The ad game is rigged against online publishers, but sovrn thinks it can be the answer

By James Robinson , written on April 24, 2014

From The News Desk

There are 1 billion websites in the world, sovrn CEO Walter Knapp tells me enthusiastically. Eighty percent of those are inactive. Of the remaining 200 million sites, half are “porn or hate” and not suitable for advertising. Which leaves 100 million websites and tens of millions of publishers, all battling each other for attention and ad dollars.

Those one hundred million active websites represent an almost infinite amount of competition. The situation is a win for marketers and ad agencies. The real estate for them to buy ads is infinite and the data they have about all of us now is incredibly precise.

It’s publishers that lose, Knapp thinks. And they don’t help themselves, he says. They silo data, resist programmatic ad placements on their sites, set price minimums, and double down on native ad content, recommended link boxes and more and more banner ads, all of which turn off audiences. “They’re sticking their head in the sand,” he says.

On these grounds, Knapp wants people to think of his company, sovrn, as a sheep in wolf’s clothing. sovrn is a traditional ad exchange, but it takes the data it gleans from that and supplies it to publishers in the form of a dashboard, to give them the tools to better monetize and engage with their audiences.

sovrn is both new as of 2014, and eight years old. It began as Lijit in 2006 and grew into a network of 12,000 publishers before it was purchased in 2011 by Federated Media. Once under that roof, it kept growing and came to represent over two-thirds of the company. At the start of this year the Federated Media name and business was sold off and sovrn now represents a reboot of that and a return to its old focus.

Knapp phrases the essential dilemma sovrn is trying to solve like this: “Everytime I talk to a publisher, I’ll say to them, you’re getting five percent of your traffic from Facebook referrals and three percent from Twitter. You’ve got a 36 percent bounce rate and 40 percent of your traffic is coming from search. Each time they’ll ask me exactly the same question: is that good?”

Coming over from Federated Media, sovrn’s dashboard has 20,000 accounts, 4,000-5,000 of which Knapp says earned more than $600 last year from sovrn selling ads on their sites. sovrn gets a cut of each ad sale, but Knapp swears that the dashboard is its priority and point of difference. Each publisher can see detailed demographic information to identify high-value readers and get traffic breakdowns and reports on the advertisers who would be interested in placing ads with them, and how much those impressions would be worth. Launching in June, it will display baseline information for comparable websites so publishers can match themselves against rivals.

The mountain of third party data sovrn’s ad exchange needs is a publishing asset. “We’ve built an ad business, but we’re not beholden to it,” Knapp says.

I counter to Knapp that many publishers are hurting and that so much ad spend is heading to search and social media, that sovrn linking so closely with content creators in 2014 might be a doomed business play. “I could be wrong. This could be a spectacular crash and burn,” he laughs.

In a somewhat grandiose manner, Knapp says that sovrn is about helping publishers make more meaningful decisions by understanding their audience and knowing what works best for them.

Although by giving publishers even more information to chase what their visitors are clicking on, Knapp could easily be feeding the same beast he is trying to fight. “I don’t think so. But it’s a good question,” he says. “We’re giving publishers an understanding about how they can use third party data to their benefit. And you know, to chase high value readers, you have to create high value content.”

Knapp clearly sees sovrn as an ad network that is a publisher’s partner, a tool that can enable them to be better and more profitable. Viewed more cynically, it might also be seen as an ad network trying to appear friendly to publishers, to coax previously resistant websites into allowing sovrn to sell ads for them.

So long as the supply of ad space online is abundant and sells for pennies, the market is always going to tilt against publishers no matter how much data they have. But Knapp disagrees that his company is trying to convince publishers into perpetuating a rigged game. “Every publisher returns to this question. They’ll say, 'I used to get $20 CPM and now I only get $3.' But that’s a false notion. The Internet doesn’t shift profits, it destroys them. They’re not coming back,” he says.

Knapp clearly imagines sovrn as working for the greater good of readers everywhere, but it could also be seen as profiting by convincing publishers to make the best of a bad situation. His company is a new, yet old, entity with a broad customer base to help it hum along nicely for now. But trying to reestablish itself as a brand is a central tension it is going to have to overcome.

[image via wikipedia]