The Roadblocks to Starting Your Own ad Network

Originally Published 05/24/09

Mainstream publishers are leaping into the ad network business with increasing frequency. Why, you may ask? After all, isn’t it hard enough for publishers to fill the ad inventory on their own domains? Or have they secretly been selling out 100 percent of all their ad placements without telling anyone? If so, I hope they haven’t been taking TARP funds under false pretenses.

But seriously, there are some rational reasons for embarking on this strategy. First, creating a network of sites with similar content helps extend a publisher’s dominance in a particular category. Build a large enough network of affiliates and, presto, you are no longer the No. 25 site in MediaMetrix; you are No. 3. Impressionable media buyers will be impressed with your reach, and shareholders will be happy with your ranking.

Second, build a network now, and you’ll beat your competition to it and leave them in the dust down the road. And finally, to be fair and balanced, some publishers actually do find themselves selling out of highly targeted inventory in travel, health, and automotive, even if a fraction of run-of-site inventory actually gets sold.

For all these reasons, be they rational, sound business reasons or not, websites with a single dotcom domain are extending their reach by building networks. However, many of them underestimate the challenges associated with this model. Believe me, it is not for the faint-hearted or unprepared.

Here are some of the most unappreciated and underestimated challenges associated with running an ad network, especially if you are a publisher starting out as the new “owner-operator.”

• The affiliate websites in your network are actually your customers. Sure, you are good to your advertisers and have experience servicing them, but now add to that equation the fact that you have 150 network affiliates all needing varying levels of support and information. Make sure you have the staff to support that, or choose a solutions provider that does.
• Affiliates will need assistance in deploying your network ad tags on their site. Sure, you can sign 150 affiliates to your network, but can you actually get them to deploy your ad tags and on a timeline that suites your business model? Your help will be needed, and it will be technical in nature.
• As a network “owner-operator,” you will find that each affiliate will have separate business rules dictating which ads or ad categories you can and cannot show on their site. One affiliate wants to prevent you from selling to sports advertisers, because they have a standing exclusivity with a single firm. Another site wants to bar an entire list of specific advertisers. None of this type of control will scale unless it is automated, so your network solution better supply this.
• You will need to supply individual revenue reports showing how many impressions ran on each affiliate. Those impressions may be subject to a different revenue share depending on targeting and site placement of sales channel. Your affiliates will want to see them — and see them frequently. As a mainstream publisher, can your current ad server do that?
• Inventory management. If you’re lucky, your affiliates will cede control of 100 percent of their inventory, in which case, you will know where you stand in terms of sold and available inventory. But in many cases, you’ll get a portion of their inventory, sometimes on an ad hoc basis as you need it. In which case, knowing where you stand on inventory will be challenging at best. Make sure your existing ad operations group is looped into this function.
• Payments. Yes, your affiliate customers will actually want to be paid. Are you personally going to write out the checks and send them out? If not, then who will?

Your options for supporting a network are varied. Mainstream publishers can attempt to do it with their existing ad serving solution and internal support staff, but frankly they are doing it at their own peril. The danger here is that you will be complicating an already complex business model by relegating it to a series of internal spreadsheets and marginal customer support from your internal resources, which are probably already overtaxed.

Your best bet is to outsource support of your network to firms who are experienced and focused on that business model instead of using a do-it-yourself approach. Make sure you can get as close to an end to end solution as possible, ranging from deployment of tags, to customer support, trafficking and optimizing, inventory management, and billing/invoicing.

Expanding your business to a network model is not for the faint hearted, but given the right planning and resources, in can expand the reach and exposure of your core brand as a publisher.