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Users, not advertisers

A friend directed me to an interesting post on Publishing 2.0 — ‘Ad Platforms vs. Ad Networks: Who Controls The Advertiser Relationship?‘ — using the new Time Inc/Quigo relationship as an example the author argues that “As more advertising dollars pour online [...] whoever controls the advertiser relationship holds all the cards”.

This comment made me think for a while about the publishers role in online advertising. Is it really all about building advertiser relationships? Most publishers that I have talked to over the past few years split their media into two buckets — premium & remnant. One sales force focuses on agencies and another on ad-networks and direct marketers. Often the second salesforce is one or two people who spend their days prioritizing networks.

Although advertiser relationships matter a lot on an individual deal basis, but I don’t see them as something that can be “controlled”. Think about it — lets say you have a great “premium” sales guy, Joe, who has solid relationships with two large agencies. He used to work at one and has a whole set of friends at the other. Quarter after quarter Joe just keeps bringing in tons of business. Well, what happens when Joe is poached by another company and leaves? Was the strength of the relationship based on Joe or on the company? What if Joe calls up the agencies from his new job and tries to convince them to move their dollars to his new gig? Who will the agency go with? It’s not that relationships aren’t valuable, but they are largely based on personal relationships between people — something that is far more fragile than a deep technical integration.

If it’s not advertiser relationships, what should publishers focus on? First and foremost every publisher should focus on increasing the user-experience on his properties, attracing more and higher quality users and collecting more information about said users. I think Niki Scevak has it right in this post — Running an Ad Network — where Niki argues “You’ve heard me crap on about the business model of ad networks enough but here it is again: over time all the value goes to the person who owns the consumer relationship.“. It’ kind of like that movie Field of Dreams, “If you build it, he will come”. Not that you don’t still have to work to bring in the advertiser dollars, but quality users make selling a lot easier.

The means of trading

So lets look at the example Time/Quigo cited above. Pre-Quigo, Time used Adsense because it enabled both contextual based buying and smaller credit-card based advertising on Time Inc. Adsense was able to provide a certain level of efficient buying and hence was able to pay higher rates than other advertisers. Citing from the Media Post article on the subject, Quigo states that “This is about publishers who want control over the ad-serving process, rather than outsourcing it to a blind network.” Well, I call bullshit!

This isn’t about Time gaining control — they’re simply transferring control from one party to another. Before the deal they had control over their users and inventory, and now they still have control over their users and inventory. The only real difference is that instead of sharing some margin with Google & Yahoo they are sharing some margin with Quigo. Quigo is getting exclusive control over the contextual advertising on Time Inc. Not convinced? Why don’t we take a look at the terms of service of a contextual buy on Time Inc

1. Display of Advertisement. Advertiser agrees that Quigo may display the advertisement Advertiser places in the AdSonar interface (the “Advertisement”) on the Quigo Network through the AdSonar Service and its affiliated sites on which Quigo places AdSonar advertisements

That’s right — this isn’t an exclusive Time Inc contextual advertising account I just signed up for, it’s a full-fledged Quigo account, it even works when I go login through the regular Adsonar login portal. So Time transferred control over the means of serving the ad from Google & Yahoo over to Quigo. So why do we care? The thing that is up for control is the means by which ad-impressions are traded or transacted. In the example above, Quigo may have tricked Time into thinking they were getting more control but really it’s three giants battling over one method (contextual matching) of serving ads on Time Inc’s inventory.

I find it hard to believe that this is financially the best move for Time. If Google or Yahoo pays a higher rate than Quigo, do you really care whether you are “selling directly” or not? Which brings me to my last thought of the day. Assuming a publisher has built up a quality user base, the focus should be on empowering all advertisers to best monetize the available inventory. Who cares if it’s Yahoo, Google, Quigo or even Bidclix! Whomever pays the most should get the inventory. If today that’s Google, great, but if tomorrow it’s Quigo then give more to them.

Next up

I realize that this post leaves a lot of questions unanswered — in my next posts I’ll talk more about maximizing revenue by pricing networks efficiently and also about how ad-networks, exchanges and technology providers are fighting for control over the means by which ad-inventory is traded.

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  • jenkins

    Good post. Quigo’s model is unique and misunderstood. They share advertisers with Time andcollaborate on pricing, targeting, etc. The advertisers come from multiple directions.

  • Mike

    Would love some more insight on Quigo — I’m presuming that fundamentally they are still an ad-network. Is that incorrect?