com