Can Online Publishers Take Back Control From Ad Networks?

If the future of advertising is online, many companies, including Google (GOOG), Yahoo! (YHOO), Microsoft (MSFT), and WPP (WPPGY), are betting that the future of online advertising is in ad networks, i.e. centralized platforms for the buying and selling ads, where the company that controls the network controls the sale and the flow of revenue to the publisher.

This is entirely counter to traditional ad sales model, where the publisher controlled the sales channel — unfortunately, there weren’t (and still aren’t) many metrics or ROI involved, which has lead to the rise of online ad networks, with Google’s AdSense leading the way.

But is it possible that online publishers, perhaps from the bottom up, might start to wrestle control away from the ad networks?

Two pieces of news make me wonder whether this is possible. First is Openads, the open source ad serving software company, taking $5 million in VC funding — Jeff Jarvis is thinking along the same lines as I am:

I may be reading too much into this, but I take hope in a $5 million investment VCs made today in the company behind Openads, a free, open-source ad server. They already serve more than 20,000 publishers, 100,000 sites in 20-plus languages over 30-plus networks. If this becomes a platform for ad serving across the web, then I believe neat new things can happen — perhaps even the first steps toward the open-source ad network I’ve been pushing. I think this could become the basis of open competition with Google — not replacing Google but allowing publishers and advertisers to put together higher value ad hoc networks.

I am using Openads for Publishing 2.0, rather than using an ad network’s serving platform that locks me into that company’s advertising business, e.g. Federated Media, Google AdSense, Feedburner (much as I love Feedburner and believe that Google will increase the value of their network). The experience of installing and learning Openads was much like the experience of installing and learning WordPress — worth every minute because of the power of independence that it confers.

Here’s the dirty little secret of ad networks — ad serving isn’t rocket science. What is hard work is developing relationships with advertisers, particularly for mass scale advertising. But for highly targeted advertising, independent niche publishers have a unique relationship with their readers, and are in the best position to judge what is most relevant to their readers (and Google has shown that relevancy is a huge driver of advertising value). Google has automated and scaled this process, but that has been to a large extent around Made for AdSense sites that have a commodity relationship with users rather than an influential, high-trust subscriber relationship.

Of course, the burden for independent publishers will be to demonstrate the value that they can create through the same or better metrics that ad networks use — indeed, measuring influence is a holy grail for independent niche publishers.

Speaking of Google, the second piece of news is that Google has caved to advertiser pressure to show how well ad performs on each site where they appear in the Google AdSense network:

Google, as expected, has added a new report type to give AdWords advertisers the ability to see the exact sites their ads are displaying on within Google’s content network. These Placement Performance reports will detail the domain, URL, impression, click, conversion and cost data for each site an ad appears on.

Such transparency could lead some niche advertisers to hand pick which sites they want to appear on — and to realize that they might derive more value by working with those publishers directly, rather than sharing a cut with Google as an intermediary.

Google may have empowered many online publishers with AdSense, including those that make a business out of creating low value content to generate low value ad revenue. But just as free software like WordPress gave publishers the power to publish high value content without the burden of expensive content management systems, a platform like Openads gives high-end publishers the opportunity to take back control from ad networks. If done right, this can create more value for advertisers and more value for readers, particularly in highly specialized niches, where even Google’s massive stable of advertisers can’t always deliver relevant ads.

Of course, the one advantage of ad networks is the efficiency of scale — but there’s nothing to stop independent publishers in the same niche from starting their own, highly targeted ad network.