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Media Companies Taking on Internet Portals for Ad Revenue

Posted on: Monday, 24 March 2008, 12:55 CDT

Forbes Inc. is expected to announce today its plan to sell advertisements for about 400 financial blogs.  

The company’s move to build it own topic-specific ad network follows similar initiatives by Viacom Inc., CBS Corp., Conde Nast and others that aim to lure advertisers who want to purchase more ads than any single Web site can sell.

These traditional media companies also hope such plans will stem the flow of advertising revenue away from Google and other large Internet companies that have built their own brand-based advertising networks.  

Russ Fradin, chief executive of Adify Corp., whose technology runs ad networks for Forbes and others, told the Associated Press that if newspapers, magazines and broadcasters do not expand their online ad inventory, they are "under threat of becoming less and less relevant to the advertiser.”

However, the traditional media’s new ad networks, some of which link only a handful of Web sites, may have an uphill climb competing with companies such as Yahoo Inc., Microsoft Corp., Google Inc., and Time Warner Inc.’s AOL, which have assembled larger networks of thousands of Web sites. 

These Internet companies have also been investing heavily in their ad networks, collectively spending over $11 acquiring smaller ad networks and technologies.

"As our technology has continued to advance, we've gotten better and better," said Lynda Clarizio, AOL’s Platform A advertising unit’s president, in an interview with the Associated Press.

"We can handle a lot of demand from advertisers."

The heavy investments by Internet and traditional media companies is being driven in large part by the fact that Internet users increasingly spend their time visiting scores of large and small Web sites. Since advertisers would prefer not to have to directly interface with thousands of individual Web sites, the Internet and media networks provide a “one-stop-shop” solution to reach large audiences.

Until recently, the Internet portal ad networks have largely succeeded through selling their affiliates’ available ad inventory at discounted rates and sharing revenue . But they are now using targeted techniques, such as matching ads to visitors' viewing preferences, to allow them to bid for higher-value ads that typically go to Web sites run by traditional media companies.

Many media companies have resisted joining the larger networks, accustomed to selling ads on their own in offline channels instead.

Sarah Chubb, president of Conde Nast's online division, CondeNet, told Associated Press, "One of the big ones said to us, 'You guys are really good at creating content and we're really good at selling advertising. It would be perfect.'"

"We're pretty good at selling advertising, too."

The smaller ad networks can offer advertisers a steady audience on pre-approved sites, while providing focused attention to such sites.

"The folks at Forbes really understood our business," said Steve Woit, publisher of Xconomy, a blog joining the Forbes network.

"A larger network, whether it's Google or others, has to deal with every industry and large consumer sites."

Instead of joining with the large networks, Martha Stewart Living Omnimedia Inc. launched Martha’s Circle in November.  The company decided it would be better off enlisting a couple dozen top lifestyle Web sites that meet its editorial standards and selling higher-priced ads to companies such as Ace Hardware, Macy’s and others.

"Publishers are brand stewards," said the company’s president for media Wenda Harris Millard.

"The folks ... who are assembling these massive networks, most come out of the technology sector. Some of them are good business models, but they are not about protecting brands."

For their part, Nickelodeon and Viacom's MTV and have formed ad partnerships with independent parenting sites, and are launching networks this spring focused on music and men's lifestyles. And last week, CBS announced several local ad networks around CBS-owned stations.

Other media companies are forming networks among themselves. Last month, the country’s two largest newspaper publishers, Gannett Co. and Tribune Co., joined The New York Times Co. and Hearst Corp. to form QuadrantOne. The new venture will collectively sell online ads, and announced last Thursday the addition of another 26 newspapers.

However, the larger ad network operators say the smaller ones will not be able to provide the scale sought by advertisers.

Todd Teresi, senior vice president at Yahoo, told the Associated Press the media companies' efforts are a "valid path to go, a first step."

But he added that even if a media company can bring together 10 or 20 like-minded blogs, the overall traffic growth would be insignificant compared with what a large Internet company could provide.

Underscoring the point, even with hundreds of bloggers, Forbes is initially looking to increase business by only 10 percent to 15 percent.

The Washington Post Co. recently pulled the plug on its ad network because many advertisers had cheaper options through the large portals and blog-specific networks like Blogads.

"We were holding out for value but there was too much inventory," Jeff Burkett, director of ad innovation with the Post's interactive unit, told the AP.

Instead, the Post plans to grow its advertising opportunities by increasing traffic to its Web site. Initially, it will carry items from its PaidContent blog and share ad revenue.

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On the Net:

Forbes Inc.

Adify Corp.

CondeNet

Martha’s Circle

QuadrantOne

Source: redOrbit Staff and Wire Reports

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