Study: Online Newspapers Must Manage Relationships with Ad Networks Carefully

CHICAGO Online advertising networks have grown from convenient ways to fill unsold banner ads to potential obstacles for maximizing publisher profits on the Web, concludes a study released Wednesday by the Media Management Center (MMC) at Northwestern University.
For online newspapers and other content publishers, managing relationships carefully with those online ad networks "can mean the difference between earning 50 cents and earning 50 dollars per 1,000 impressions," the MMC study found.
The report, "Online Ad Networks: Disruption -- and Opportunity -- for Media Businesses," argues that ad networks are increasingly defining the future of online content business as they sell not just a growing share of Internet advertising -- generating significant income for content publishers -- but become increasingly sophisticated, serving ads dynamically based on previous customer behavior and real-time feedback. Advertising becomes more measurable, accountable and personalized, the MMC notes.
But what's good for advertisers is not necessarily good for publishers, the MMC adds: "Among four publishers studied for the Interactive Advertising Bureau, the average revenue from ad networks (measured in CPMs, or cost per thousand impressions) was one-sixteenth the revenue generated by ads sold by the publisher's sales staff."
The largest networks, MMC adds, will fill a newspaper's advertising inventory with banners that generate less than $1 CPM -- when the publisher's own sales staff could offer better-targeted ads that "might bring prices of $20, $30 or even $50 per 1,000 banners served."
Scott Anderson, a former content and technology manager at Tribune Interactive, was the lead author, with Michael A. Silver, another former Tribune Co. executive contributing portions of the report. Silver is now the executive director of the Yahoo Newspaper Consortium. The report's project manager and editor was Rich Gordon, MMC's Director of New Communities and Director of Digital Innovation for Northwestern's Medill School of Journalism.
Among the reports recommendations, as taken from the executive summary, are the following:
"Devote staff time and technology investment to tracking and optimizing their advertising revenue and their use of networks;
"Pay more attention to their ad inventory, understanding which ad positions are worth the most and which ones they should sell themselves rather than through a network;
"Understand and serve their core advertisers better than the networks can. MMC found that publishers will generate higher prices selling ads directly than by relying on networks, and they may have opportunities to help their advertisers and themselves by creating networks of their own;
"Consider partnerships that leverage complementary strengths, such as the Yahoo!-newspaper partnership that promises to generate new revenue for both Yahoo! and the hundreds of participating newspapers."

Source: Editor&Publisher