Despite all the innovation in display and talk of disintermediation, ad networks are still doing pretty nicely. They're still making big margins. And more importantly are still delivering performance for agencies and advertisers. But the threats to their business model remain from both the buy and sell side. ExchangeWire spoke to Tim Brown, EU General Manager at Tribal Fusion, about how Tribal Fusion will offer value to publishers and advertisers and why he's not concerned by increasing competition from exchanges, SSPs and DSPs.

From the perspective of a leading ad network, what kind of top of level trends did you see in the display market over 2010?

TB: There was a big change in the level of understanding and sense of urgency about the new opportunities in audience buying and display technology. It’s still early days but we’re finally past the blog fodder stage. Advertisers and agencies are learning fast how networks in particular can deliver precisely-targeted audience buys at large volume, overlayed with incredibly rich creative solutions. The shift from buying sites to buying audiences has gone past tipping point. Everything that happens from now on in will be about how we can help advertisers do that best and help publishers deliver the inventory advertisers (and their users) need.

As part of that, agencies are reducing the number of networks they work with to focus on real partnership and to work together to deliver media plans that meet their clients’ objectives. As the supply of inventory that is not traditionally channel-focused continues to grow, particularly fuelled by the likes of Facebook, agencies recognise the need to use networks that can deliver their target audiences in an environment where buying, for example, ‘finance’ is no longer nearly enough.

Lastly, there was a definite – if long-awaited - emergence of brand-focused campaigns on the web. Direct-response remains dominant but brand-led campaigns, thanks to the loss of traction through traditional media and the rise of video on the web, are growing in frequency.

The video ad market grew significantly last year, and is forecast to expand further in 2011. Can you give an overview on how Tribal Fusion is helping media buyers buy across video inventory?

TB: Tribal Fusion, with our video product Firefly Video, has a unique ability to deliver that golden combination: the emotional impact and engagement of ‘TV’ (as in ‘TeleVisual’) with the fine-grain targeting, rich audience insights, and interactivity of online display advertising. As advertisers increasingly look for video inventory to buy and publishers look for it to supply, we are expecting very big things from Firefly Video this year.

It lets advertisers reach over 29m UK adults across the Tribal Fusion network and, using our own Insights tool we can identify an advertiser’s consumers on the network and build a custom campaign to reach these people with the most engaging and compelling video executions imaginable.

Given the demand, we want to make buying online video simple and easy for clients and agencies, and part of our commitment to this is a dedicated creative team who produce all of our Firefly Video campaigns. We provide this creative service to clients for free. We also provide a full post-campaign report, detailing all engagements with the campaign and making it easy for buyers to understand what impact their campaign had on the consumer - for example, how many people engaged with the video or how many people shared the video via social media like Twitter and Facebook.

Advertisers are understandably eager to commit to video-enabled campaigns and publishers, for both their users and their advertisers, are eager to supply them. We’re obviously happy that Firefly Video puts us in pole position to deliver on that demand.

The ad network business is currently being forced to iterate its model. From a supply-side perspective your traditional role of inventory aggregation is increasingly being replaced by SSPs and Exchanges. What kind of value do you think an ad network, like Tribal Fusion, can now offer publishers?

TB: The optimisers’ pitch is clear and compelling – one point of contact and higher yields. But, aside from the 10-15% margin that’s lost from the value chain, agencies are reacting to the first by reducing the number of networks they work with and we would fundamentally dispute their ability to deliver on the second. We know that, in the short-run, they are able to get publishers higher yield for only the most premium inventory, while the rest – maybe 90% - will be utterly commoditised. The economic principles at work will be straightforward – with publishers selling their inventory through tens of networks, supply will overtake demand and yields will drop lower and lower. That’s no good for publishers or – in the long-run – advertisers, since it is incredibly smart audience (not inventory) aggregation that will deliver better performing campaigns and thus growing yields. When it comes to audience aggregation, networks are the experts and – as you’d expect me to say – Tribal Fusion is the best of those.

With us, publishers gain a genuine, global partner that is able to work directly with the buyers to deliver higher yields across their entire inventory, not just those impressions that seem the most valuable. When you are able to aggregate audiences in an incredibly targeted way, an impression that bidders through SSPs might see as worthless, is invaluable to the right advertiser and campaign.

On the demand-side, the growth of DSPs and trading desks is eating into ad network margin. How can ad networks remain relevant and deliver better performance for agencies and advertisers?

TB: Our Founder & CEO Dilip Da Silva said the following: “People have been predicting the demise of ad networks since their inception, yet they continue to thrive. Why? Because delivering the integrated capabilities, doing it at significant scale, running thousands of concurrent campaigns, serving 10’s of billions of ad impressions per month is very difficult. It requires deep technical capabilities, data management and analytics, and advertiser and publisher relationship management skills. Once a network learns how to do it successfully it finds itself in a highly enviable position. When you create value for clients and do something that helps them succeed, they keep coming back for more.”

In a nutshell, what networks do is very difficult. We’re not concerned that others will be able to supplant technology, data and relationships that take years to build. If we continue to evolve at our current rate and deliver the kind of results for advertisers and agencies that we do, we’ll become more, not less, relevant.

Do you think ad networks will have to choose a side? And is it more likely to be a move towards the demand-side?

TB: I don’t think so. Publisher optimisers look more like networks the moment they talk to anyone but a tech contact at an agency, while DSPs and agency trading desks look increasingly like networks as they add publisher relationships and value-added technologies. If anything, the trend is to offer services across the value chain in an integrated manner. With such a blurring of the lines, there will be no sides left to choose, just a market where the businesses that deliver best for advertisers and publishers will thrive.

Is it a case of whoever has the best optimisation layer will ultimately win budget allocation?

TB: No. While we are a technology business at heart we have been doing this long enough to know that people matter just as much as algorithmic horsepower. Performance, service and innovation all go together. You can’t all be at the top of the plan all of the time so delivering performance with high service levels – and real insight – has its value as does the ability to bring new ideas to the relationship that can then be shared with the advertiser.

You’ve written several posts around data and audience-targeting on your AdNtwork4.0 blog. Can you give some insight on what Tribal Fusion is doing in this area?

TB: We have had a couple of major initiatives over the last 6-9 months. Firstly, we have been using our audience data and marketing analysts to go back to clients, either pre or post campaign, to both validate what they thought they knew about their customers but also to tell them a few things they didn’t know. For an example, if you’re an auto manufacturer, you would be pleased to know that auto in-market behaviours are indeed most predictive of a site visit or conversion but you might not have known that cookery segments worked well – because of the underlying psychographics – and were less competitive. Secondly, because our data aggregation and targeting capabilities sit on the same platform we’ve been trialling the analytics approach to build audience models for brand and brand response advertisers that we expect to take to market in the coming months.

Tribal Fusion has been enjoying success across Europe, particularly in the Spanish market? Can you give some insight into the Spanish in terms of how display is bought and sold? Is the real opportunity in Spain access to the South American market?

TB: For some quick context, according to the IAB, digital advertising in Spain reached €750m last year, a 13% share versus traditional media, with 30% spent on display and 55% on search so it’s a very good opportunity; sizeable with room for growth.

Display has a good share of the market but it is still bought chiefly by site rather than audience - 80% of the display investment is concentrated in the top 20 properties. And this is where the opportunity lies, to help drive the evolution to audience aggregation, segmentation and buying, as well as creative tools such as Firefly Video.

The market is becoming more mature and advertisers are becoming more demanding in terms of their ROI expectations. They are also asking agencies to measure not just CTR and conversion but more sophisticated metrics such as engagement rate, dwell time, capacity to reach a specific targeted audience segment, conversion rate with post impression etc.

There are 30 ‘networks’ in Spain but only three of what we would understand as ‘a network’. The rest are affiliate networks or sales houses. And most of the display advertising technologies dominating thinking in the US and UK – DSPs, SSPs etc. – are not yet here, though the big five agencies are launching their trading desk.

Firefly Video has been a particular hit in Spain as online video usage here takes off – we have 45 premium advertisers using the platform.

Spain for us is an opportunity in itself, as is expansion in the rest of Europe. We already have offices in 17 locations so it’s not about using this as a basis for reaching into South America but achieving growth in Europe by doing as much as we can to help advertisers evolve.

What can we expect to see from Tribal Fusion in 2011? Will there be a bigger push into video? Or a possible move into the mobile display market?

TB: We have three big themes for 2011. Firstly, we want to share more with the market about the insights we’re finding from our audience data and give more opportunities to buy against that insight. Secondly, we saw a lot of traction with Firefly Video in the second half of 2010 and have now reached the critical mass of scale and operations to push this further. Finally, we have the global inventory and operational scale to support more rapid international expansion. We opened our Spanish office in June last year and expect to open several more markets in 2011.