Ad networks could grow mobile advertising

Online ad networks are booming as publishers scramble to place marketing messages on a glut of unsold advertising space. And that may be good news for their mobile counterparts.
The use of ad networks – companies that essentially serve as inventory clearinghouses, connecting advertisers with publishers that have space to fill – surged six-fold from 2006 to 2007, according to a recent report by the Interactive Advertising Bureau (IAB) and Bain & Co. The networks accounted for a mere 5% of total ad impressions two years ago but delivered nearly one-third of all online ads last year.
The companies found two reasons for the sudden increase: large marketers are ramping up their online ad buys in general, and – perhaps more importantly – a lack of adequate pricing tools and inventory management discipline sparked growth in inventory.
“Online publishers are producing more inventory than the market demands, and risk devaluing the premium nature of their brands, particularly in light of ad networks’ growth and their dramatically lower pricing,” noted John Frelinghuysen, the Bain partner who authored the study. “Building more effective relationships between publishers and ad networks is critical. In the longer term, both parties will benefit from gains in ad-networks CPMs (cost per thousand impressions).”
While the study didn’t address mobile ads, there are strong parallels between the recent findings and wireless marketing. Pricing and inventory-management tools in the nascent, more fragmented world of mobile are even less finely honed than in the online arena. And mobile is awash in unsold inventory, with unsold space on everything from the least expensive locations (specifically, social networking sites) to the priciest, high-profile mobile Internet destinations.
And while the entrenched online players grapple with their home turf, many have thrown up their hands and walked away from mobile for now. While AOL’s Platform-A has made mobile a key component of its cross-platform strategy, other traditional Internet players have grown frustrated with wireless, according to Bob Walczak, founder and CEO of Ringleader Digital, a New York-based mobile advertising firm.
“The online guys are trying to figure it out,” said Walczak. “I think the problem is that they’re employing online methodologies in the mobile environment, and it just doesn’t work one-to-one. There are no browser standards (on the traditional Internet), you have to deal with device libraries, screen sizes, you need to be able to target by carrier.. We’ve worked with several different networks online, and they come back and say mobile is too much of a pain in the ass.”
That may bode well for pure-play mobile ad networks AdMob and Millennial Media, among others. Big-name publishers are having trouble selling their own mobile inventory, and may increasingly offload the task to networks that have a pool of advertisers ready to spend on wireless. While the middleman may result in lesser per-ad revenues – not only does an ad network add a link to the value chain, it often offers discounted rates compared to in-house prices – it could result in increased overall sales. But those increased revenues will come only if the ad networks can find enough marketing dollars to keep pace with whatever new inventory is funneled their way.
“There’s a ton of inventory in mobile; the fill rate isn’t 100% anywhere I’ve seen,” Walczak said. “Everybody’s fighting for the same dollar from brands looking to jump into the space. It’s very competitive, but because it’s not as proven, agencies aren’t jumping as aggressively into it yet.”