Competition can sneak up on a company when they don’t expect it and from a direction they would not have seen coming. One example, which may only illustrate my appreciation for Revenue Science, as opposed to point being made, involves how that company has become a force to reckon with in the online ad space. Revenue Science didn’t enter the online advertising world with intentions of becoming an ad network. They, instead, focused on building technology that would help sites such as the Wall Street Journal, New York Times and other content, category deep publishers make more money.
The example I always use when describing this form of behavioral targeting involves The Wall Street Journal always selling out of certain inventory, e.g., the Technology section. The site knows that many of its technology readers also visit the Weekend Journal section, which because of its less upscale content (movie and book reviews), commands a lower CPM. The Journal is right though in believing that readers of one do read the other, but the Journal can only target contextually, i.e. what the content talks about. If they could target to the user and not the content, then they could show a technology ad to a technology user regardless of that user’s location on the site. And, this is exactly what Revenue Science can do.
Revenue Science provides a tool that lets The Journal slice up its readers by the content they see and show ads to them wherever they are on a site. Having done this for enough sites, Revenue Science, all of the sudden, has access to a network of sites and can now sell behaviorally targeted ads across many sites in addition to that site selling its own inventory. There is no way a company could do this if they had been tasked with building an ad network of the top content sites; they would have thought along traditional approaches and missed the opportunity to become a network by beginning life almost as a tool for that site.
The low barriers to entry that existed in 2001 when a Fastclick could grow organically don’t exist today. A company has to find a way to build in new efficiencies, as cliché as that might sound. Having had experience in this space, I don’t envy any company trying to break into the ad network space, especially if they want to do so in the established areas – display ads. Companies looking to do this will almost surely have money at the outset to fund the optimization expertise as it looks to create a better way to target ads.
This isn’t to say companies couldn’t get far on their own, but it will take a slightly different approach to do so. Think of him what you may, Philip Pud Kaplan did a good job creating AdBrite, which is effectively an ad network, but it operates with text links and a self-serve environment rather than display ads and traditional sales. Chitika, a second example, managed to get good distribution of their display ad product. Their unique ad unit, a mini-comparison shopping site inside a banner set them apart from other providers. The ad’s interactive, non-intrusive, and almost value-adding qualities saw great viral adoption among publishers looking for a Google AdSense supplement, one that didn’t violate Google’s T&Cs. Not being run by network guys, Chitika made some grave publisher management mistakes that have almost assured them of being a niche player.
Ad network are not alone in this science driven, inside-out approach to online advertising. Even lead generation, which to many seems so straightforward, has felt the affects of companies entering the space and doing things differently. Some companies in lead generation made their margin through one-sided agreements that they fought to uphold when the other side wised-up. Others kept their place near the top because they had such built in distribution and higher rates, that it made it difficult for anyone to come close. Those types of companies, though, struggle to see growth in lead generation.
A new breed has seen the opportunity in lead generation and has decided to invest resources in areas that stalwarts took for granted. They treat lead generation much the way an Advertising.com did their ad network by trying to match the right ad to the right user, and repeating this for every step in the chain. And similar to the world of ad networks, a surprising number of new entrants come into lead generation equipped with a war chest with which they can not only hire talent but build a better mousetrap. In the end, that seems to be the biggest trend, more and more new companies having success following an approach that early companies did not have to, and that is investing in value-creating technology first. Certain aspects might still resemble the Wild West, but those who end up creating the big cities today aren’t afraid to pave the road and create the sewers before opening up shop.
Jay,
Love your blog. Fascinating stuff. I'm wondering if you've seen the reincarnated I/Pro. Any thoughts on the company's prospects as an ad network? Seems like the "ratings" angle is an interesting differentiator.
Thanks
Posted by: Reader | June 05, 2006 at 02:45 PM