Monday, September 19, 2005
Most Web Ads on Upside of Roller Coaster
With more and more advertising dollars chasing the Internet, sellers of online ad space are suddenly confronting soaring prices and growing competition for premium inventory. A number of companies -- so-called ad networks -- make money by selling ad space across multiple Web sites. The field is dominated by Google and Yahoo, but there are small, niche players as well.
While ad networks all depend on Web site publishers to turn over their ad inventories, they are affected in different ways by rising demand, depending on their business model. Some are clearly benefiting, while others are getting squeezed. Jumpstart Automotive Media, which specializes in selling space on automotive sites, is one of the beneficiaries. The company has locked up long-term, exclusive agreements with a handful of partners like eBay Motors and Automotive.com to sell their ad space.
The San Francisco-based company has already sold all of its available ad space for the fourth quarter as large automakers like Ford and GM shift huge amounts of advertising dollars online.
"We are sold out and I mean 110 percent for the fourth quarter," said Dillon McDonald, chief strategy officer. Other ad networks are also seeing a surge in demand -- in particular for the fourth quarter, when many advertisers launch holiday campaigns -- with some experiencing a shortage of inventory. "We are seeing lots of advertisers setting up campaigns scheduled to start in [the fourth quarter], with some sites already sold out," said Phil Kaplan, the CEO and founder of AdBrite.
Burst sells ad space across about 2,000 sites, mostly mid-sized publishers that range from Kiplingers.com to niche sites like Coolmath.com. CEO Jarvis Coffin said that while there is no shortage of new Web sites, it is getting harder for ad networks to snap up "cheap inventory."
"What we're certainly seeing is prices are going up," said Coffin. "Our CFO is fond of saying that you don't have a supply problem, you have a pricing problem." At the same time, publishers are getting savvy about how to get the most bang for the ad space. Some are holding back their inventory, figuring they can get a better deal if they wait.
Industry observers say ad networks are starting to offer rate "guarantees" -- a minimum price that they will sell the space for -- in order to entice publishers. "That's exactly what's happening," Coffin said. "Somewhere as a compromise between what we're able to pay and what you're willing to accept, we'll guarantee you a price in order to secure the inventory." Middleman Squeezed
Those feeling the most pressure are ad networks that act as resellers, meaning they buy all the inventory off a publisher and turn around and sell it for more. Those players are seeing their profit spread shrink because of the intense competition.
One way to deal with the issue is to merge, as ad networks Fastclick and Valueclick did earlier this month. Industry observers expect consolidation as Internet ad networks try to gain more clout.
Kevin Lee, CEO of online search marketer firm Did-It, said, "Everybody is fighting over the same inventory."
Brought to you by Guardian eCommerce.
While ad networks all depend on Web site publishers to turn over their ad inventories, they are affected in different ways by rising demand, depending on their business model. Some are clearly benefiting, while others are getting squeezed. Jumpstart Automotive Media, which specializes in selling space on automotive sites, is one of the beneficiaries. The company has locked up long-term, exclusive agreements with a handful of partners like eBay Motors and Automotive.com to sell their ad space.
The San Francisco-based company has already sold all of its available ad space for the fourth quarter as large automakers like Ford and GM shift huge amounts of advertising dollars online.
"We are sold out and I mean 110 percent for the fourth quarter," said Dillon McDonald, chief strategy officer. Other ad networks are also seeing a surge in demand -- in particular for the fourth quarter, when many advertisers launch holiday campaigns -- with some experiencing a shortage of inventory. "We are seeing lots of advertisers setting up campaigns scheduled to start in [the fourth quarter], with some sites already sold out," said Phil Kaplan, the CEO and founder of AdBrite.
Burst sells ad space across about 2,000 sites, mostly mid-sized publishers that range from Kiplingers.com to niche sites like Coolmath.com. CEO Jarvis Coffin said that while there is no shortage of new Web sites, it is getting harder for ad networks to snap up "cheap inventory."
"What we're certainly seeing is prices are going up," said Coffin. "Our CFO is fond of saying that you don't have a supply problem, you have a pricing problem." At the same time, publishers are getting savvy about how to get the most bang for the ad space. Some are holding back their inventory, figuring they can get a better deal if they wait.
Industry observers say ad networks are starting to offer rate "guarantees" -- a minimum price that they will sell the space for -- in order to entice publishers. "That's exactly what's happening," Coffin said. "Somewhere as a compromise between what we're able to pay and what you're willing to accept, we'll guarantee you a price in order to secure the inventory." Middleman Squeezed
Those feeling the most pressure are ad networks that act as resellers, meaning they buy all the inventory off a publisher and turn around and sell it for more. Those players are seeing their profit spread shrink because of the intense competition.
One way to deal with the issue is to merge, as ad networks Fastclick and Valueclick did earlier this month. Industry observers expect consolidation as Internet ad networks try to gain more clout.
Kevin Lee, CEO of online search marketer firm Did-It, said, "Everybody is fighting over the same inventory."
Brought to you by Guardian eCommerce.
