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Ads find strength in numbers

Infoseek is the latest company to join the newest trend in online revenue: ad networks formed by several Web sites to coordinate sales forces.

Tech Industry

Net search engine firm Infoseek (SEEK) seems convinced that when it comes to selling ads online, Web sites should stick together.

The company today launched Infoseek Network, a new advertising sales organization modeled on what seems like the latest way to boost Web revenue: ad networks. These networks are formed by several Web sites that coordinate their sales forces so that advertisers can buy space on several Web sites through a single contract. Infoseek Network, for example, will sell ads for the company's search engine site but also for other members of the network.

Two months ago, influential Forrester Research declared that the future of Web advertising belonged to ad networks rather than single Web sites. Since then, a crop of new networks has sprouted, including InfoSeek's today.

Softbank Interactive Marketing, a major ad firm that sells banners on busy sites such as Yahoo, will also soon announce it will branch out, launching several thematic ad networks early next year, CNET has learned. Softbank declined to discuss its plans, but the company already sells ads for at least 4,000 smaller Web sites in the Commonwealth Network, organized by Interactive Imaginations, publisher of the Riddler Web site.

Sources told CNET that AdSmart.net, a new arm of CMG Information Services, is also now recruiting sites for a Web advertising network it plans to launch in January. AdSmart.net, an outgrowth of CMG-owned search engine Lycos, initially will represent only those Web sites that CMG has invested in, but it intends to eventually build a broader clientele.

Ad networks have become popular so quickly because Internet ad networks promise some of the most highly targeted advertising available. Networks such as DoubleClick, today's leading network, for example actually collect Internet user and organization profiles. Advertisers then design their ads for a specific audience by selecting from a wide range of criteria about the kind of customer they are trying to reach. When a user hits a Web site that is a member of the ad network, the sites knows to display the advertising banner that best matches the user's or organization's profile.

Forrester's analysis (See chart) identifies five categories of Internet ad networks:
--Ad-reach networks are designed to sell large numbers of banners across many Web sites. "The great paradox with targeting ads is that the more you are micro-targeting, the more reach you have to have," said Kevin O'Conner, DoubleClick president and CEO. For example, an ad that targets "soccer Moms" requires a large pool of people to find a few potential candidates.

--Local networks?such as those formed among local newspapers or in chains of local sites planned by Microsoft and America Online--put national ads from the network next to banners from local merchants.

--Personal broadcast networks, such as PointCast, send relevant ads with topical information based on the user's interests to "channel" or categories of content. Forrester expects firms like PointCast, Freeloader, and others to develop 15 to 20 special interest "channels."

--Publishing conglomerates?such as Starwave and Pathfinder--will create their own networks of content sites supported by related advertising.

--Navigation hubs that draw massive traffic for short visits, like Yahoo, Netscape Communications or Infoseek, can sell highly targeted advertising based on keyword searches.

The trend is driven by the potential cost savings for both advertising buyers and advertising-supported Web sites. For ad buyers, who must use multiple sites to buy the millions of ad banners needed for a major ad campaign, the Web's hundreds, soon to be thousands, of sites are simply overwhelming. Ad buyers can also target their marketing message to a large audience that fits a certain profile with the network, said Su Doyle, marketing director for AdSmart.net, instead of relying on a single Web site that caters to a niche group.

"It's impossible from the buying side to deal with the volume," said Steve Klein, director of media and interactive services for ad agency Kirshenbaum Bond & Partners. "I have a buy that deals with 50 to 200 sites. I'd much rather deal with networks."

Mary Modahl, the analyst who wrote the Forrester report on Internet advertising, explained: "To traditional media buyers, the Web's vast array of sites is appalling, but no one wants their ad running on a dead site or one with inappropriate content. Networks will solve this problem by vetting sites."

And on the seller's side, many Web sites cannot afford to maintain their own sales force when they receive only pennies for each banner ad viewed unless they outsource sales to a network.

Technology costs play a role too in the increasing demand for ad networks. Sophisticated software to serve up ad banners, report ad views, and bill advertisers is just the beginning. As Web advertisers move toward tailoring ad banners to individual Web surfers based on their interests or demographic traits, the investment in technology leaps higher. Ad networks can leverage investments in that kind of technology across multiple sites, Mohdal said, while single sites cannot.

For example, DoubleClick manages information about visitors across its 60-plus sites using "cookies" that identify an individual Web browser. So when one browser hits iGolf>, Total Baseball, and Travelocity, the DoubleClick server infers that an ad for a golfing vacation or fantasy baseball camp is a good bet.

Vendors of user tracking software are also starting to cater to the new ad networks. NetGravity, which has software to let individual Web sites manage their ad inventory, is reportedly testing software to do the same for ad networks. The company declined to confirm this report.

But advertising networks by themselves won't answer still outstanding questions about the effectiveness of Net advertising. John Nardone, chief advertising buyer for interactive ad agency Modem Media and the person who controls more Net advertising dollars than any other single individual, says that ad networks are useful but not a panacea.

"Ultimately, the quality of sites and the quality of ad placement within sites are more important than anything," he said, noting that leading-brand advertisers want to be associated only with quality content.

Networks also don't help advertisers who want to move beyond ad banners to sponsor a particular section of a Web site because these deals are done directly with Web site publishers.

Still, ad networks offer lots of advantages on both sides of the transaction and seem to be the next important tool to make the Net profitable for content-driven sites.

"We as ad sales reps want to be the one phone call a media buyer makes so that we can allow them to spread their money over a number of sites," says Andy Batkin, CEO and president of Softbank Interactive. "The network is just the extension of that. We want to make it easier for people to buy."

Networks: New Ways To Sell Web Ads
CompaniesDescriptionPotential sizeRates
Ad Reach:
DoubleClick, Commonwealth, WebConnect
Reaches mass audience with ability to target individuals Hundreds or thousands of content sites CPM* or per response
Local:
AOL's Digital City, Microsoft's CityScape
National ads run with local ads 50 to 200 city sites Per response or percent of sales from ad
Personal Broadcast:
PointCast, Freeloader
Deliver ads to desktop 15 to 20 channels CPM*
In-House Content:
Starwave, Pathfinder, AOL Greenhouse, CNET, ZDNet, iVillage, CMP TechWeb
Ads related to content 10 to 15 sites per network Higher CPM* based on audience; percent of sales from ad
Navigation:
Yahoo, Excite, Netscape, AltaVista
Mass traffic, short visits, keyword searches 2 to 3 hubs CPM*
*CPM: Cost per thousand ad views
Source: Forrester Research
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