Wow: ESPN’s bold decision to drop ad networks

Wow, huge news out of ESPN.com this morning. They are dropping ad networks as advertisers on their Web site.

http://www.mediaweek.com/mw/current/article_display.jsp?vnu_content_id=1003729063

This is monumental information if merely to understand that one of the networks they dropped, Specific Media, just raised $200M on the strength of their targetting and optimization technology.

Most folks understand how networks work, they serve performance based marketing on higher quality placements (because these placements drive CTR) and actually show higher CPM, brand advertising on the lower quality inventory. This has been going on for years.

This is an exceedingly interesting position for ESPN to take in the wake of some of the following moves by large media companies:

AOL’s creation of Platform A and desire to shudder their other businesses

Microsoft’s purchase of Rapt and others

Yahoo’s purchase and bet on RightMedia, Blue Lithium and performance marketing and segmentation to drive revenue

and perhaps most interesting…

Decisions by brand agencies, like Coke (mycokerewards.com) to focus on a performance metric to reduce the premium they are paying for the same inventory online.

What’s ESPN’s rationale and what did this mean for the space?

First, ESPN.com is uniquely positioned to make this move. They are moving towards more multimedia content formats and their inventory is highly valued already by brand advertisers. The thinking here is they can improve the quality and “brand ability” of their content and then price of their inventory higher. A few more brand marketers at exceedingly high CPMs will cover the vast amount of remant revenue the company makes.

ESPN does need other publishers to follow suit here with them and this may just come down to some of the following factors:

– Do the macros indicate a bear or bull market? In a bear market, I’m hunkering down with a measureable ROI. So will CPM buyers be impacted and be impacted online.

– Do brand marketers migrate online faster? Well, if they are migrating online faster than there is more advertising dollars across inventory. This might correlate with 1, but one major thing missing is the cycles it take to build any creative at an agency. If you continually wait for that creative, there is bound be gaps in revenue.

– The promise of the Internet: What data do advertisers and clients really want? In a world, where media addressability is becoming a reality through measurement and where companies manage balance sheets will media actually seek to not be accountable?

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