Recent news stories have begged the question: Just how many ad networks should there be? Underscore Marketing's president explores the limits inherent in ad networks.

A story in last week's Wall Street Journal characterized online media buyers as "scratching their heads" when confronted with the sheer number of ad networks competing for online ad dollars. Indeed, the number of ad networks seems to be steadily increasing, while the technologies and approaches that differentiate them are not.

Many of my buddies in the business rely on reach potential as a screener, so they can determine which ad networks are worth meeting with and which are "me too" imitators that don't add significant value to the ad placement landscape. The proliferation of these networks begs the question: Just how many ad networks can this market support?

That depends on how you define "network." To me, a network is an aggregation of inventory that is sold, albeit not necessarily on an exclusive basis, through a distinct sales force. It's a pretty broad definition, but others might be even looser with that label, applying it to cookie pools that don't necessarily have ad inventory attached to them, or to aggregated ad inventory that is bought solely on a self-serve basis. In comparison, I think my definition is pretty tight.

Theoretically, there can be as many networks as ad dollars can support. When we start looking at where the bottlenecks are in this business, however, there are plenty of functional limitations that limit how many ad networks can be viable.

Among them…

• Media buyer bandwidth -- Simply put, there's only so much time in the day. A single media buyer doesn't stand a chance of being able to schedule meetings and have meaningful dialogue with every single network out there. A typical buyer would be lucky to squeeze in the top 20 before getting overwhelmed. Networks that want to get on the radar screens of ad buyers on the agency and client sides will need to be differentiated enough from their competitors to convince buyers that there might be significant consequences to skipping a meeting. Otherwise, their only other option is to go completely self-serve (like Google's content network or many of the ad exchanges) and hope for the best.
  
• Position in the ad queue -- Raise your hand if some time in the past week you've had a web page completely hang. If you saw the name of a popular ad server in your request bar, the delay was probably the result of your browser getting confused by a tangled web of redirects that, collectively, were supposed to deliver an ad. It's not uncommon for several different ad networks to get a look at the same piece of ad inventory. If the first network in line has an ad to serve at an attractive CPM, it delivers it. Otherwise, it passes on it and redirects to the next ad network in line. User expectation is that pages actually get served up without timeouts and page hangs, so there's a functional limit on how long an ad queue can be if a publisher wants to be able to serve ads reliably and on time. Networks that have arrangements with publishers that call for "first look" at inventory, or top positioning in the queue, will tend to stick around. Networks further down the line might find themselves pre-empted by their competitors who are ahead of them in line. You might say that the number of ad networks is limited by the number of redirects ad servers can reliably serve without causing browser hiccups (or worse).
  
• Publisher bandwidth -- Working with a handful of networks is now the rule rather than the exception for many publishers, even if they have a dedicated sales force. Just as media buyers have only limited time to deal with network sales reps, publishers have only limited time to deal with affiliate relations and business development people from networks. While The Wall Street Journal article I linked to earlier showed that new businesses are emerging to help publishers figure out which networks to join and how to optimize their network mix for maximum profitability, the truth of the matter is that the money has to come from somewhere. With margins continuing to decline, publishers are hesitant to part with hard-earned ad revenue to pay for such services. Most publishers have a VP of Sales or equivalent executive ultimately approving network relationships, and if these relationships get too hairy to manage, you'll see publishers cutting back on the number of networks they'll work with.

There are additional forces at work against the continued proliferation of networks, but you get the gist. We may be overdue for a shakeout. While it's doubtful that one network will dominate the landscape on an ongoing basis, we may see Uncle Darwin select for only one or two networks in each category. (Behavioral targeting, content-specific, performance-based, etc.) Be sure to check on the financial health of a network before committing significant ad dollars. The sudden loss of a network relationship can often throw a monkey wrench into media plans, particularly direct response-heavy ones.

Tom Hespos is the president of Underscore Marketing and blogs at Hespos.com.