With over 400 ad networks, segmentation has become a big part of successful performance marketing campaigns.
Katrina Toft loves sushi. So it’s only natural that the designer, a recent college graduate, started a blog about the Seattle sushi restaurants she haunts. Already, she’s making enough from BestSeattleSushi.com to feed her fish habit. Now, she’s working on a site for gamers.
The explosion of ad networks – we count more than 400, and rising – makes it easier for people like Toft to make money from some very niche content for very small groups of readers. Vertical ad networks that segment according to their incomes, interests or ethnicity, help marketers hone in on these spot markets.
There are all sorts of ways to segment American consumers. Forbes Ad Network goes after high-earning executives, while BlogHer addresses women with wide-ranging interests, and Complex Media focuses on cool young guys. But one of the best opportunities lies in ethnic marketing, for two reasons: First, the spending power of Hispanics, Asian-Americans and African Americans is growing faster than that of U.S. consumers as a whole. Second, because advertisers tend to lump them into mass-market ad campaigns, those who address them directly have an opportunity to grab new, loyal customers.
For example, even during the recession, the purchasing power – and spending – of Hispanics has grown. According to Ethnic Technologies, a research firm focused on global multicultural marketing, because Hispanic-Americans tend to abhor debt, they weren’t overleveraged like so many other American consumers. The Conference Board’s Research Center forecast the purchasing power of Hispanics less than 44 years old will grow from $295 billion in 2008 to $397 billion by 2010 – that’s about a third in two otherwise sluggish years.
According to the Selig Center for Economic Growth at the University of Georgia’s Terry College of Business, African-American buying power is projected to top $1.1 trillion by 2012 – a 34 percent increase over a five-year period, while the purchasing power of Asian-Americans, the third-largest minority group, is forecast to grow 45.9 percent in the same time, reaching $670 billion in spending by 2012.
But tapping into this market via horizontal networks may miss many of them, according to Alicia Morga, CEO of Consorte Media, a vertical network focused on the Hispanic markets in the United States and Latin America.
In order to reach Hispanics, Best Buy worked with Consorte on a banner and paid search campaign in English and Spanish to bring new customers to Espanol.Best-Buy.com. Dealix, a company that provides leads to auto dealers in the United States, ran a lead generation campaign with Consorte to find the Hispanics it knew it was missing with its generic campaigns.
Are You Being Served?
The Hispanic market is well-served by a variety of performance- and CPM-based ad networks, including Batanga Network, Hola Networks and ImpreMedia. In addition, Yahoo, MSN and AOL operate Spanish-language portals to reach U.S. Latinos.
There’s a dearth of ad networks focused specifically on other ethnic groups. AdGroups.com and the Nubian Ad Network target African-Americans, while BET ad network focuses on music, entertainment and lifestyle sites. For reaching Asian Americans, there’s the Asian American Ad Network.
However, networks for non-ethnic demographic and interest verticals are popping up like mushrooms after a monsoon. According to comScore, vertical ad networks as a whole doubled their reach from 2008 to 2009. More important, comScore found that content-targeted verticals were significantly more engaging to consumers. People reached by vertical ad networks spent at least 60 percent more time in those site categories than the average category visitor.
The marketplace may get still more crowded, thanks to Adify and DevHub, two services designed to let publishers easily build and manage their own ad networks. Adify also operates a larger ad network spanning all the properties
on the platform.
Wide or Deep
Of course, advertisers also can reach Hispanics – or whomever – via the large portals: AOL, Yahoo, MSN and Google. These mass, horizontal ad networks segment via behavioral targeting, a technique that uses a unique cookie to track consumer behavior both within the major property, as well as over its network of third-party sites, in order to build a richer profile of each individual. The profile includes interactions with both content and ads, and the aim is to gather insight that can be used to show ads that are more relevant to each person. For example, a woman who reads pregnancy-related content may be a desirable target for an automaker with a vehicle that appeals to new families.
Horizontal networks can help large advertisers reach more consumers in a vertical than some targeted networks can.
“Performance advertisers may need to reach a certain audience, but at the end of the day, they’ll be judging the success of the campaign based on performance. Simple things need to be there: They need the reach, and they need the data and optimization tools to drive the performance,” says David Zinman, general manager of the Yahoo! Network.
Michael Sprouse, CMO of Epic Advertising, a performance marketing company that operates the AZN ad network focused on big brands and super-affiliates, says that because his network is so large, advertisers can reach a niche as well as a vertical – at a cheaper price. “We don’t change our pricing considerably based on how specific you want to get. We take the model that is used to appeal to large constituencies and hone that to reach something very specific,” Sprouse says.
Buys on horizontal networks also tend to be cheaper. As a replacement for contextual targeting, BT could let that automaker reach the pregnant lady with ads placed on lower-cost media. According to Amy Manus, director of media for interactive marketing agency Nurun, 70 percent of horizontal networks and portals either already offer this kind of targeting or plan to.
“The latest trend is for advertisers and brands to utilize networks to determine who they should be targeting through audience analytics like Blue Kai, Quantcast or Personifi. These allow you to find untapped target audiences. It has really become more about psychographics than demographics,” Manus says.
“The Hispanic market is easier to understand in terms of language preference. One third is Spanish-dominant, one third is English dominant, and one third is bilingual. So, an advertiser might be missing a portion of that pie they want to reach,” she says. For example, if you advertise on Yahoo en Español, you’d miss English-dominant and bilingual Hispanics, while advertising to Hispanics who visit English-language sites would miss the Spanish-speakers.
Vertical ad networks sell their deep knowledge of their customer segment and their publishers’ passion for it.
Says Genia Stevens, publisher of the Women’s Blog Ad Network and the Lesbian Blog Ad Network, “The advantage of using a targeted network like ours is that bloggers tend to have that trust relationship with their readers. Blogs tend to be more engaging and speak more to their readers, so ads can feed the conversation.”
In addition, the vertical networks consult with advertisers to share what they know about their audience’s interests and what they respond to. “They are people who understand their market deeply and select the sites that speak to the passion of the audience. They also maintain a long-term relationship with their publisher that helps them understand what the community cares about,” says Joelle Gropper Kaufman, SVP of worldwide marketing for Adify.
They can use this expertise to help marketers fine-tune their messaging. Colors used in ads, key phrases and photography all can increase performance of ads, according to Candace Kennedy, sales and marketing director for Ethnic Technologies, a market research firm. “It’s more warming to the individual, so there’s higher chance they’ll read it and do business with your company,” Kennedy says.
For example, an auto maker ran its mass-market campaign on AdGroups.com, a vertical network of 300+ independent publishers focused on the African-American market, with not-so-great results. After consulting with AdGroups, the advertiser included images of African-Americans in the ads for the network and saw response triple.
Roary Wilder, CEO of AdGroups, says that, in general, these tactics increase the response by about 300 percent. “The relevancy of what you’re able to do in a niche network is always going to be more powerful,” he says.
Vertical content networks also claim that their ads reach consumers when they’re more receptive. For example, a stockbroker might be interested in a call from a mutual fund while she’s at the office, and incensed to receive the call at night, when she’s home with her family.
“It’s the right target but the wrong environment and the wrong frame of mind. We’ve got the same people as the horizontal networks. The difference is the ability to reach somebody in the right frame of mind,” says Robert Pietsch, Forbes co-president and chief advertising officer. Adds Brian Silver, CEO of the Travel Ad Network. “What makes my network special is that, because we are trying to monetize the travel audience at all times, we have the ability to understand where someone is in the purchasing lifecycle and target the appropriate ad.”
All these factors position verticals as premium networks, able to charge more and insist on terms – at least in theory. Other factors that go int0 making a network “premium” include curating the sites in the network and using the CPM ad model.
On the Adify network of vertical blogs, “We focus on great brand engagement. Your advertising will perform better in the right context, but the right context is often expensive,” says Kaufman.
Content- or interest-targeted vertical networks tend to carefully select publishers and keep networks to a manageable number.
“We have our bloggers all sign the editorial guidelines, and we have humans who are reviewing every blog all the time, making sure they are blogging regularly about their vertical, that there are no paid endorsements or paid posts, and no unacceptable content,” says Elisa Camahort Page, co-founder and COO of BlogHer.
Tactics like these assure advertisers that the quality of traffic on the sites is as good as the content. In addition, most networks provide statistics on what percent of Internet users they reach, as well as how many times they can reach an individual, on average. They often do user studies to help advertisers understand their readers. Information on the demographics of visitors to media properties is also available through third-party media analysis and tracking services, including comScore and Nielsen@plan, paid services used by large networks, and Quantcast, a free audience measurement service.
In today’s tight-fisted economy, even brand advertisers are looking at CPAs – even if they’re paying based on CPMs. The difference is, when they advertise on CPM networks, they do some reverse-math to analyze how the CPM translates to whichever action metric they choose.
“In display, there’s always a back-end metric. For example, an advertiser may have a $7 CPA target on the back end. We may charge $10 CPM, and if the campaign garners a $12 CPA, we can see the lowest-performing sites, eliminate them and we’ve reduced the CPA to $6,” says the Travel Ad Network’s Silver.
Large advertisers and agencies, such as those that advertise on Forbes Audience Network, often have their own, very sophisticated analytics platforms used to track conversions; they may also use their own optimization services. Others make use of built-in analytics and dashboards provided by the ad networks.
The Big Deal
When it comes to the publisher’s revenue share, some, like the Gay Ad Network, let publishers set their own CPMs and fill unused inventory via other networks, a process known as backfilling or tethering.
“They can use us as the primary sales channel, but if we’re unable to sell their inventory at their minimum CPM, we’ll relinquish it and send it over to Google or whatever backup they choose. If a publisher knows what their effective CPM is, if we don’t hit it, they’re no worse off, because we’ll redirect back to what they’re using today. It’s like a no-risk trial,” says Gay Ad Network CEO Mark Elderkin.
Other networks demand exclusivity, but say they make up for it with the quality and quantity of advertisers they can provide.
“Our brand lends credibility and an access to advertisers that most networks don’t have,” Pietsch says. For example, a major financial advertiser on Forbes.com, the publisher’s original content site, wanted to reach small business owners. It targeted them via IP address on
Forbes.com, and then also ran ads targeted by content on the Business and Financial Blog Network.
Some networks have a reverse sliding scale, rewarding high-performing super-affiliates with better splits or custom models.
DevHub gradually raises publishers’ percentages as they build up their sites. Says Mark Michael, co-founder and SVP of strategic marketing for Evo Media Group, which operates the service, “Out of the box, you get our standard rev share. As you’re building that site, one piece of content today, another tomorrow, slowly your rev share would go up.”
Power in Numbers
Large publishers and superaffiliates on the Casale network – those with more than 250,000 unique visitors a month – may be able to negotiate a guaranteed CPM or exclusive representation.
“Everybody starts with us in a revenue-share scenario, so we can have the opportunity to evaluate the property and audience, as well as advertiser demand for the inventory. From there, we set a benchmark, work with publishers to improve how their traffic is performing, and recommend where we could take the relationship potentially,” says CEO Julia Casale-Amorim.
CPMs and rev-shares are all over the map. Casale Media pays 70 percent of ad revenue to the publisher, while BlogHer shares 45 percent and Forbes offers 40 percent. Some networks we spoke with didn’t disclose their revenue shares.
Ultimately, though, what’s more important than the CPM or the rev-share is the publisher’s net revenue. Says Gay Ad Network’s Elderkin, “Whether it’s 90 percent of a five-cent CPM or 50 percent of a $10 CPM, the percentage almost doesn’t matter. Sites that perform well get a larger percent of campaign dollars and a higher percentage fill-rate, while sites that don’t, get optimized out of the campaign.” Another key factor is the audience growth a vertical network can provide by operating a portal or central hub that features all the sites in the network.
Says BlogHer’s Camahort Page, “We do a lot to try to cross-promote our sites, and foster the amplification effect across our community.” For example, every blogger, regardless of the size of her audience, sees her headlines run in rotation in a “what they’re saying” box on all the other blogs in her group. Selected headlines are also distributed to iVillage.com.
That audience growth translates into more revenue for publishers. Says Richard Antoniello, CEO and publisher of ComplexMedia, which publishes a print magazine and original content on Complex.com, “Say Nike or Brand Jordan comes to us. We run the campaign on Complex.com, but of course they also want to run on NiceKicks.com (one of the independent sites in the network). We usually end up running a little more on the individual sneaker site, but Complex.com is successful as well, because we get a smaller slice of lots of ads.”
The Intangible Factors
And then, there are the intangibles: better branding, a sense of community and the availability of technology and services to improve a site may all be important.
If affiliate marketing and blogging are solitary businesses, the right ad network can ease the loneliness. BlogHer hosts annual conferences, as well as conference calls where network members can ask questions and share knowledge. Even some large networks like Epic try to leave the door open to help publishers improve site performance and traffic.
Networks may also provide technology beyond what most indies can easily acquire. “Publishers are as loyal as the biggest check, which doesn’t always come from the CPA that runs across my banners. If you’re site 1,000 in the long tail of 10,000 travel sites, you’re going to look to see who’s going to drive higher CPM, but also, what products and services do they have that I can add? When you come to us, you can extend your pages through microsites, or add widgets, and make more money from those,” says Silver of the Travel Ad Network.
Evo Media also promises an expandable platform for publishers. Says Michael, “No one should ever outgrow the platform – even if you get ridiculously popular. If you want to add a forum or chat layer, it should be right there for you in your publishing dashboard.”
A Tidy Marketplace
Clearly, the CPM model removes the risk of many types of fraud facing super-affiliates. But there are different gotchas publishers should watch out for.
First, they should read the fine print to determine what a network’s fill rate is, says AdGroups’ Wilder. “That’s where the sneaky language starts coming in from networks with lower fill rates. They can fill a certain amount of inventory at a certain CPM, but it’s only 20 percent – and the rest is filled in with CPMs at less than a dime. That’s the language some inexperienced publishers will
Don’t forget to ask about when and how you’ll get paid, warns Casale-Amorim. Some networks don’t pay publishers until they get paid by advertisers. “Net 30 would be the ideal,” she says.