AdRoll Emerges From Private Beta With Co-Op Economics For Blog Advertising

adroll-logo.pngWhen it comes to advertising for blogs, there is Federated Media for the biggest ones, and for everyone else there is AdSense (or some other low-paying ad network). Jared Kopf thinks there is room for a better alternative in between the two. His startup, AdRoll, (see our earlier coverage) brings together niche publishers into self-selecting communities that, when rolled up, are big enough to attract brand advertisers. Today, AdRoll is coming out of private beta and introducing new economics for bloggers who join.

Blogs who join AdRoll can set their own bare minimum price that acts like a private reserve on eBay. Advertisers bid for that ad inventory, and whenever the AdRoll price is higher than what the blog can get from AdSense, AdRoll swaps in one of its ads in the same spot normally occupied by AdSense (or Glam or Pubmatic or whatever ad network the blog uses). But AdRoll only gets to show its ads if it can beat the price that the blog is getting from AdSense (after AdRoll takes its 30 percent cut). And the pricing decays with time as ad inventory gets closer to expiring, so that an ad for tomorrow is cheaper than an ad for next month.

adroll-community-pricing.pngBut where AdRoll becomes interesting is when blogs join communities of like-minded blogs. For instance, there is a community for surfing blogs, car blogs, sports blogs, and book blogs. By joining forces, 6 to 12 blogs with similar readerships can offer half a million to a million readers a month that share a common interest. During the private beta, about 600 publishers created 140 different communities. In order to motivate blogs to join a community, AdRoll only takes a 20 percent cut from ads that run across these groups, leaving more ad dollars on the table for the blogs. Says Kopf:

It is really about designing the right compensation structures and incentives to encourage sites to work together and sell more.

This is co-op economics at work. The idea is that small blogs should be able to band together to command a higher price for ads than they would be able to on their own. The effective CPM (cost per thousand impressions) that blogs are getting on AdRoll is about $1.50 (which is much less than the $10-plus that Federated Media is getting for the blogs in its network, but it is better than AdSense).

Anyone can create a blog community. That person becomes the leader of that particular community, and he or she can set the minimum price for ads on that community. The leader can also set a commission rate for participating blogs who bring in their own advertising to the group. That way, the bloggers themselves can sell ads for their network. (More details on Adroll’s economics here). Kopf hopes all of these incentives will be enough for community leaders to assemble the best audiences possible.

This is a classic Long Tail business. Roll up the niches and sell targeted advertising. Repeat 10,000 times.