Forbes.com President and CEO Jim Spanfeller recently delivered a preemptive eulogy for ad networks at Needham & Company’s Third Annual Internet and Digital Media Conference. In doing so he has stoked the already searing flames ignited by Martha Stewart Living Omnimedia Media President Wenda Harris Millard and her infamous “pork bellies” quote that algorithm-driven ad networks are devaluing premium brand advertising. Forget the dripping irony that Forbes themselves have recently announced an ad network of their own, albeit a “slightly different” model, when you peel back the spinning layers of this onion the death certificate seems to be lacking any sort of authoritative signature. Everyone seems happy to relegate remnant inventory to the networks and exchanges, as though it were the red-headed stepchild of the display advertising world, but their panties sure get in a wad quickly when it comes to premium advertising going through the same algorithm-driven systems. You need look no further than Forbes own healthy revenue growth, even in a recession economy, to see that the current trends are working and improving on both remnant and premium inventory for the publisher and for the advertiser. Spanfeller prophesied that the ascendancy of online ad networks is probably at its peak as advertisers and publishers struggle to monetize the growing supply of inventory created by social media exploding online. He better be ready to embrace Google’s new Friend Connect social widget! He bravely predicted that the role of ad networks and ad exchanges will diminish over time as publishers take back more control over how their own media is monetized. Yes publisher want and need editorial control but the data seems to indicate that publishers gravitate to what maximizes yield and not what maximizes control. The question is really whether or not algorithm-driven media buying will have a negative long term impact on media buying. I have to give props to Tameka Kee over at MediaPost and my colleague Paul Levine, Vice President of Marketing over at AdBrite, who countered recently with a great deal of pertinent data which seems to prove the doom sayers are missing the mark with their dark prophesies. The roots of this debate spring from the early wild-wild-west days of the ad networks. Back in the early formative years of the ad network’s puberty it was almost an “anything for revenue” attitude and the trust got broken. Just look at how Spanfeller describes how the Forbes ad network is different from us unwashed masses. He depicts his solution as a “clean, well lit place” for monetizing the rapidly expanding long tail. How is that different from the new breed of algorithm-driven ad marketplaces out there? Take a look at the Certified Ad Space within the Rubicon Project. With the stellar reputation of the Rubicon folks, their approach seems like a cleaner and even better lit ad space. Or take a look at how LucidMedia provides brand safety through the most rigorous contextual scrubbing solution on the market creating a guaranteed Ad Safe Environment for premium brand advertisers. And yes, they all are in part algorithm-driven solutions. But these are good for the premium brand advertisers (and good for the publishers) and are not devaluing the brands they serve. Actually the opposite seems to be happening as these brand safe zones buoy up premium CPM rates wherever they occur. What the Spanfellers and Millards of the world are really saying is not that this is bad for the premium brands; they are actually signaling that the new breed of competition is an unwanted threat to their profit margins. The amount of angst created by the wonderful new breed of algorithm-driven advertising spaces on ad networks and exchanges like AdBrite, PubMatic, Rubicon and LucidMedia is a very clear indication of how positive these solutions are for brands going online. If they were truly bad then the Spanfellers and Millards would not care and subsequently draw this kind of attention to them because it would not be threatening their margins. I say that while the ad networks and exchanges must evolve to survive and continue flourishing—Levine’s comment about reach versus engagement for example—they are working just fine and are here to stay for the foreseeable future.

Adotas recently posted an interesting, albeit oddly written article on the value of the ad exchange. The real story seems to be the value of the vertical ad networks—with which I cannot agree more—but their analogy between mutual fund managers and ad exchanges is a fascinating one. They equate the ad exchange to a specialized mutual fund manager who can add real value to your portfolio and that is very true for the new breed of ad exchanges out there today. The scenario buy that they walk through truly highlights the value that an ad exchange can bring to a media planner. They point out that when an advertiser wants to maximize ROAS they need their media buyer (their agency folk) to create a balanced “portfolio” mixing direct investment in large targeted sites with the specialized engagement of the vertical ad networks and the broad reach from the many low cost remnant networks. The share of voice and audience is highest on the expensive premium sites, highly relevant on the vertical ad networks (vertical search sites for instance) and yet there is massive reach to be had across the broad remnant networks. It is the mix that is critical to getting the job done. This is how you nail the ROAS for a big branding campaign where audience engagement is a critical factor—and this is just what the exchanges are good at delivering. They have the mix all ready to go, you just need your media planner, your mutual fund manager, to recommend and execute that perfectly balanced portfolio and your investment will pay off. What an exciting time for interactive media!