The decline of ad networks is a chance for innovation as they transition to new market positions which will transform the existing advertising ecosystem. Ad networks are businesses that deal directly with their clients in both advertising and ad publishing. Ad networks directly control the ad inventory and as well as sell the ad inventory to their advertising clients. The weakening of ad networks has been slow and yet the ad networks who evolve too late will die. Ad networks have several options for the evolution of their market position： SSPs, DSPs, DMPs, Agencies and even ad exchanges. Here is a brief explanation of these possibilities.
Sell/Supply Side Platform (SSP) – Supply Side Platforms are the broker for ad publishers to sell their inventory for bidding on ad exchanges. Ad networks with strong publisher bases can grow their relationships with publishers by adding value to their publishers’ inventory and becoming SSPs.
Demand Side Platform (DSP) –Demand Side Platforms facilitate the buying of ads from ad exchanges. Ad networks with strong advertiser platforms have already begun working with other DSPs and may begin to build their own bidder and transition to an independent DSP. This option is a logical transition for ad networks, but they will face dangerously high competition in this space. Existing relationships with advertisers and knowledge of their needs may allow them to corner this market.
Ad Agency – Ad agencies work on behalf of clients to purchase the correct audiences for ads. Their clients are often multinational brands who are interested in procuring specific types of audiences. Ad networks who have strong advertising experience, but have focused less on their technology may see opportunities in beginning to positioning themselves as an ad agency. This would be a radical change from their existing technology, but would represent a positive opportunity for working with the huge branded content ad market.
Data Management Platform (DMP) – Ad networks who have the most data will find themselves the best equipped to move into any of the above areas, but some may opt selling this data to third parties. This is an easy route but may not have long term stability as their core source of market data continues to erode.
Ad Exchange- Ad exchanges are the market place where ads are bought and sold in times measured in milliseconds. Transitioning from an ad network to an ad exchange (similar terminology but vastly different meanings) is the most ambitious option for an ad network. Cornering this market allows for all other products of the original ad network preference. This would be the most difficult transition and is most likely only possible for the largest existing ad networks.
The Innovators Some small ad networks may look at these options and see nothing but costly competition and low profit margins. Instead they will look to create the next opportunities in the advertising world. Their innovations may be incredibly disruptive as they seek to create a market position by changing the ecosystem itself. I look forward most to seeing the ways in which the markets will evolve and the role that innovative ad networks and other small businesses will play.
In conclusion, the continued pressure on ad networks will cause pivots, innovations and failures. This is exciting opportunity will see new technologies coming to the fore. The continuing dominance of mobile, the use of big data and predictive AI to target ads will be the platforms and tools that fuel these massive changes through 2016.