I’m going to take you on a little trip back in time. Because sometimes, we need to look at where we’ve been to see where we’re going.
During the Wild West days of the Internet, blog sites now referred to as publishers, became all the rage. Big advertiser dollars were spent to reach the highly engaged user consuming all of this blog content. Companies like Federated Media, Say Media or Blogher did the job of herding thousands of these cats (a.ka. blogs/publishers) into inventory pools and then sold them at scale for large agency buys. Since everything was running on the same tech, deploying native ad units or handling custom programs across so many sites made this appealing to the agencies or advertisers. The publisher thought this was a win because they did not know how to get direct campaigns on their own.
This business model was an early framework for success. These companies were competing with the Yahoo’s, Conde’s and the AOLs of the world. As you can imagine, Federated Media and Blogher were quickly swallowed up the minute the venture capital firms sniffed out digital as the next brightest spot in which to invest. At some point, these business models began to fail, and the first wave of ad networks was forced to pivot.
It became clear to many publishers that these ad networks did not have their interests at heart. A large portion of the revenue share went to the ad networks, which owned and operated blogs themselves. This meant, when the ad networks had direct buys, they would immediately run more inventory on their own blogs, leaving little left for publishers. So the promise of direct buys, which was usually a 50/50 revenue share, was not worth the loss in programmatic revenue, which could be a 60/40 relationship. So the 40% given to the ad network for programmatic did not make up for the promise of a 50% direct sales split. The next wave of ad networks drastically changed these revenue splits.
The New Wave of Ad Networks Spells Trouble for Publishers
There was also now a lot of stiff competition, with this new wave of ad networks promising publishers a better revenue share, a better ad experience and guaranteed revenue. The old school ad networks also had to become banks at this point, forced to pay publishers in 30 days while they themselves had to wait 60 or 90 days to get paid. When the ad networks tried to delay the payments, the publisher would go elsewhere.
The process of handling everything internally was so manual that they would hire a boatload of employees right out of college who might stay six to eight months and then, upon realizing they had no future, up and quit. Or the ad networks would install software for everything and quickly become unprofitable.
In the meanwhile, companies like AdThrive had developed the formula for nabbing publishers from Federated Media and basically ate their lunch on ad tech and pricing. This new type of company model focused on handling all revenue for the publisher including ad ops in a term I like to call “a concierge.” The ad concierge will come and promise you more revenue than you are currently making if you accept and make the revenue shares 80/20 for programmatic. There still may be a different revenue share on direct, but again, a more favorable one than the previous era.
Previously, the publisher would engage in new vendor relationships like affiliate marketing or other video relationships. Now, the ad concierge company is working with vendors, allowing the publisher to focus 100% on the content. I think the old school networks never felt that the publisher would hand over this control, but after years of struggling, publishers were more than happy to just give it away and simply collect a check.
The Current State of Ad Networks and How Publishers Still Get Tripped Up
Now fast forward to today. A lot of direct spend has shifted to programmatic, and most of the direct buys are only handled by the large, closed ecosystems like Facebook. So what would it take for a publisher to build these ad-buying capabilities on their own? Unfortunately, programmatic has gotten fairly technical. If you think you can just install prebid.js and set up a few SSPs and you are good to go, you are quite wrong. It’s a lot more complicated than that, and you really need to have multiple engineers with a dedicated focus and strong ad ops leadership. There are several SPACs trying to do this now, and I wish them luck. From what I have seen, they are leaving hundreds of thousands of dollars on the table because they think they know best.
If you are at a company where you see constant friction between engineers and ad ops, then your company is not set up for monetization success. Ad ops wants the engineers to make changes to code quickly because they know not testing things could cost them money. The engineers usually respond that they need to be prioritized in the queue because there is a long list from the editorial team. This is where a lot of publishers fail.
The Future State of Ad Networks and How Publishers Can Get the Value They Deserve
There is yet another new wave of ad networks, this time providing SaaS-based platforms. This approach removes the need for expensive engineering and allows your ad ops experts to plug in and play, try new things quickly, fail fast and then try the next opton. Don’t have an ad ops person since you are currently working with an ad concierge company? Well, these new ad networks can provide you one who will expertly and strategically run, optimize and report on your campaigns.
The truly unique thing about the SaaS model for ad networks is that it removes some of the complexity from ad tech while putting control back into the publisher’s hands. In general, this model needs to make sense for publishers. But just like we’ve seen with the evolution of WordPress, I am betting that these software tools will become de facto for larger media companies so they can maintain control while lowering engineering expense.