New York: Traditional media companies trying to stem the flow of advertising dollars to Google and other large Internet companies are increasingly building ad networks of their own, anchored by their brands.
The latest, Forbes Inc., announced that it will soon start selling ads for about 400 financial blogs. In recent months, Conde Nast, Viacom Inc., CBS Corp. and other major media companies have unveiled topic-specific ad networks to lure advertisers that want to buy more ads than any single site can sell.
If newspapers, magazines and broadcasters cannot expand online ad inventory, they are “under threat of becoming less and less relevant to the advertiser,” said Russ Fradin, chief executive of Adify Corp., whose technology runs ad networks for Forbes and others.
But these media networks, some linking fewer than a dozen hand-picked Web sites may have a tough time competing with the larger networks of thousands assembled by Google Inc., Yahoo Inc., Microsoft Corp. and Time Warner Inc.’s AOL.
Those companies have been expanding, too, spending at least $11 billion collectively to buy smaller ad networks and technologies and in Microsoft’s case, also bidding more than $40 billion for Yahoo.
“As our technology has continued to advance, we’ve gotten better and better,” said Lynda Clarizio, president of AOL’s emerging Platform A advertising unit. “We can handle a lot of demand from advertisers.”
Advertisers prefer dealing with networks rather than individual web sites
The expansion drive by both sides comes as Internet users increasingly divide their time across scores of sites large and small. Advertisers would rather not deal with thousands of individual Web sites. Media companies and Internet portals alike are promoting networks as a way to reach larger audiences with “one-stop” ad buys.
So far, portal ad networks have largely succeeded in selling their affiliates’ leftover ad inventory at discounted rates and sharing revenue. By employing targeting techniques like matching ads to visitors’ surfing habits, those large networks are stepping up bids for higher-value ads , ones that have traditionally gone to sites run by media companies.
Small networks under pressure to sell to larger networks
Accustomed to selling ads on their own in offline channels, many traditional media companies have been resisting overtures to join larger networks.
“One of the big ones said to us, ‘You guys are really good at creating content and we are really good at selling advertising. It would be perfect,”’ said Sarah Chubb, president of Conde Nast’s online division, CondeNet, which has signed up a handful of blogs on fashion and technology. “We’re pretty good at selling advertising, too.”
Smaller networks can offer advertisers a consistent audience on pre-approved sites, while giving those sites individualized attention.
“Forbes understood our business,” said Steve Woit, publisher of Xconomy, a blog joining the Forbes network. “A larger network, whether it’s Google or others, has to deal with every industry and large consumer sites.”
Rather than join large networks, Martha Stewart Living Omnimedia Inc. figures it is better off recruiting one or two dozen leading lifestyles sites that meet its editorial standards and selling higher-priced ads to Macy’s, Ace Hardware and other brands. Martha’s Circle launched in November.
Ad partnerships with indepdendent parenting sites
Viacom’s MTV and Nickelodeon have ad partnerships with independent parenting sites and are launching groups this spring around music and men’s lifestyles. CBS announced last week several local ad networks around CBS-owned stations.
Other media companies are forming networks among themselves. In February, Gannett Co. and Tribune Co., the two largest US newspaper publishers, joined Hearst Corp. and New York Times Co. to form QuadrantOne to collectively sell online ads. On Thursday, QuadrantOne said another 26 newspaper companies have joined.
Operators of the larger networks, however, say smaller networks can never produce on the scale advertisers are seeking. Todd Teresi, a Yahoo senior vice president, said the media companies’ efforts are a “valid path to go, a first step.”
Bunch of blogs too cannot compete with large internet companies
But even if a media company can assemble 10 or 20 like-minded blogs, he said, overall traffic wouldn’t be growing as much compared with what a large Internet company can offer.
Forbes is initially looking to increase business by just 10-15%, even with hundreds of bloggers. In mid-March, Washington Post Co. ended its 16-month-old ad network because many advertisers had cheaper options through the large portals and blog-specific networks like Blogads.
“We were holding out for value but there was too much inventory,” said Jeff Burkett, director of ad innovation with the Post’s interactive unit.
Instead, the Post hopes to increase ad opportunities by boosting traffic. For starters, it plans to start carrying items from the PaidContent blog and will likely share ad revenue.
Yet media companies are finding their own networks hard to resist, even if they join the larger efforts. MSNBC.com, a joint venture between General Electric Co.’s NBC and Microsoft, uses Microsoft’s ad technology and sales teams but also recently formed networks around politics and the female-heavy “Today” show.
“We can’t match what Microsoft does, ... but they represent a lot of different products,” said Kyoo Kim, vice president of sales with MSNBC.com. “We want to make sure we protect our brand and be in charge of our own destiny as well.”