Bold move by CBS Interactive

The CBS Interactive decision this week to join other major publishers in refusing to take ads from most third-party ad networks is one of the biggest stories of the year, because of the cascading effect that, I believe, will follow. Other major publishers, like ESPN, Turner, Gawker, Conde Nast, Martha Stewart, and Forbes, have done likewise, so what’s up? Even CBS admits it’ll cost them income in the short term, but something much bigger is at stake.

ESPN started all this in the late Spring of 2008, and CBS quickly followed with its sports properties. Here’s what I said at the time, and it’s still appropriate.

What most people don’t understand is that the hidden value of an ad served on any website is the cookie data from the users who visit that site. In my opinion, this data belongs to the media company, not the network serving the ads, and more and more media companies are beginning to see it this way. The problem is that media companies have no way of monetizing that data absent running their own ad networks, and this is one of the big reasons you’re seeing this taking place.

Ad networks use the cookie data to target ads elsewhere, so it has a real dollar value. The question is whether the money the media company receives for exposing ads to its audience is sufficient to include the value of that cookie data. Clearly, ESPN and CBS don’t believe it is.

Publicly, CBS Interactive is saying that third-party ad networks lower the value of their ad impressions, and that’s certainly true. In the aggregate, though, they make a lot of money from these networks, and CBS will lose that in the beginning. The network is creating its own ad server, something called “Madison,” so they’ll clearly be in the ad serving business. And given the number of properties they own (CBS.com, Gamespot, TV.com and CNET, plus their O&Os), it will be a big one.

Jarvis Coffin, CEO of Burst Media (a third-party ad network) wrote that CBS Interactive needs to exercise care in potentially creating its own monster.

If the same discounted opportunities continue to exist through Madison then CBS Interactive will start fighting with itself instead of third-party networks. In the final analysis it doesn’t matter who sells it; it matters only what it sells for. So they should proceed carefully, because internal fights are far more destructive to a host than fights with third-parties.

CBS Interactive CEO Neil Ashe told Advertising Age that Madison will offer advertisers audiences based on demographics or behavior. Behavior is the big word there, and that requires data, data that those who don’t serve their own ads just don’t have. Note the key word in this statement by Ashe:

“What we are careful not do is open our inventory to third parties that may have data interests not aligned with our own,” Mr. Ashe said.

Third-party ad networks steal data and then use it to serve ads to audiences apart from the original properties from which the data was obtained. Therefore, it’s possible for one of the big ad networks to capture user data from CBS.com and then serve ads to those people away from CBS.com, so what’s the point of advertisers paying any sort of premium to CBS.com? This is the big controversy that’s unfolding in stories like this.

What will happen next will raise the price of online advertising, simply because advertisers and agencies will have to deal with so many more networks. Efficiences go down; ad prices go up. I think this is good and healthy for the industry, and I’m convinced that this will be the big theme for media companies in 2010. Serve your own ads and get into the data business. It is and will be your entry into the back end reality that is the Web. More importantly, it’s the path to real profit.

Speak Your Mind

*