I recently wrote a post about the ways in which ad networks can differentiate themselves.  One of the three key considerations is type of inventory.

With a belief that ads will continue to penetrate more facets of our lives, I think that ad networks targeting non-traditional inventory are quite interesting.  By non-traditional ad inventory, I’m referring to media that does not currently have ads placed on it.

While I spend a decent amount of time evaluating companies that are targeting non-traditional inventories, there are a couple of reasons why we often pass:

• First, the entrepreneurs often haven’t completed a thorough assessment of their addressable market size – often misstating their market as their addressable market. After a bit of probing, I find that these companies have addressable markets that are too small for us and we end up passing. While there might be an opportunity for the business to be large enough to support a profitable business, the addressable market isn’t big enough to provide the types of returns that we need.


• Second, in order for ad networks to scale their businesses they need both advertisers and the owners of inventory to subscribe to their services.  With truly non-traditional inventory, there is often a cultural chasm between the way advertisers and/or inventory owners think about the inventory and the way the ad network intends to monetize it.  I’m told that there was initially hesitance to insert ads into magazines, radio shows and, yes, the Internet.  While the opportunity associated with some non-traditional inventories is sufficient enough to drive adoption, for other types of inventories it’s not.

Ad networks targeting non-traditional inventories are generally very interesting to me (and potentially other investors). Just be sure you really understand the addressable market and try to demonstrate adoption before raising money.

Comments

[Richard Kligman]

Hey Mark,

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