Ad networks normally take a 30-40% cut of the revenue and pass the bigger part to the publisher. The question is whether we deliver more value than we cut, and I believe the answer in most cases is *absolutely yes*.

Here are a few ways we add value that would be very difficult for any single publisher to do on their own:

1) Appeal to large advertisers and agencies – I agree 100% with what Zach Coelius said above – it’s usually very difficult for any single publisher to attract large advertisers and agencies. The ad network facilitates larger ad buys for those and all participating publishers benefit in a way they could never do on their own.

2) Yield optimization algorithms – On auction-based networks (like Quigo and Google), the highest bidded ad in most cases is *not* the ad that would yield the most $$’s for the publisher. To find the highest yielding ads you need to crunch a lot of data and test ads on a massive scale. 99% of the publishers in the world do not have the scale necessary to make yield optimization algorithms efficient. Without this network value, the publisher will be rotating low yielding ads and would effectively be leaving a lot of money on the table.

3) Account management & expertise – Remember that online advertising is very very different from traditional advertising. For one, it needs to perform well for the advertisers… Most publishers do not have the expertise in-house to help advertisers with setting up bidding, optimizing for ROI, managing their budgets, etc, etc. This is a huge component of what we bring to the table as a network.

4) Vibrant marketplace – One of the big values auction-based ad networks bring to the table is a vibrant bidding marketplace. For that, again, there is huge value in aggregating many advertisers bidding each other upwards. A single publisher would find it extremely difficult to attract even say 100 advertisers to bid each other up.

5) Etc, etc.

I’m rooting for OpenAds and I think they are a great solution for mid-tier, well-defined special interest niche sites, operated by highly technical folks. Those are sites that could benefit from hand-picking the few advertisers that would work best for them and their audience. Boing Boing or Slashdot are good examples. The ads on Boing Boing are perfect for their audience and no ad network would be able to pick better ones.

But for all other publishers I think the ad networks add a ton more value than they take off the table.

At Quigo we’re focused on getting our publishers the best of both worlds: The advantages the ad network brings to the table, combined with the advantages of selling to advertisers directly, under the publishers’ brands and owning those relationships with advertisers. This is very different from “black box” type ad networks like Google & Co which are the absolute opposite from a platform like OpenAds.

Thanks again for writing this interesting post.

Scott is right. Adsense does not work for “regular” bloggers/webmasters with low traffic.

When I say “does not work”, I mean very profitable. Adsense pays when you have lots of eyeballs.

Give me an example of a “hobby” site with high quality content that has made anything more the pocket change from AdSense.

That is simply not true. Hobby sites who have great relationships with readers but no interest in selling ads themselves have benefited from Adsense.

But only if the tools like this continue to get better, which is what I’m assuming the investment is for.

Openads (at least the old version I’m using) is nice, but a real pain in the butt to figure out and use really. Confusing to say the least.

I’d like to see some more niche level type creative ad serving options come out this year. Hey, maybe I’ll just build my own.

I think I will!

Quigo is in part responsible for forcing Google’s hand.

The effectiveness of AdSense for advertisers depends a lot on scale — the more targeted/niche the advertiser is, the less efficiency there is AdSense/ad network aggregation, especially given the loss of control.