John Battelle: Glam Media, et al, "Flavor of Month"*

The CEO of Glam Media competitor Federated Media, John Battelle, isn't falling for any of Samir Arora's Glam Media hype. The problem? According to John in his recent interview with CNET's Stefanie Olsen, "horizontal" ad networks like Glam just aren't that compelling:

CNET: Vertical ad networks like Glam Media are really popular right now. Investors love them. Why do you think that is?

Battelle: Because people don't understand them and they hope things that they don't understand will pan out.

CNET: That's not very smart.

Battelle: Well, I just think they are the kind of flavor of the month, but you have to get down to where do you add value to the marketer and where do you add value to the publisher.

I think that there is definitely more value in a vertical ad network than in a horizontal ad network. So you can say look, I've got these 400 sites and they are all women's interest. Advertisers are going to probably pay a little bit more for that. I just don't think at the end of the day you can get the brand awareness and brand engagement using algorithms, putting (Interactive Advertising Bureau) banners next to content. You can get part of the way there. To get all the way there you have to have the kind of ecosystem that was the magazine business at the height of its expression, where you can really get into that and do some cool things working with the publisher, like (the equivalent of) a two-page advertising spread online.

The industry is really good at direct response advertising online. The problem with vertical ad networks is that until you have engagement, integration, and proof of that consumer awareness, you are just going to keep devolving down to direct response pricing, which is sub $5 cost per thousand (CPM) for an ad.

John then goes on to describe how his vertical ad network, Federated Media, is different:

We want it at the kinds of CPMs that supported the magazine and the cable industry, which is above $20, $30, $40, $50 cost per thousand. Advertisers will pay that once they feel like they're getting that value for it, and once the media is created that proves that value, and it's not just the publisher's job to create that media, it's the publishers working in partnership with the marketers and that what we try to do it with them.

*UPDATE: John Battelle quickly weighed in to say that he was speaking more of the ad-network frenzy as being the "flavor of the month," not Glam in particular. We have thus softened our headline summary of his remarks. We, personally, would love to see a debate between John and Samir on the ad-network topic and we'd be happy to host and moderate it. But in the meantime, here's a link to John's excellent post on the subject on Searchblog.

See Also: Much-Hyped Glam Raises $85 Million on a $500 Million Valuation

Disclosure: SAI is a client of Federated Media.