Horizontal Vs Vertical Adnetworks – A View from the Trenches
10 July, 2008
Aditya Khanna, Business Head, Tyroo Call 2 publishers in a vertical and tell them to align with you non-exclusively (who says no to a sitting monitory opportunity?), take a “plug & play” 3rd party adserver (there are dozens of commoditised platforms to choose from), and then start your pitch to an advertiser. And you’re good to go.
It’s easier to open a network than launching a website these days. I hear of one opening up every month.
Natural outcome is clutter. Lots of it.
To break away, potential networks have started scampering for cover (read differentiation). One of the easiest one again has to become aligned to a particular vertical.
Such a cosmetic differentiation has the risk of staying just that – cosmetic and might not translate into a ‘must buy’ option for an advertiser.
Let’s take a look at the overall market size for a minute – In 08-09, ad networks are expected to continue to gain momentum with a 30 odd crores billings (6% marketshare). Currently, the top 1-2 Indian horizontal networks are together expected to corner about 75% of this universe, outside of Google. The rest are testing their staying power. With the horizontal game not yet settled down, as to whom the top 1-2 are, I think that the vertical game can only be sliced out once the dust is a bit settled.
Consider this: If you breakup the 500 crores that the Online industry is estimated to do in 08-09, verticals like finance, jobs, travel, matrimony, technology, automobiles take 80% of the chunk. With 6 odd verticals of a certain scalable size, it is narrow enough universe for the horizontal networks to be playing in. Had the vertical channels been a couple of dozen, focus could be something that could have been a focal point of discussion.
Going away from the data for a minute, to start with, for an entrepreneur, a passion for adnetworks comes with the role one thinks networks are positioned to play. It might take a few years to do this, but networks are today best positioned potentially to reach closest to the performance benchmark that Search has set of reaching out to the right user at the right time when intent is strongest. With a page click-through of 20% for Search (each ad on a search page gets roughly a 1-2% clickthrough, multiplied by 10 ads typically on a page), everything else in online advertising is distant – horizontals, social media, emailers, vertical publishers etc.
Today a media planner gets excited with a 1% CTR, so the opportunity gap is very high for the 95% of inventory on the Internet (non-Search). Networks have the potential of coming closest to this benchmark because of the sophisticated platform that they currently use, where audiences are sliced out and inventory is rated according to the performance on a particular type of products. So, as a monetization play, networks have the edge over even horizontals as the latter is a content play primarily.
By starting out as a vertical at this point in India, one is already out of the race of inching closer against Search. Verticals today are opening up so rapidly, because they are essentially content aggregation plays only, with no different platform play.
Coming back to the market - if you go deeper into any of the verticals, there are limited players, in most cases, less than 5 so the longtail around them is not as fragmented as the vertical play would have liked. For a network to call itself aligned to a vertical, it needs to have an exclusive representation of atleast 4-5 players which is difficult to do with such small pockets of supply that are easily accessible to anyone – let alone other networks, but even agencies. If the vertical network doesn’t control a substantial part of the total inventory, say 50% (which is difficult to go with such a small supply pool) by an accepted standard, then again it doesn’t get into the must-buy option. Too much reliance on 4-5 publishers itself in a vertical to have your business model depend on is also downright risky.
Choosing the vertical to play in has its own set of risks. 08-09 hasn’t been a good year for the finance and travel industries in general, and online advertising will also bear a brunt of this. A vertical starting out in an industry going through a rough patch can seriously jeopardise one’s projections for reasons outside one’s control. Horizontals are more insulated from specific industry ups and downs, by switching focus to cover the other critical categories mentioned earlier.
Let’s take this question from another angle – to what a customer really wants from an adnetwork - Scale & Performance.
By slicing out a much smaller niche, albeit a vertical, vertical networks are not viewed as a very scalable audience. Similarly, even so-called premium networks are judged by higher click throughs and leads. Brand monies (without ROI goals) follow to the player who has the perception of performing the best. And that happens, when a network has the history to prove past performance.
And that’s where the greatest challenge for a vertical network with few supply points locked in will find an issue.
Performance is not just a vertical content game. While contextual content works well and the performance of the vertical content leaders proves that, it is just one way that a network uses to target and optimize audiences. As targeting and optimization become more sophisticated, chasing the user irrespective of the content he is viewing real time increases the bandwidth to reach the right user and therefore, performance. To be in the network game for long term, a network will have to have some technology differentiator that its platform or platform top-up brings. The vertical players currently mushrooming are playing more around content, than technology.
Where the horizontal networks have made a dent into is the admonies currently flowing into the horizontal portals, and that’s where the scale opportunity arises. The sheer size of the audience base that horizontal networks, coupled with advanced platforms that horizontal networks are prepared to invest in, give it the potential unfair advantage that a growing company needs. Millions of audience profiles give a network the bandwidth to understand what products work better in which audience profiles, in most cases reactively. It is a ‘learning’ phase, rather than just a sure shot decision based on content.
Now, let’s approach the question from an advertiser point of view. Networks are slowly creeping into media plans these days, consuming roughly 5-10% of an advertiser’s budget typically. An advertiser is just beginning to demystify one network from another. With agencies controlling 80% of the spends, of most big advertisers, they are typically comfortable dealing with 1-2 networks per media plan, usually going by past performance to determine which network works out best for it.
In the US, where the vertical networks have been successful, players like Travel Adnetwork (TAN), Jumpstart etc, the timing of these players came about at a time when players like Ad.com and Tribalfusion matured the market, opened up new categories and the proliferation of content across several players, gave rise to this vertical play.
In India, the horizontals game is still wide open right now, so the verticals will require all the staying power they can muster.
I agree with ram that India online ad network is not performing and be mature as usa. In fact now business of online marketing is changing rapidly and any points like the horizontal or vertical players ( network ) has no relevance at all.
After all when we are talk about the network, how it will gurantee a full inventory utilization at all point of time, if they lake the advertisers, or how budget and revenue of a puyblishers realy become more and more optimize, if they don’t have more advertisers.
See this is not the question of market and its potential as a vertical or horizontal players in market, it is about the best value for advertisers and publishers all together.
I m not seen any network are able to increase the revenue and pricing of publishers as they increase their visibility and value, it is only the impression and ctr that increase the revenue for portal.
So it is very easy to say that vertical network is not workable. I think vertical network has more chances of provide efficiencies. Also we are currently focusing of CPM only, where more than 90% of the cpm is not converted to click. So we need to think something new and innovative that really creates value to advertisers and consumer all together.
We find that technology is improving for delivery and reporting of advertisement and market size of industry is also growing (even in the recession period we don’t see any down gradation in online advertisement worldwide), but I m disquiet about the ROI to advertisers, advertisers are supporting the network and working together with creative agency and putting the faith in opportunities, but we are not find any kind of enhancement and innovation from network. Big network of India and even international market (exclude Google) we can see the thrust for impressions only and result is not majored at several point of time.
As we are in nascent stage we have to be very careful so that advertiser faith in online advertisement and media network cannot get damage.
It is easy to comment on these points, however very tough to explore the market and new innovations. I m also face one kind of resistance from advertisers about the new companies and the acceptability of idea. We as a small organization having great idea to play but we didn’t see any kind of appraisal and only few of advertisers putting faith on us. So some time advertisers also come as a roadblock for the innovation and benefits of these happened to big network. But big network also have to understand that if innovation come to market it will sure to happen and no one can block it. I remember once when I started my 1st idea of online media and branding I work on the idea for more than 1 year and after that I got to know that one of the company going to launch it. I don’t have regrets as it is now one of the successful products and market.
So the concept behind the comment is not to bias about any network, let together bring out real innovation in online advertisement so that all stakeholders will get benefits of fastest growing 100% educated, qualified, affluent and decision makers netizens.
Live green and don’t print, start your office as paperless and save the world.
To know more about logon to http://blog.mukeshjha.com
These are insightful comments backed by sharp analysis.
My question would be If verticals are getting that sort of traction backed by meaningful content, is it to assume that on an everyday/some regular basis there is a strong audience pull?
I mean, do i go on the finance and travel vertical everyday or every now and then? How are the advertisers buying onto this? Is the audience base of the verticals so wide and voluminous, one is to assume that the effect on aggregate due to drop-out of individuals is minimised on an average over a period of time?
The way i see it, if there is no way to ensure loyalty of audience for a vertical then horizontal is the best bet as you are tuned to the audience driven by timeliness of content and not by nature of the content itself...
Can somebody shed some light pls.?
Hey Ram, you never blogged with your real name before!!!
Very brave comments.
Sure it is interesting times ahead.
After reading your post, I am completely in flux as to which one is actually correct between the two of you. Both sound so right, :-)
If I was a moderator, I would agree that growing yields is the most important thing for a publisher and India Internet Story is so small that it needs efforts like you mentioned to get to a size that would actually make some sense else horizontals will only cater to the current market situation which is performance driven.
Good analogy Ram.
Hi Adi,
Good summary on how the market is but I have a few pointers for you to ponder over:
1) Just going by how the market in the US matured is not necesarily the way it will play out in India.
2) Horizontals have no differentiation in the Indian market unless the product is the big hit. Both you and I know that product offerings have to mature in a big way for all networks in India and I dont see a single offering today, which is a winner.
3) Sure it is easy to start an ad network with a lot of plug and play available for free but how many will last?
- The ones that have exclusive tie ups.
- The ones who are going to increase yields for a publisher.
- The ones who are going to grow the market by adding new advertisers.
- The ones who have a great sales team.
- And offcourse the ones who can last the distance financially.
4) Verticals / Multi-Verticals definately have better audiences which are more mature in nature when it comes to consumptions of an offering of a portal on the network than the generic ones. Now you would contest with me saying, "Multi-Verticals are Horizontals". I would disagree simply because Multi-Verticals may have a couple of categories but still continue to be focussed to play the premium game.
How does it work then, right? It simply works because each category has a focussed audience, which definately is not the same on uniques, data (content offerings of a site) consumption patters and engagement when compared to with an horizontal.
This only means that verticals have relevancy on mapping with their advertisers for a premium push.
How many women brands are online today? Isnt the 35% women audience on the internet not enough a number for an advertiser to weigh his/her bets on? Sure it is and that is what a category like women does in multi-vertical offerings.
I mean, if we look at the way TAM reports its numbers with a couple of thousand meters plugged in across the country to then do an indexing of sorts to arrive at a number, which then is rated as TRP is by itself is such a sham.
So a electronic ABC or a Comscore supported data is good enough to support and so I think category specific verticals, which I would call Multi-Verticals is a definate survivor.
5) We in the travel vertical have locked up everyone in the business who have meaningful supply and like wise with women, and all the other 4categories where we have exclusive India IPs. Now what does this translate to? It translates to some fantastic audiences for brands to latch up, which has begun in a big way for us. It only makes us more confident of being a vertical ad network because we have no product yet and till such time we would want to be associated with audience differentiation wherever networkplay is positioned.
Now I am sure you would be saying, look at this, this is Ram saving his pride but no dude, it just is not that, its about what and how one would look at a differentiator and I think we are poised to do that in the whole of 09 as an organisation just because we believe thats the right route.
6) Lets look at the big ones in the US, which have received funding over 15M+ USD in the last couple of months - Turn, Brand.net and Martini - all of these are either deadly product companies or are focussed on audience as a matter of subject.
7)Why should we not compare this situation to US?
- US internet media proliferation is huge and numbers are just not comparable and so a TAM and Ad.com (while the former is a vertical adnetwork and actually does not hold as a right example when stating market growth as a story through horizontals)catered to creating value for the long tail, which werent making money but in India nobody is making money and thats because of lack of knowledge one and two pork belly kind of pitching for business. We dont sell anything less than 140 Rs CPM (I might be an idiot in saying this publicly but what the heck, I am growing the market and want my collegues in the space to understand that it is possible to sell at those rates, sure you are committed to performance but yields have to grow for publishers for ad networks like us to be winners) and we would land closing very steep on gross revenues in 2months of our business operations. So how does that happen? It happens only because our sales team is selling audiences and they really are focussing outside of pure play performance. Brand performance is the next wave and brand performance metrices are not going to be, 50 Rs CPA but a well defined audience story with brand logics.
Uff, I can just keep going on and on but I am gonna end this here for you guys to ponder over this.
Adi - lets talk soon mate :-)
Cheers
Ram
horizontal networks most definitely have the upper hand advantage...just based on the audience size is enough!
there are couple of horizontal adnetworks in india, komli, ozone...I heard some more coming
You are a star Aditya Khanna.I m in kenya where internet usage is at growth stage and expected to reach full potential by end of 2009 in kenya with the connection of Kenya to the under sea cable
You analysis of vertical vs horizontal adnetworks is very useful.
I would like to know which 3rd party adserver would you recommend for a start up adnetwork in an emerging online advertising market.How is reception of adnetwoks in India and does google adsense pose a threat to adnetworks
amazing view points...u laid it all bare :-)
Post new comment