@andrewchen

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7 ideas for billion dollar companies in the online ads

Given my previous Debbie Downer post on the advertising industry in a recession, I wanted to outline a couple major opportunities in the ad industry where huge companies could be built. This is a summary of many discussions that already out there, so it should be obvious to most folks in the ad industry but maybe new for everyone outside.

Here it is, not in any particular order:

  1. Online video
  2. User-generated content (blogs, social networks, etc.)
  3. Monetizing international traffic
  4. Vertical ad networks
  5. Cross-channel/cross-property targeting
  6. Continued securitization and efficient brokering of ad inventory
  7. New platforms and categories

Most of these may be obvious, but I’ll summarize all of them with a line or two of description. If I’m missing anything, please shoot me a note at voodoo [at] gmail and if I agree I’ll add it ;-)

Online video

Obviously video is a huge category since it’s the clearest metaphor to TV advertising, and no one really has cracked it. What’s the opportunity for folks outside of the big branded publishers? What are the key metrics? What’s the right ad unit? (hopefully not pre-roll)

User-generated content (blogs, social networks, etc.)
The buzz and incredible word-of-mouth for blogs and social networks is undeniable, but in order for this opportunity to scale, a saleable ad unit needs to be determined. This ad unit needs to be priced, measured, and otherwise standardized. What will it be? Is a standard of profile + news item + widget + etc emerging? Will blogs be treated similarly to social networks, or are they considered too different?

Monetizing international traffic

Many social networks and ad networks attract a tremendous amount of international traffic, much of which monetizes poorly because of a lack of direct relationships with advertisers in the source countries (and also ad spend internationally). Sometimes it’s akin to throwing away 30% of your pageviews because the 30% isn’t monetizable to a comparable degree. Who will solve this? Who will own the infrastructure to broker these transactions?

Vertical ad networks

As content becomes increasingly separated from distribution online using widgets, syndication, and aggregation, more and more of branded content exists outside the destination sites of branded publishers. Many of these guys are now organizing vertical networks to take advantage of larger, trusted networks. Is this model here to stay? How expansive will the influence of branded publishers be relative to the hustle and bustle of long tail publishers?

Cross-channel/cross-property targeting
As the amount of content and products increase online, user attention is getting fragmented – the same person that browses WSJ at a $60 CPM goes to their email service and is served an ad at $1 CPM. Similarly, the same person who is shopping for a car on Google is priced at $10 a click, but the same search elsewhere yields terrible monetization. Bridging the small areas of “high-context” online versus the larger swaths of high-engagement/low-context activities online will become an increasingly large opportunity. How will companies price, organize, and otherwise securitize this data? What will consumers think of their data getting aggregated? Will one company win, or will it be an open exchange? Or a co-op of similar sites?

Continued securitization and efficient brokering of ad inventory

As ad networks become more technologically advanced, allowing APIs, automated campaign management, a multitude of targeting options, the ad inventory of the world is becoming more efficient over time. (Though never efficient enough!) As exchanges, arbitrageurs, networks, and ad infrastructure become more mature, how much of the finance world can be directly applied? Will there be an organized futures, options, and derivatives market? Who will be the Bloomberg, the LTCM, the Instinet? What infrastructure hasn’t been built for ad industry that does already exists in the finance world?

New platforms and categories
And of course, the big wild card is that the available inventory online is constantly shifting as new consumer products are being created. If a new category of websites is created, like social networks or widgets in recent years, some of these opportunities have new and different advertising characteristics than others. Some may have extremely high CTRs, or capture the imagination of brand marketers.

For example, the ad market within games is still very much in flux, and who knows what standards will emerge there. Similarly, mobile continues to be a large opportunity that may open up as Android, Symbian, and the iPhone evolve.

Have a billion dollar ad play that’s not in here?
Email me cuz I’d be interested in hearing about it ;-)

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