Ad Platforms vs. Ad Networks: Who Controls The Advertiser Relationship?

Time Inc. has selected Quigo to provide an Adwords-like platform for bidding on pay-per-click text ads across all Time Inc. sites. Quigo will replace Google AdSense network and Yahoo Publisher Network, which currently serve pay-per-click ads from advertisers that buy ads in Google’s and Yahoo’s centralized search advertising marketplace.

What distinguishes the Quigo platform is that advertisers can buy ads directly on Time Inc sites — and in fact they must do so. In contrast, most advertisers that appear through AdSense and Yahoo Publisher Network appear across the entire network, and are served based on keywords that appear on individual web pages.

This got me thinking about the difference between and ad platform and an ad network — there are definitely too distinct phenomenon going on here, so I’m going to co-opt these terms to draw this distinction:
**
Ad Network**
Ads are purchased from one centralized seller (e.g. Google AdWords, Yahoo Search Marketing) and are served across the entire network of affiliated sites, typically without the sites or advertisers being able to choose which ads run on which sites, i.e. the ads are served based on automated systems, such as keyword context or behavioral targeting

Ad Platform
Ads are purchased directly from individual sites based on the platform’s dynamic marketplace and serving capabilities, e.g. text-based pay-per-click ads

The key distinction here is WHO does the selling and, most importantly, who controls the advertiser relationships. For Google AdWords and Yahoo Search Marketing, Google and Yahoo do the selling — and so they control the advertiser relationship. Quigo has been making headway against Google and Yahoo because its ad platform allows publishers to do their own selling and own the advertiser relationship — which is traditionally how it’s been done.

This distinction is crucial because what we’re seeing now is a battle for control of advertiser relationships — especially the largest brand advertisers — which has lead to the recent M&A activity around ad network and ad platform companies. Google AdSense, Tacoda’s behavioral targeting network, AOL’s Advertising.com network and other ad networks have been successful because many sites can’t or don’t want to do their own selling. That is the principle behind Federated Media selling ads for top blogs — it’s notable that the recent Microsoft advertorial controversy represents an instance where some sites did not feel that their interests were well represented.

I think there remains a robust market for sites that need traditional ad networks, i.e. someone to sell for them — the cost of sale can be very high. But I think increasingly both large and small publishers will want to control the advertiser relationship. Most high quality niche sites don’t have the scale to sell pay-per-click ads directly, so they may still reasonably use Google or Yahoo (or, yes, Microsoft), but large publishers like Time Inc. certainly do have the scale to sell PPC ads themselves. Niche sites, on the other hand, don’t need huge scale to sell sponsorships and display ads themselves.

The market right now is split between Google and Yahoo, which own the relationship with small and medium-size businesses that use mostly search advertising, and large mainstream publishers and online portals, which own the relationship with the large brand advertisers that use mostly display advertising. Yahoo is of course the crossover — they recently combined search and display ad sales to try to own the advertiser relationship across the two main buckets of online advertising — likely a wise move.

I would expect to see more niche sites adopting ad platforms like Openads, which put them in the drivers seat for sponsorships and display ads, and large sites adopt ad platforms like Quigo, which put them in the drivers seat for pay-per-click ads. (Large sites, of course, are already in the drivers seat for display ad sales.)

As more advertising dollars pour online — increasingly brand advertising dollars, which have traditionally been very relationship driven — whoever controls the advertiser relationship holds all the cards.