Earlier this week I stumbled on a podcast I did with Susan Bratton for her “Dishy Mix” program in 2008. One of the subjects we discussed was what I called “the Network Effect:” how the emergence and proliferation of digital ad networks – many of them quite intelligently designed – had drained the RFP watering hole publishers were used to drinking from. My advice then for publishers was simple: look at your own sales team and see if what they’re really selling and doing in the market is at all different from what the network rep is bringing. In truth, the difference at the time was quite slim – in some cases, nonexistent. If all you sell are holes in pages without some extraordinary level of service, then you’re a commodity broker and price and reach will win.
Fast forward just three years and an amazing irony has presented itself. The networks are now the ones being squeezed by “Trading Desk Syndrome.” After a couple of strong years, the network potion of rates, reach, targeting and optimization no longer holds the same magic. At least not to the agency holding companies now tooling up their own DSP-driven trading desks; the same customers who once leaned so heavily on ad networks for planning, optimization and delivery of large scale reach are now taking aim squarely at the networks’ bottom line. The availability of massive amounts of exchange-based inventory has made this all possible, and complicated the picture considerably for network operators.
When faced with their own crisis in 2008, publishers responded in a number of ways. Some cut off or radically changed their relationships with networks. Others leaned more heavily on integration and sponsorship models. Still more developed deeper services and analytic capabilities. Whatever the steps, the intent was very consistent: “We must do that which cannot be commoditized. We must differentiate.”
Today it’s the ad networks’ moment for the same kind of reflection and reinvention. Many are already rising to the challenge; acquiring unique content resources, developing unique services, trying to corner the market on one-of-a-kind ad technologies or – in some cases – plunging headlong into the exchange game themselves.
Commoditization is not something you can outrun and you can’t negotiate with it. It is ruthless and unforgiving. It can only be avoided through intellectual and strategic leadership. Now is the moment when network leaders will define themselves, the future of their companies, and the viability and purpose of the entire model. Which ones will rise to the task of reinvention?
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