Is OpenAds a threat to ad networks?

OpenAds is getting a ton of coverage following their recent $5M funding announced this week. OpenAds is a very popular, free, open-source ad serving system.
A lot of people are debating whether this will mark the end of the online ad networks. A particularly good post on the subject was published by Scott Karp over at Publishing2.0 - "Can Online Publishers Take Back Control From Ad Networks?"

I think, obviously, that the answer is 'no'. If anything, publisher-side exchanges like this will be very complimentary to the existing ad networks.

I posted a comment on Scott's post. It came out long enough to merit a full blog post, so here it is for you:

Hey - I’m the co-founder of Quigo. Great post, Scott.

Ad networks normally take a 30-40% cut of the revenue and pass the bigger part to the publisher. The question is whether we deliver more value than we cut, and I believe the answer in most cases is *absolutely yes*.

Here are a few ways we add value that would be very difficult for any single publisher to do on their own:

1) Appeal to large advertisers and agencies - I agree 100% with what Zach Coelius said above - it’s usually very difficult for any single publisher to attract large advertisers and agencies. The ad network facilitates larger ad buys for those and all participating publishers benefit in a way they could never do on their own.

2) Yield optimization algorithms - On auction-based networks (like Quigo and Google), the highest bidded ad in most cases is *not* the ad that would yield the most $$’s for the publisher. To find the highest yielding ads you need to crunch a lot of data and test ads on a massive scale. 99% of the publishers in the world do not have the scale necessary to make yield optimization algorithms efficient. Without this network value, the publisher will be rotating low yielding ads and would effectively be leaving a lot of money on the table.

3) Account management & expertise - Remember that online advertising is very very different from traditional advertising. For one, it needs to perform well for the advertisers… Most publishers do not have the expertise in-house to help advertisers with setting up bidding, optimizing for ROI, managing their budgets, etc, etc. This is a huge component of what we bring to the table as a network.

4) Vibrant marketplace - One of the big values auction-based ad networks bring to the table is a vibrant bidding marketplace. For that, again, there is huge value in aggregating many advertisers bidding each other upwards. A single publisher would find it extremely difficult to attract even say 100 advertisers to bid each other up.

5) Etc, etc.

I’m rooting for OpenAds and I think they are a great solution for mid-tier, well-defined special interest niche sites, operated by highly technical folks. Those are sites that could benefit from hand-picking the few advertisers that would work best for them and their audience. Boing Boing or Slashdot are good examples. The ads on Boing Boing are perfect for their audience and no ad network would be able to pick better ones.

But for all other publishers I think the ad networks add a ton more value than they take off the table.

At Quigo we’re focused on getting our publishers the best of both worlds: The advantages the ad network brings to the table, combined with the advantages of selling to advertisers directly, under the publishers’ brands and owning those relationships with advertisers. This is very different from “black box” type ad networks like Google & Co which are the absolute opposite from a platform like OpenAds.

Thanks again for writing this interesting post.

Comments

[Rick]

Marketplace-scmarketplace. There's no marketplace for ads that are local or specific-niche. Open Ads is basically the only option (or make your own).

However, Open Ads really sucks (really really sucks). Hard to use. Confusing for non-developers. Doesn't have a great option for the clients to create/edit their own ads. Hard/annoying to customize. I could go on and on (and on).

They better be planning on spending 1/2 of that $5m on gtting better out of the box. I bet that most of that money is going to go to making OpenAds a network rather than a solution.

[ziggy]

i agree with Rick. Openads sucks bigtime, but it's the only free option.
Why cannot be as simple as browse > select publishing dates > upload banner.

But nooooo! We have to be wankers on duty "hackers". what's with the zones? why we have advertisers? linking zones? what on earth is this?!?!