Demand-Side Advertising Networks: An Issue of Consideration

03/18/2010 05:12 am ET | Updated May 25, 2011

Like the Internet needs another catch-phrase or buzzword (and I'm always the last to find out about the new ones) but, now, apparently, we have "Demand-side networks," the description being applied to the businesses that are cropping up within ad agencies that are intended to reclaim the buying territory lost to various ad networks.

Michael Zimbalist, of the New York Times Company, offers a thoughtful piece on the trend in Paid Content, holding the demand-side network model up to the light to look at from 360°. Is it a friend or foe to publishers? In Michael's opinion, the answer depends on the extent to which demand-side networks move beyond the automated practices of performance marketing to champion audience targeting, i.e., the right message in the right place at the right time.

Audience targeting, says Michael, implies that the media plan means a lot. ("At long last, audience truly becomes the basis for both planning and buying online," he says.) Performance marketing, by extension, means it does not. That's an excellent distinction worth holding on to. And, in the context of understanding the future of demand-side networks, we must ask how the distinction is resolved inside media buying agencies where the role of demand-side networks might not weigh greatly - for now, or ever - on the importance of media planning.

I suppose the answer we'd get is "results." Oh right; That. In which case, the value of demand-side networks will be pegged to performance because audience targeting and media planning are messy, cumbersome businesses highly dependent on - well - planning. They are expensive.

Expensive hurts. As Michael Zimbalist observes, agencies have struggled to buy online display profitably because there are too many suppliers. "But," he notes, "agencies have woken up to the fact that even as they struggle to make online buying profitable, the ad networks are reaping huge operating margins. And they make these margins by doing essentially the same media planning work that agencies are supposed to be doing for their clients!"

So, are demand-side networks likely to be good for publishers? Not especially, but that's understandable because ad agencies don't work for publishers, they work for advertisers.

The larger question is whether demand-side networks are likely to be good for advertisers. To the extent advertisers desire to regard the whole world through the pinhole of performance marketing, yes; demand-side networks - nearly any network - will be good for them. But the temptation, and perhaps danger, will be for agencies to squeeze as much media buying business through that pinhole in order to reap the financial rewards that have flowed to third-parties until now.

The Internet has become a proxy for performance and this is why: performance is cheaper to the advertiser and more lucrative to the buyer. Publishers have been only semi-conscious of the money that never makes it out the door and into their coffers. Agencies, now, are not.

Is it a problem? Only to the extent that the art of media planning will be a necessary instrument of success in a new media world, and that depends on whether the marketing world will continue to regard consideration as a strand in its DNA - consumer consideration; audience consideration; product consideration; finally, brand consideration. For where there is consideration there must also be planning.

The facts are clearly that the media landscape has fractured into countless bits and pieces. Ad Age's Bob Garfield calls it chaos, but not me. As a consumer, I call it luxury. I call it wonderful and so does everyone I know that uses the Internet, especially my children.

Wonderful has always been at the end of the rainbow for marketers who until now have never tired of seeking those kinds of connections with audiences. Are demand-side networks selling wonderful? No. Like so much in advertising, they don't believe in searching for pots of gold at the ends of rainbows these days even if their clients keep trying to bottle such notions and sell it to consumers with rainbow fragrance inside. Fanciful notions like that have been kicked-out of agencies by the grown-ups in Procurement. At this point, demand-side networks are about the best thing media agencies can come up with to save themselves. Who is going to blame them?

Fix agency comp and maybe wonderful happens once more. As a consumer, I'd like to see that in advertising again - and so would everybody I know.