08/03/2007
I’m not one who gives in easily to hysteria. After all, if you work in ad operations, you eventually become desensitized to emotions of panic and horror; the same thing that happens when you watch too many violent movies. However, when the latest round of acquisitions occurred in our sector, leaving virtually no tier one independent ad serving companies left standing, the following dialogue came to mind:
Fire and brimstone coming down from the skies. Rivers and seas boiling. Forty years of darkness. Earthquakes, volcanoes…
The dead rising from the grave.
Human sacrifice, dogs and cats living together — mass hysteria
(Ghostbusters, 1984)
For those of you who have been off meditating in Tibet for the last two months, I’m of course referring to Atlas’ acquisition of Accipiter, both of whom were bought by MSN; Google’s acquisition of DoubleClick; WPP gobbling up 24/7 RealMedia; and Ad-Tech being snatched by AOL. Amazingly, this happened all within the space of about three weeks.
Is it really the end of the world as we know it? To gain some perspective beyond my own, I had a chance to talk to several publishers and agencies over the last few weeks.
Short term, the news generated all the intense response of one hand clapping. In other words, it was business as usual. In a way, that just makes sense. Publishers still have campaigns to serve and revenue goals to meet. Ad agencies have clients to service and budgets allocated to the distribution of online advertising. Leaderboards, skyscrapers and messaging units all need to be served.
Long term, however, it’s another story. There are several implications to the changes in this end of our business. They are as follows:
Privacy
No, not individual privacy (frankly, there is none so don’t post anything online you don’t want on the evening news). I’m speaking primarily of publisher data. Now that the ad servers are all owned by other publishers or ad agencies, they have a view into CPM and pricing data that can potentially give them competitive information on online sales trends for the automotive, or business, or entertainment sectors. Keeping this data secure and confidential — even in this world of new ownership — will be crucial to maintaining the trust that is an important part of the publisher’s relationship with the ad serving companies.
Network dominance
I don’t have an inside track to the strategic plans for any of these companies. But if it were me, I’d go to every publisher and say: “We’ll greatly reduce your ad serving fees (or give it to you for free) if you give us custody of your entire unsold inventory.” This would allow Google or MSN to grow their network reach tremendously. The revenue from that growth might just offset any losses due to decreased ad serving fees. The long-term implication of this would be to further commoditize the cost of ad serving, making it even more difficult for a new and independent ad serving firm to get a foothold on the business.
Where your bread is buttered
We all have a tendency to focus on the aspects of business that can most efficiently get us the most amount of money. This is just as true for a corporation as it is for an individual salesperson. If the new ad serving owners do indeed go after network dominance by increasing their focus on gobbling up more publisher impressions, where will that leave their agency clients? Will support of agency side ad serving products be put in a maintenance mode, while the other side of the business gets all the attention?
Fox in the henhouse?
Isn’t it ironic that the new parent companies that now own the top two agency-side ad serving solutions have business models that are competitive with the very agencies they service? For example, Google is intent on fostering its self service/exchange model and rolling it out into all media forms.
Where does that leave the ad agency? I’m not arguing for one model or the other here because the answer is somewhere in the middle. But the lines are getting blurred and, long term, this may have implication on how agencies develop the operations end of their business.
Standards
One thing that may be more convenient in this whole scenario is the issue of standards related to the methodology of counting impressions, the methods of targeting ad campaigns, and of pricing. After all, if there are only two humongous ad serving companies, there’s little variance in methodology left to debate. This might leave the IAB with little left to complain about. However, consider the alternate future of many ad agencies replicating what WPP has done in acquiring an in- house ad server from 24/7 RealMedia. What if all the agencies do that or developed their own solutions: are we then headed to the disintegration of standards and a regression into Babel?
To come full circle on all this: I will admit I am engaging in a little bit of sensationalist journalism. And to be frank, I had fun doing it! Short term, it’s likely nothing remarkable happens. Is this REALLY a cataclysmic event in which the earth will open up and swallow all ad operations departments in one horrendous moment? Naw. If anything, it may be just a steady erosion, the kind that happens when you build your house too close to the seaside. The degree of danger you’re in depends on how close your house is to the water. So, what’s to worry!?
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