Silicon Valley Watcher - Former FT journalist Tom Foremski reporting from the intersection of technology and media

FAST Analysis: The advantages of your own ad network

Posted by Tom Foremski - April 30, 2007

 FAST Search and Transfer, the leading European search firm, introduced a search based business platform for media companies and said that search traffic from its customers has surpassed Yahoo! and will overtake Google in 2 years.

European Firm Enters Battle For US Media Markets

Foremski's Take: Should media companies run their own ad networks? GOOG and YHOO will argue that joining their ad networks means greater liquidity, more customers, which means more ads.

Yes, they can sell more ads but at what price?

Not only do media companies give up a big share of the revenues but the price of online advertising is kept low because the media partners have to compete with what GOOG and YHOO charge for advertising on their own sites.

This sets the price for all ads on the same network. Which means that unless media companies can reduce their operating costs to the same level as the search giants, revenues from online advertising through the search engine ad networks will never be enough to cover their costs.

Media companies have to pay content producers, Goog and Yahoo! don't.

By running their own advertising networks media companies will have a smaller pool of potential customers but they keep more of the advertising revenues. And they can gain better control over ad prices.

There are many media companies that have local markets cornered, and are well positioned in many niche markets. GOOG and YHOO and MSFT are way behind in targeting local markets.

If media companies run their own advertising networks they will have a far more favorable ad pricing environment plus opportunities to sell additional services. I can't see the downside.

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