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There has been a proliferation of online ad networks over the last decade although like any technology these ad networks have evolved and developed.  I would argue that we have seen a progression of three distinct generations of ad networks and now starting to see some leaders talking about the newest form of ad network; one that is highly personalized and is more individually focused.

Basically, all Ad Networks are based on the notion of representing a group of web sites in selling advertising, allowing advertising buyers to reach broad audiences relatively easily through run-of-category and run-of-network buys. But the difference between the Ad Networks is the technology used and the focus of the online publisher community- either highly verticalized, long tail sites or premium sites etc…

First Generation: Inventory Aggregation

The first generation of ad networks were built on their ability to aggregate and control inventory from a wide array of websites. They basically brokered publisher relationships with Advertisers…. Inventory was bundled together to provide reach (and sold as a site, channel or Run of Network). This inventory was typically  remnant or distress inventory but provided an efficient way for advertisers to buy ads at a cost effective way.

Second Generation: User Tracking

The next generation of ad networks evolved to using third party cookies and ad pixels within their publishers pages in order to be able to track users across all of the web sites in their network, and to start to target advertising based on recognizing a user when they showed up on different sites.

Third Generation: Improving Targeting Techniques

The next innovation in ad networks pioneered behavioral targeting. Not only were they able to recognize a user across their network, but they could begin to predict which users had a greater propensity to click on a particular ad based on their past surfing behavior.

Together, these three elements represent three of the four core competences of ad networks:

Aggregating Inventory
Aggregating Data
Targeting
Performance (Sales/Leads etc)

Next Generation: Personalization

So this next generation Ad Network has a lot at stake given the large numbers of Ad Networks in the market and the contention for new advertising and publishing deals. Each Ad Network is looking for an ‘edge’ to attract (and retain) clients.  SinoTech Group who also has a significant Chinese Ad Network (SinoAds), is not different in this aspect and is also looking towards new directions to provide value to the publishers, advertisers and users.

The basic premise for the next gen Ad Network is:

• Advertisers need to get better at creating a 1:1 experience for their users.
• Advertisements need to be increasing personalized- using XML data with the flash.
• Users need to be able to give prompt, immediate feedback to advertisers

Also the delivery of ads needs to be extended from simply pushing ads to web browsers and mobile phones…  The value system needs to be completed turned on it’s head… Why should a website get most benefit from adverting revenues? Why not use micro-payments and targeted offers to  build consumer buzz? Why not use desktop Widgets or other windows for advertising display? So for those Ad Networks that can crack these challenges and bring scalable social ad network technology to bear have significant potential (and value).

If you are not convinced that we will shortly be seeing social re-engineering of Ad Networks then you just need to look at the retric coming out of Facebook and Google.  Both these companies are seriously looking to develop revenues around advertising on social widgets. Even MySpace and AOL are working on their own flavors of socially-targeted ads. While these efforts are all couched in terms of making it easier for consumers to share data about themselves between the sites they care about, don’t be fooled. They are less about sharing data than about targeting ads.

Erick Schonfeld, wrote a post on TechCrunch that speaks about the introduction of ads through Facebook Connect being an obvious way to expand revenues. He said in his post:

“Facebook had even began testing ads on third-party application pages. It also introduced a commenting widget for sites that use Facebook Connect which expands the footprint of FB Connect on sites that install it. One can imagine other Facebook Connect apps, and even third-party apps, appearing on partner sites. The more real estate those apps take up, the more room there will be to insert an ad or two”.

Google is rumored to be working on Friend Connect (Google’s answer to Facebook Connect) to allow ad display “Friendsense” (Friends + AdSense).

So, I content; the next evolutionary step in Ad Networks is ‘Social” and  it is only a matter of when, not if, it will occur.

For those that are interested in joining the beta testing program for SinoTech’s New 4th Generation (Social) Ad Network (U2Mee) can send me an email or leave a comment.

UPDATE: SinoTech Group has signed an agreement with City Media (China’s largest Print classifieds company) to draw this print classified into U2Mee and provide an online classifieds system that will use geo, contextually and behaviourl targeting.