2009 Ad Network Study


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2009 Ad Network Study

  1. 1. Ad Network Study Executive Summary 2009 This year marks the 3rd annual Ad Network Study managed by Collective Media and the first year that it has been conducted by Sterling Research Group, Inc., an independent market research firm. The purpose of this tracking study is to gain valuable insight into the ad network space and trends in the online advertising marketplace. This tracking study continues to provide ad networks Authors: as a whole clarity of the industry to better serve clients and offer the industry relevant data on how buying and selling online media is evolving. Joe Apprendi CEO, Collective Media Online ad revenue in the U.S. surpassed $23 billion in 2008, reaching a record high and posting the 5th consecutive year of Veronica Mathieson record results, according to the Interactive Advertising Bureau’s Vice President of Marketing, 2008 Internet Advertising Revenue Report. This amount represents Collective Media approximately a 10.6% increase over 2007. The report shows display advertising accounted for $7.6 billion or 33% of total Amenan Kouadio revenue. Display ad revenue saw an overall increase of 8% over Market Research Coordinator, 2007. While many of the other media sectors are showing Collective Media weakness for the period, Internet display advertising is showing strength as online programs continue to expand. Allison Stewart Senior Account Manager, Ad networks continue to be a viable solution for agencies and Sterling Research Group, Inc. advertisers to specifically target and reach their intended markets with the utmost efficiency. Other highlights include: • Continuing Growth in Brand Advertising: More than 50 percent of respondents continue to work with ad networks for both their branding and direct marketing plans. At the same time, there was a statistically significant decrease between 2007 to 2009 in the percentage of those using ad networks for only direct marketing plans – which correlates to an increase of marketers using networks strictly for branding purposes. • Short List of Ad Network Partners: Most agencies and advertisers appear to have established a limited number of trusted ad network partners. Over 70 percent of respondents surveyed work with only one or two ad networks on an average media plan. • Ad Exchanges Won’t Replace Ad Networks: Although 4.5% more agencies and advertisers said they worked with ad exchanges than those surveyed in 2008, these respondents remain in the minority. Most respondents (85%) did not work with exchanges, and only 7 percent believe exchanges will replace ad networks. Close to 500 online surveys were completed this year by online media decision makers including advertisers and agencies as well as publishers holding inventory. The following results are among 417 agency and advertiser respondents representing a 4.5% margin of error calculated on a 95% confidence interval. Surveys were completed between February 17th and March 6th, 2009. Most of the questions were multiple choice, many with a space for open-ended answers, providing deeper understanding of what is driving growth in this space.
  2. 2. Results and Key Findings More respondents plan to work with ad networks in 2009 than did in 2008. In 2008 84% of respondents did work with networks where 89% plan to this year (see Figs. 1 and 2). A little more than 70% of agencies and advertisers use one or two ad networks on an average media plan, and 29% work with three or more ad networks. This has changed slightly over last year’s results where nearly 75% of respondents used one or two ad networks for an average media plan and approximately 25% used three or more (see Fig. 3). This finding is in line with Rubicon’s 2008 Online Advertising Market Report that found 70% of the time a combination of networks outperform one, based on different technology capabilities and advertiser relationships. A larger percentage of respondents this year thought there were too many ad networks (see Fig. 4). Over the past two years, this statistic was relatively stable, but increased significantly in 2009. Based on articles in The New York Times and research conducted by comScore, there was an expectation last year that agencies and advertisers may begin to feel there were too many ad networks due to noted growth in early 2008. This expectation is now a reality based on the survey results. 2009 Ad Network Study Page 2 of 12
  3. 3. More than 50% of respondents continue to work with ad networks for both their branding and direct marketing plans. Alone, 20% of agencies and advertisers use ad networks for direct marketing efforts and 23% use them for branding only, a slight increase over 2008. Combining these categories with those who use both, shows fully 96% of agencies and advertisers work with ad networks for their branding, direct marketing or both (see Fig. 5). There was a statistically significant decrease in the percentage of agencies and advertisers using ad networks just for their direct marketing plans from 2007 to 2009. It can be assumed this decrease correlates to the increase of marketers using networks strictly for branding purposes. We can expect this trend to continue as more brand advertisers utilize networks in media plans. Conversely, there was a significant decrease in agencies and advertisers not using ad networks for any of these plans, showing the use of networks increasing across the board. Increasingly, agencies and advertisers are using a variety of ad unit types with in-page ads being strongest, followed by sponsorship, home page takeover ads, in-stream video and synched ads/road blocks. The percentage of respondents buying in-stream and sponsorship ad units was up significantly in 2009 (see Fig. 6). 2009 Ad Network Study Page 3 of 12
  4. 4. Targeting continues to be a key component of ad network media buys and has significantly increased since 2007. Demographic and behavioral targeting methodologies continue to be the most widely used followed by contextual, geographic, channel and re-targeting. Re-targeting has increased significantly since 2007 (see Fig. 7). Site re-targeting based on web-pages visited is the most common type of re-targeting used and increased significantly in 2009 (see Fig. 8). Ad re-targeting showed a significant decline in 2009. 2009 Ad Network Study Page 4 of 12
  5. 5. This year, several questions related to in-stream video ad formats were added to the Ad Network Survey to learn more about this increasingly popular format. Of the respondents who will buy in-stream video ads, 69% will buy pre-roll formats (see Fig. 9) Of the respondents who will buy in-stream video ads, more than one third place up to 10% of their buys with ad networks (see Fig. 9b). 2009 Ad Network Study Page 5 of 12
  6. 6. Efficiency continues to be the number one reason why agencies and advertisers use ad networks (see Fig. 10). This year, there was a significant increase from 2007 in the percentage of respondents selecting reach and targeting. The dramatic increase from targeting as a primary reason for ad network use illustrates the recent trend of marketers adopting audience centric buying practices versus purchasing site specific. High percentages in the top three categories indicate multiple reasons why ad networks are used and follow prior years’ trends. (Note: more than one answer was allowed in 2007 and 2009, but in 2008 this question permitted only one answer.) While audience duplication remains a concern about working with ad networks, respondents this year noted lack of site transparency, control and editorial quality as their top reasons for limiting usage of ad networks, showing that marketers, especially brand advertisers who are using ad networks more frequently, do place value on transparent third party partners and high quality environments for their brands(see Fig. 11).Alternatively, there was a significant decline in the percentage of respondents citing client policy and other reasons for limiting ad network usage. User-generated video continues to be the most unpopular advertising environment among agencies and advertisers (see Fig. 12). However, fewer respondents expressed clients’ refusal to run on user-generated content this year than last. This is most likely 2009 Ad Network Study Page 6 of 12
  7. 7. attributed to the increase in consumption of UGC by consumers today. Marketers are following this development and seem to be more willing to advertise where their target is spending time online. The “Other” category was added this year providing additional insight into which types of content is restricted for advertising. Of the 23% of respondents indicating other content sites, one-quarter of these respondents noted adult content sites having content on which they do not advertise. Surprisingly, another one-quarter of the “Other” category indicated their clients do not restrict online advertising based on site content. The best differentiators of ad networks are inventory quality, reliable targeting and transparency (see Fig 13). Although considered less of a differentiator, price was mentioned by a significantly larger percent of respondents in 2009 when compared to 2008, which most likely relates to the current economic climate. (2007 results not reflected in chart because this question allowed for multiple answers that year. Price, optimization and reach were considered high differentiators in 2007. This is no longer the case as market conditions have changed). 2009 Ad Network Study Page 7 of 12
  8. 8. About three-quarters of respondents plan to use vertical ad networks (see Fig. 14). This represents a decline from last year’s response rate of 83%. One-quarter of respondents plan to use vertical ad networks less in 2009, a significant increase from 17% last year. Portals (75%) and specific publishers (60%) continue to be the most viable alternatives to ad networks (see Fig. 15). Affiliated marketing programs and ad exchanges are not considered strong alternatives to ad networks. With ad networks also offering efficiency, targeting and optimization, they seem to offer a competitive advantage over portals. Paid search received a significant response (47%) as an alternative to ad networks. This is a dramatic decrease from 2007 but shows that marketers still find some value in the performance-based model of paid search. 2009 Ad Network Study Page 8 of 12
  9. 9. In 2009, 4.5% more agencies and advertisers said they worked with ad exchanges than those answering the same question last year (see Fig. 16). The percentage of respondents not using ad exchanges continues to be high as brand advertisers work closely with high quality ad networks, portals and publishers. In addition, an overwhelming majority of respondents thought ad networks would not be replaced by ad exchanges (see Fig. 17). Targeting remains the primary reason for working with specific publishers, and custom sponsorships are beginning to show signs of growth (see Fig. 18). (2007 results not reflected in chart because this question allowed for multiple answers that year. Reach was the top reason cited in 2007). 2009 Ad Network Study Page 9 of 12
  10. 10. When buying online media using portals, reach is by far the primary reason (see Fig. 19). Targeting and efficiency play a much smaller role in why portals are used. (2007 results not reflected in chart because this question allowed for multiple answers that year. Reach was the top reason cited). Many respondents expect to increase their online advertising and ad network spending in 2009. A little more than 50% of online media buyers expect to spend up to 15% of their overall budget with ad networks (see Fig.20). 2009 Ad Network Study Page 10 of 12
  11. 11. Conclusions • Ad networks continue to be adopted by more direct marketers and brand advertisers. • A majority of agencies and advertisers believe ad networks are safe for brand advertisers. • Premium and vertical ad networks are providing higher inventory quality, more reliable targeting and greater site transparency. • Efficiency and reach are the most important reasons to work with ad networks, and true differentiators are most often seen as inventory quality and targeting. • Re-targeting and channel targeting are the fastest growing targeting types used by agencies and advertisers. • Ad exchanges are used very little by agencies and advertisers and are not expected to replace ad networks. • Results of the overall perspective of ad networks held steady in 2009 from 2008. • Agencies and advertisers will work with more ad networks over in 2009, and limit their usage to one or two ad networks. • Many agencies and advertisers plan to spend more with ad networks in 2009 than they did in 2008. • To become the one or two ad networks agencies and advertisers will work with on an average media plan, ad networks should continue to offer high efficiency, broad reach, specific targeting and optimization. In addition, ad networks should do whatever they can to overcome the primary reasons why agencies and advertisers limit their usage of ad networks (lack of site transparency, control and editorial quality). Methodology The Collective Media 2009 Ad Network Survey was conducted by Sterling Research Group, Inc. This online survey was fielded between February 17, 2009 and March 6, 2009. Collective Media provided the database of interactive decision makers. Almost 500 respondents completed the survey, with more than 400 identifying themselves as an agency or advertiser. Each respondent received a $10 iTunes gift card. These respondents were automatically entered into a drawing to win the Grand Prize, a Nintendo Wii. About Collective Media Collective Media’s media and technology solutions serve online publishers, agencies and advertisers. Collective’s product suite includes the Collective Network™, the largest premium display advertising network, the Directive Network™, the only transparent performance advertising network, AMP®, its proprietary ad network management platform and Personifi®, the leading semantic content classification and audience targeting solution. Founded in 2005, Collective Media is a member of the Network Advertising Initiative (NAI) and is headquartered in New York City with offices in Boston, Chicago, Dallas, Detroit, Los Angeles and San Francisco. Visit Collective Media at www.collective.com. . 2009 Ad Network Study Page 11 of 12
  12. 12. About Sterling Research Group, Inc. Sterling Research Group, Inc. is a full-service consulting and market research firm headquartered in St. Petersburg, Florida. Sterling is a leading customer experience management company in the service industries and deploys a highly-effective, proprietary research and reporting technology that enables its clients to achieve superior financial returns by better understanding their customers’ experience. Visit Sterling Research at www.sterlingresearchgroup.com. Sterling was founded in 1987 by several marketing professors from the University of South Florida. One of the founding principles of the company was to bring the use of state-of-the-art technology to market research. Sterling started with document scanning when almost all other companies were still using key data entry. Today, Sterling continues to lead the industry in the use of technology to make market research more accurate, less costly, and highly actionable. Our focus is on providing tracking programs and management tools to service industries with many of our projects focusing on longitudinal customer satisfaction tracking and performance improvement programs. Sterling is committed to methodologically rigorous market research. We partner with organizations to help them meet financial objectives through measuring and understanding their customers’ opinions. Today we conduct over 180,000 customer “touches” per week through mailed surveys, web-based surveys, and IVR (“integrated voice response”) phone call surveys. 2009 Ad Network Study Page 12 of 12