Silicon Valley Insider’s Michael Learmonth, writing for Advertising Age, contends that top online content producers, destination sites that identify Web users with a vertical buying intent in particular, are losing advertising value to parasitic behavioral advertising networks. The content producers, such as Edmunds.com or NYTimes.com, do the heavy lifting of providing value that brings users to their sites. Behavioral advertising networks on these sites, usually running on remnant inventory, capture user data and seek to monetize them based on their established profiles on lower-quality sites that the same user might visit later.

For example, a visitor to WebMD.com might read an article about mesothelioma, establishing that visitor as a possible asbestos-victim litigant, the clicks on advertisements for which pay top-dollar among lawyers trawling the Intertubes for potential clients. However, instead of clicking on an ad on WebMD, the visitor might end up clicking on a mesothelioma ad on a low-CPM social network a few days later. The social network enjoys a great RPC (revenue per click) without having done any of the valuable content building that profiled the visitor in the first place.

The heart of this issue is the value of user data that high-quality content networks are effectively giving away for free to the behavioral advertising networks that they work with to monetize their remnant inventory.

Increasingly, large publishers are choosing to stop contracting with third-party ad networks because they find visitor data more valuable when it is exchanged directly with their advertisers (and because they have greater control over ad creatives and scheduling). But smaller publishers without the scale to build their own advertiser relationships or even demand premium pricing might have gotten the short end of the stick, despite delivering a unique value proposition in carving out a niche to advertisers.

What’s next? As publishers using behavioral ad networks begin to understand that the value of their content is often recouped beyond their sites, they might begin to demand some of that dispersed value back. Privacy issues abound with user data ownership and transferability, and tracing an advertising click to its “true source” is a sticky proposition. But difficulties like these will have to be surmounted in order for behavioral targeting ad networks to continue to get buy-in from valuable publishers. The alternative might be worse: much like larger publishers like ESPN have done, smaller but targeted publishers might drop behavioral targeting networks altogether.

This entry was posted on Monday, January 5th, 2009 at 3:28 pm and is filed under Online Advertising. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.