Adify is a vertical ad network platform that helps publishers build out their own network, augment their reach, and connects brands to highly targeted audiences. Nick Reid, Senior Director of Platform Development UK at Adify, took time to speak to ExchangeWire this week about the state of the UK ad network market, what ad nets will need to do to survive, and the potential disrupting effect of DSPs.

Can you give an overview of Adify’s offering?

NR: Adify is the leading solution for creating, managing and commercializing premium vertical ad networks. We work with publishers, agencies and sales houses to help improve audience and revenue opportunities by building vertical networks. This enables them to engage with mid-to-long tails sites. The Adify Network Builder focuses on the creation and management of vertical ad networks. It provides media companies with all they need to build and manage their own branded vertical network. This is built on the pioneering Adify Ad Server, which manages over 225 vertical networks globally, across 20,000 sites, and delivering over 8 billion ad impressions a month. Across these vertical networks, we provide both our behavioural and predictive targeting technology and a dedicated media sales team.

How would you differentiate yourself from other ad networks in the UK market?

NR: Vertical networks are a growing phenomenon in the digital media space and a bi-product of the fragmentation of the display market. Through Adify, publishers, brands and entrepreneurs are provided with a solution that helps them extend their reach and deliver incremental revenues. In addition, this allows publishers across the mid-to-long tail to be monetized in a much more efficient away, connecting audiences with brands and publishers with ad new revenue. The Adify Network is not a remnant network of unsold and low grade impressions, but rather a collection of specific verticals, built across niche sites and content verticals.

Media planners buy across these vertical networks because they can achieve reach without compromising on inventory quality and transparency. They can buy with media brands they trust, knowing that these expert curators of content have handpicked the highest-quality sites. From a publisher’s perspective, our partners build vertical networks because they can increase sales volume at premium prices. This helps publishers defend against declining CPMs in the market and the degrading brand perception due to their growing dependence on third-party remnant ad networks. Many leading publishers are taking back control of their inventory and their commercial future by building a network under their own brand umbrella. It gives them an opportunity to own a category in the market and build or maintain the dominance and category expertise.

Adify is helping publishers build out their own ad networks and augment their current reach. Can you provide an example of an existing partnership you have with a UK publisher where they have leveraged your technology in this way?

NR: We have worked with over 225 Network builders in the UK and across 18 other countries. They range across both publishers and brands from The Guardian, NBC Universal, Financial Times, Forbes, Reed Business Information, Dennis, Warner Brothers, Comcast, and Fairfax. We have worked with them all on a specific business need and brief. This could be around building a specific vertical on content which they are currently sold out in, or it could be around building them a particular vertical. The publisher might see a revenue opportunity around content they do not currently have. The overall theme is helping publishers tap into the mid-to-long tail sites, which are not being currently monetized or marketed to. We are able to do this through our proprietary Network Builder and Market Mapping process, managing this across the Adify Platform.

There are nearly eighty ad networks in the UK market. Is that number sustainable – and will the display market’s move towards a more measurable media buy signal the end of the middlemen and arbitragers?

NR: No, this is frankly not sustainable. This year will be an incredibly challenging one for many networks. Networks without proprietary systems or technology, which provide a point of difference, will see intense pressure on their business model. The concept of arbitraging will also be challenged. There is no real price logic to it and agencies are fully aware they are being asked to pay 30% more on inventory which is available and easily accessed elsewhere.

Like all media owners and publishers, there really needs to be greater definition around why agencies should be spending with them – whether this relates to performance, price, audience, content. At the moment it’s based on performance and price. Likewise publishers will questions their worth around yield and benefit in the long term.

What will ad networks need to do to remain competitive? Is it better technology? Better targeting, optimization and audience insight?

NR: It’s an interesting question. At the moment the number of networks is growing - not necessarily because of the increase in new technology and innovation, but more because of the increase in inventory volumes. The situation is being further complicated by the performance buying mentality of agencies and clients. Networks need to deliver all the criteria above to remain competitive. They will need to demonstrate their worth and value - otherwise publishers will look to cut off inventory supply. The network’s role in the middle of the supply and the demand side could well start to be seen as irrelevant.

As the agency side platforms improve and evolve, it’s the relationship between the exchanges and the inventory sources – as opposed to the current intermediary pools - that will become more important. Networks will need to bring something to both sides. Currently the power lies with the networks - not with the agencies or the publishers. But the market is telling us that this situation is likely to change: agencies will look to encourage everyone to work with their own buy side platform. This move will place the power back in the hands of the agencies.

What’s your view of DSPs (Demand Side Platforms such as Invite Media and MediaMath)? Do you think they will have a major influence on how ad inventory is bought by agencies in 2010?

NR: I think there is a role for DSPs in the market around the area of performance buying. DR is where the bulk of current media buying is happening and some see as the only way forward for digital advertising at the moment. Agency-owned platforms will no doubt replace the stand alone DSPs as we go through the next 18 months. Indeed some groups already have built out their own buying desks. The implications for publishers, especially those who up to now have had a history with brand advertisers, are a little disturbing.

DSP’s are really not helping evaluate or increase publisher yield, unless it’s from an unsold perspective. They are simply providing a viable alternative to network CPMs. Though the DSP’s improve efficiencies, ROI and help deliver relevant impressions to targeted audiences, there are still questions about the appropriateness and relevancy of the environment in which they do that.

LucidMedia recently announced it was brining its own DSP to market? Do you think ad networks will have to build out their own DSPs to survive?

NR: Yes they will - or at least have some point of difference which drives efficiency in terms of scale, yield and results. How long this will last for before the agencies have their own bespoke platforms in place is probably the more pertinent question.

Do you think RTB is going to have a major affect on the way online display is bought and sold? Does Adify have any plans to use RTB to trade ad inventory?

NR: Real Time Bidding is starting to gain pace and will continue to develop, especially as more availability increases. What effect will it have on display? I think when we discuss display advertising we really need to differentiate between brand and performance. RTB will help increase display spend. But you will not hear many premium publishers celebrating this fact. Conversations with many of the content publishers tends to lead to the opinion that their business models will either have to change, or collectively they must challenge the concept of RTB by not make inventory available to bidders. Adify currently has no plans to build out RTB capabilities - but the Adify Server will partner with those clients needing reach onto exchanges and want to use RTB for buying efficiency.

Do you think Behavioural Targeting works in the UK? Does contextual still return better campaign results?

NR: Behavioural Targeting works in the UK – and everywhere else - but only if it delivers results and improves relevancy and ROI. Like most forms of targeting: if the placements are set up in the right way to reflect and match the behaviour you are looking to monetize and you are reaching the relevant audience, you will get achieve the results your stated objectives. This will be even more enhanced if this is run in the right environment and within the right context. Which vendors’ performance is superior really is perhaps a question that can’t be answered from an overall perspective. Adify has a comprehensive BT offering across our platform, which many of our network builders use. Again this solution was built to manage scale and helps to improve yield and performance across the contextual sites in our networks.

What trends is Adify presently seeing in the display market?

NR: There will be an increase in display advertising driven by performance spend and enabled by exchange platforms. There will also be challenge to networks from the buy and sell side, as its role and relevancy around scale and yield is tested. A number of large ad networks will dominate the market, while smaller players will find it increasingly difficult to compete. I expect a fight back from publishers around content, data ownership and brand relevancy. Place your bets now please.