Ads-by-numbers irks ESPN.com

Site seeking to protect brand's value

NEW YORK -- Top Web publishers are planning a revolt. Even as more prominent sites experiment with selling remnant inventory through online ad networks, and in some cases ad exchanges, ESPN.com is saying, "Thanks, but no thanks."

The site recently cut ties with Specific Media and several other unnamed ad networks and is taking the bold stand that ad selling that relies heavily on arbitrage and algorithms is not for them.

"We're heading down a path where it no longer suits our business needs to work with ad networks," said Eric Johnson, executive vp multimedia sales for ESPN customer marketing and sales.

Sources say that ESPN would like to rally support from other publishers behind this move and ultimately tamp down ad networks' growth. Turner's digital ad sales wing is rumored to be considering a similar move, though officials said no decisions are imminent.

"Turner, like a lot of media companies, is currently reviewing all of its media practices, and ad networks are certainly a part of that process," said Walker Jacobs, senior vp of Turner Entertainment New Media Ad Sales.

ESPN's decision crystallizes a philosophical debate in the online ad sales industry that has intensified since the Interactive Advertising Bureau's annual meeting last month, when Martha Stewart Living Omnimedia media president Wenda Harris Millard warned against selling Web inventory like "pork bellies."

Two sides have formed -- those who want to protect traditional, direct selling of premium content brands and those in the math-loving crowd that favor automation and data. The math lovers make the traditional sellers nervous.

"There is a genuine concern about commoditization of brand inventory by some of the networks," Millard said in an interview. She's concerned that such a debate is happening so early in the Web's development as a business. "We haven't even established the value of our medium, and all of a sudden it's about price. That is very bothersome to people who are brand stewards."

Of course, there's a reason that online ad networks -- which rose to prominence in the late '90s by aggregating inventory across thousands of smaller Web sites -- are playing a bigger role in Web publishing. Most large sites are swimming in avails they can't sell. Insiders estimate that 20% to as much as 70% of inventory can go unsold at a given time. Thus, ad networks offer a monetization alternative.

And in recent years, to differentiate themselves, more of these companies have been touting themselves as "premium" ad networks, talking up their associations with the ESPNs of the world when they meet with ad agencies. "Nobody comes into a meeting and says, 'I've got a bunch of lousy sites,' " said Mike Cassidy, CEO of Undertone Networks.

That doesn't sit well with publishers like ESPN, who see networks as profiting on their brand investments and user data while also threatening their own marketer relationships. Many think using networks devalues the power of content.

Several publishers, in conversations with Mediaweek, privately applauded ESPN and hope others will follow its move. But applause doesn't necessarily translate to action.

"I don't see it happening," said John Battelle, founder, chairman and CEO of Federated Media, a company that represents numerous blogs. "I suppose certain premium brands could say, 'I'm above the fray. Our inventory is all very valuable.' With that there are some problems."

Central among those problems is that in this accountability-driven, quarter-by-quarter business climate, it's hard for any publisher to walk away from revenue, even if it's not huge.

"Not all inventory is created equal," said Peter Naylor, senior vp digital media sales at NBC Universal. For example, Naylor said iVillage's Horoscope section generates a lot of traffic but doesn't attract many endemic advertisers. Thus, he turns to networks.

According to Pam Horan, president of the Online Publishers Assn., most publishers do just that.

For example, MTV Networks recently inked a deal with Microsoft to let the software giant sell its remnant inventory. Nada Stirratt, executive vp at MTV Networks Digital Media (and herself a former top sales exec at ad net giant Advertising.com), said that ad networks "absolutely have a place for high frequency, low value impressions." Plus, she likes tapping into Microsoft's tech expertise and is comfortable with the numerous safeguards the deal offers.

Even Tina Sharkey, chairman of BabyCenter.com (and a former AOL exec) who gave a well-received presentation of the value of branded-sites' relationships with their readers at the IAB meeting, defended the network model. "Ad networks play a vital role in the online advertising ecosystem," she said.

So can ESPN change the model? "It won't have the desired impact," said Adam Kasper, senior vp and director of digital media at Media Contacts, unless the top 10 or so Web sites follow suit.

The ad networks themselves don't seem worried. Tim Vanderhook, co-founder of Specific Media, said he hopes that his company can work with ESPN again and doesn't believe that big name publishers can afford to ignore networks down the road.

"Specific Media's publishing partners come and go in the network throughout the year as we constantly assess the cost and performance of their ad inventory for our advertisers," he said.

"If several, or even all, big name publishers stopped working with us, it would hurt the publishers themselves more than us. ... The online advertising business is all about targeting, and publishers can't do it on their own because they don't have enough data."

Kasper, and many others, believe that data is essential to online advertising's future. "(ESPN is) essentially fighting technology," he said. "That's a hard thing to do."
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