Managing relationships with online advertising networks is becoming a critical differentiator for content businesses on the World Wide Web, according to a new report released Wednesday by the Media Management Center at Northwestern University.

The report, Online Ad Networks: Disruption - and Opportunity - for Media Businesses, finds that advertising networks are increasingly defining the future of the online content business. Once just a tool for filling unsold banner ad inventory at low prices, networks have grown in size, variety, complexity - and, for publishers, importance.

Managing ad inventory - and relationships with ad networks - can mean the difference between earning 50 cents and earning 50 dollars per 1,000 impressions, MMC found.

The Center's report not only provides rich context for understanding the impact of online ad networks, it offers practical advice for how publishers can and should more actively manage network relationships. The MMC report recommends that publishers:

• Devote staff time and technology investment to tracking and optimizing their advertising revenue and their use of networks;


• Pay more attention to their ad inventory, understanding which ad positions are worth the most and which ones they should sell themselves rather than through a network;


• Understand and serve their core advertisers better than the networks can. MMC found that publishers will generate higher prices selling ads directly than by relying on networks, and they may have opportunities to help their advertisers and themselves by creating networks of their own;


• Consider partnerships that leverage complementary strengths, such as the Yahoo!-newspaper partnership that promises to generate new revenue for both Yahoo! and the hundreds of participating newspapers.

As important as ad networks already are, the Center's report predicts that they will grow in importance as digital technologies evolve. That is because digital ad networks are spreading beyond the Web to mobile platforms and even to television. As their influence grows, they are generating new questions about user privacy and driving disruptive changes in the business model supporting online content.

The Center's report was compiled by:

• Lead author Scott Anderson, a former content and technology manager at Tribune Interactive;


• Contributing author Michael A. Silver, a former Tribune Co. executive who reported and wrote portions of the report before taking his current position as executive director of the Newspaper Consortium made up of newspaper companies collaborating with Yahoo!;


• Project manager/editor Rich Gordon, Media Management Center's Director of New Communities and Director of Digital Innovation for Northwestern's Medill School.

Click here to download your copy of the report.

The report notes that networks are selling and delivering a growing share of Internet advertising, generating real revenue for content sites - even those without their own ad-sales staffs. But many of the largest networks will fill a publisher's ad inventory with banners generating less than a dollar per 1,000 impressions - at a time when better-targeted ads sold by a publisher's own sales force might bring prices of $20, $30 or even $50 per 1,000 banners served.

Underlying the growing influence of ad networks are powerful and increasingly sophisticated technologies that enable ads to be served dynamically based on previous consumer behavior and real-time feedback. Armed with these new tools, networks are helping make online advertising more measurable, accountable and personalized. But these capabilities can often benefit advertisers more than publishers, the MMC report finds.

Among four publishers studied for the Interactive Advertising Bureau, the average revenue from ad networks (measured in CPMs, or cost per thousand impressions) was one-sixteenth the revenue generated by ads sold by the publisher's sales staff.

A driving force in the growth of online ad networks is their capacity to target advertising based on individual users' behavior rather than on content topics or a site's overall demographics. Ad networks enable publishers to play in this potentially profitable arena, pooling their audiences with others to achieve the scale required for successful behavioral targeting. However, being part of a network can require publishers to cede user knowledge to the networks, which track people across many sites.

Behavioral targeting also has raised concern among consumer advocates and government regulators who think the networks haven't given users enough control over the use of data about their online usage patterns.

The same technologies that are strengthening ad network companies are also creating opportunities for publishers to form - not just join - ad networks. Among the name brands that have recently launched their own online ad networks are Martha Stewart, Forbes and CBS.