How do you value an ad network?


Ben Shepherd writes: According to the Oz Media section there’s rumours that a few of the local ad networks are shopping themselves around.

http://www.theaustralian.news.com.au/business/story/0,28124,24993096-7582,00.html

They name 3Di, Postclick and Ansearch’s Media division.

My question. How do you value a company – a third party ad network in this case – that really doesn’t have any unique IP? They represent other peoples sites – frequently non exclusively – and generally use other peoples software to make it happen. What do they really own that they can sell to a buyer?

These groups are different to the likes of Drive/Adconion/Google/Right Media in that the value of those companies is their technology.

Is there much of a business in 2009 being a third party sales force? I would imagine the pressure would be intense from all angles – stakeholders, sites and advertisers.

Liam writes: It is a very tough business to be in and extremely thankless. Not sure margins are slipping that much, I think that has mostly happened.

And of course I believe technology driven businesses are valuable.

What needs to be understood is repping versus non-technology businesses doing cpa deals via remnant. The latter has been quite successful for some local operators. Very successful actually. It is rapidly coming to a close as the value proposition is poor.

The former, third party repping is mostly doing it tough but it is fair question about trying to ascertain the value of the asset. It is elusive.

They are essentially businesses of sales people and some operations. The main differentiator is quality rather than specific service differential. In a service business where the differentiator is quality of people, there is nothing much to buy.

An asset is tangible, it is a process, it is a technology, it may be a supply chain. It is not smart people, these can be hired.

But I am not sure it is much different for an ad agency. Those businesses dont have much unique about them. The bigger ones tend to have better people and better quality but when the good people leave so does the revenue.

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