-By Russ Fradin

The land-grab is on. Media companies have increasingly embraced the concept of vertical ad networks, and are rushing to roll up smaller Web sites and blogs to establish branded networks in untapped categories. Their efforts have hastened in the face of nimble entrepreneurs who also seek to dominate desirable niches.

Industry pundits have bemoaned the recent proliferation of ad networks. These ‘experts’ are missing the point. The number of networks does not matter; what matters is the value delivered to advertisers and publishers by any given network. If that value is high, the network will succeed; if not, well…

The fundamental question is whether each new network offers unduplicated, high-quality inventory, and a highly efficient way to reach it. I argue here that quality vertical ad networks will enrich the advertising ecosystem, because their underlying structure differentiates them from performance ad networks, and from one another.

From 2000 to 2007, the number of Web sites grew from 20 million to 160 million. Most of that growth consisted of smaller sites and blogs, collectively referred to as the long tail. Long-tail sites are collectively very popular: U.S. Internet users spend 61 percent of their online time outside of the top 20 domains.

The narrow focus of smaller sites gives rise to deep content on a particular subject that greatly interests a core group of users. As a result, users’ engagement with online content tends to be stronger when they are visiting long-tail sites. These high engagement levels make long-tail inventory highly attractive for brand advertisers. More than 50 percent of brand advertisers in a 2008 survey by Topline Strategy Group rated “reaching the long tail of
smaller sites” as a top strategic priority.

But how to buy on the long tail? The sheer number of sites in the long tail, and their wide variation in quality, presents a dilemma for advertisers. Brand advertisers, in particular, want to ensure that their brand is presented alongside high-quality content, and are often daunted by the lack of transparency. Their experiences with performance ad networks that reach the long tail have not always been positive, because they have little assurance that their brand message is appearing in the best possible context, and they receive aggregate reporting that doesn’t provide transparency about the sites upon which the campaign ran. Targeting technology has offered some comfort that advertisers are reaching audiences with the basic characteristics they have specified. But the fundamental question, “Is my brand appearing alongside the best possible content?” remains unanswered with performance ad networks.

Technology by itself cannot accurately judge the quality of a long-tail site. That task is best left to humans who are experts in a content category. A long-tail campaign with the best chance of success will run across sites that have been hand-picked by proficient curators of content.

Enter the era of the vertical ad network. From 2003 onward, a new concept began to take hold. Upstart networks such as Glam Media, Martha’s Circle, Jumpstart Automotive Media, and IDG Tech Network offered a “have your cake and eat it too” proposition: advertisers could get the long-tail reach that only a network could offer, with quality inventory previously only available on large destination properties.

This was made possible by focusing the network on a single vertical in which the network operator had expertise, and hand-picking sites that met high-quality standards. Enterprise network operators leveraged their widely-known brand, as in the case of Martha Stewart Living with its Martha’s Circle offering. This level of branding brings with it prestige to member publishers, and heightens the network’s attractiveness to advertisers. The resulting network can command premium CPM campaigns from top-tier advertisers because those advertisers no longer have to sacrifice quality to achieve reach.

By building a differentiated vertical ad network, media companies can transcend the boundaries of their sites. They will have achieved the following:

• Met advertisers’ needs for high-quality, high-quantity long-tail inventory;
• Assembled a community of valuable and influential sites, yielding synergies such as content sharing and intra-network traffic flows;
• Steered their business toward a model that preserves capital, and leverages their existing brand and sales competency.

All ad networks are an answer to the ever-expanding number of Web sites. Vertical ad networks do the expensive work of finding the highest quality Web sites focused on very specific audiences and then building a community that shares traffic, content and revenue in order to deliver that audience efficiently to brand advertisers. There will be “too many” networks when new Web sites stop emerging. Until then, welcome the vertical ad networks and insist that they live up to their value proposition of cultivating and binding unique, high-quality content that attracts a common and valued audience.    

Russ Fradin is the co-founder and president of Adify, a vertical ad network management firm that is an independent, wholly-owned subsidiary of Cox Enterprises. He can be reached at russ@adify.com.