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

The Fallacy of Internet Ad Personlization...and the Bleak Future for Social Network Ads

Posted by Tom Foremski - August 13, 2008

exec_0001_russ.jpgI spent part of my afternoon catching up with advertising network of ad networks, Adify, which was sold to Cox earlier this year for $300m. That was a super smart move for Cox and it gives Adify a large media company as a partner that can leverage its technology across borders and across industries.

Adify has a great front-end for controlling and placing ad inventory by advertisers and publishers. And what isn't appreciated, a great back-end for handling invoices, 1099s and all the other daily paperwork and reports that needs to be dealt with.

Adify enables publishers to run their own vertical ad networks and to recruit other sites to their ad network, and it takes a cut of the ad revenue. This year it is on target to move as much as $80m in ads, next year it plans to double that number.

exec_0006_joelle.jpg I met with Russ Fradin, president and Joelle Gropper Kaufman, VP marketing. Most of my questions were on the trends in online advertising--a key interest of mine since I'm an online publisher but also because of my interest in what will be the new business models for online content.

Here are some key notes from our conversation:

- If you are doing brand advertising, large ads are more effective than small ones even though focus groups say people prefer small ads. It's about creating an immersive experience.

- There is a shortage of quality content. Ad prices are good for sites or ad networks that offer quality content.

- Personalization of advertising on the web isn't happening. Ad agencies want to make large buys. I pointed out that an ad agency might buy a 20m page view site but it really just needs to reach 10,000 people in that 20m. Why not make buys that target that 10,000 people? If ad agencies were to do that, it might mean dealing with dozens of seperate buys and dealing with dozens of invoices and reports and other paperwork. That won't happen. Personalization in any form isn't happening, ad agencies are still buying broad demographic profiles. It will never happen, ad personalization is a myth that has been talked about since the mid-1990s and it continues to be unrealistic.

- Social networks are offering low quality ad inventory and there is a lot of it out there. It is cheap because people are doing things rather than consuming content, they aren't interested or paying attention to the ads. Adify believes that this will always be the case, Facebook, MySpace etc will continue to offer huge amounts of low quality advertising inventory.

Adify says it has signed up 40 new networks in the past quarter and will soon announce its first overseas deal.

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Please see:

News Analysis: Cox Acquires Adify For $300m Cash - Will Others Follow?

The future battle between ad networks and publishers… | Tom Foremski: IMHO | ZDNet.com

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