Speakers (from left to right): Ahmet Ozalp, Partner, Atlas Venture Capital; Keith Smith, CEO, Zango; Antti Öhrling, Co-Founder, Blyk; Shanthini Sarkar, SVP of Operations and Product Management, ADSDAQ by ContextWeb; Joel Dreyfuss, Editor-in-chief, Red Herring and panel moderator

Red Herrring Global 100 Conference, Seattle, Washington, December 4

“What’s the revenue source for new digital distribution models?” Joel Dreyfuss, Editor-in-chief, Red Herring, asked Ahmet Ozalp of Atlas Venture Capital. “And how will user generated content be monetized?” Ahmet responsed with the obvious (though relevant) answer. The two main revenue sources will continue to be advertising and subscription models. As a VC, he added, he’s interesting in investing in companies that are building out the infrastructure needed to support the digital distribution, along with investing in companies that are part of the new digital distribution medium.

Next, Joel raised an important and sensitive issue: total online ad spend world wide was only 6% of all ad spend in 2006. If users are spending more time online, why are advertisers not allocating more of their budgets for online?

ADSDAQ by ContextWeb’s Shanthi Sarkar made the point that online audience is fragmented. There are few ways for advertisers (especially brand advertisers) to reach their target audience and control their brand. They can buy directly from a single site, but very few sites have large enough reach to meet advertiser’s needs. Audience behavior has also shifted in the past two years. According to eMarketer, users spend 61% of their time online viewing sites other than the top 20 portals, and they’re spending more time on niche content sites. Ad exchanges, such as ADSDAQ, provide advertisers with a way to reach a large audience, while providing them with the ability to control their brand by not displaying their ads on inappropriate content. Because of business models, such as ad exchanges, Mrs. Sarkar predicated that we’ll see more ad dollars being allocated to online.

Pushing further, Joel asked, “In what way can ADSDAQ give this type of control?” Shanthi explained that ADSDAQ’s real-time technology targets at the page level. The targeting capability excludes pages with negative content. Ad exchanges have an advantage over ad networks, as networks manually categorized sites into channels, and ADSDAQ’s real-time, automated technology is dynamic. According to Technorati, 120K new blogs are published daily, which means they’re virtually impossible to manually categorize. Traffic to the new content is highest right after it’s published, so manual categorization can’t compare to the real-time, automated technology in the fast growing world of online.

Joel discussed Blyk’s business model, which involves an exchange for mobile advertising, with Antti Ohrling, and Zango, a gaming advertising group, with Keith Smith. The panel wrapped with Ahmet Ozlap stating that, as a VC, he’s very bullish on the digital distribution models and thinks there are great opportunities to be found.

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