Time Warner's Digital Media Strategy: Moving Into Ad Networks

In a previous post, I discussed Time Warner’s (TWX) digital media strategy. In this one, I will analyze their move into Ad Networks, via an investment in Adify, a small company providing technology infrastructure services for building and running ad networks. [If you are new to the field on online advertising, please read my interview with the CEO of Adify for domain knowledge and a mapping of players and business models.]

Time Warner has recently joined hands with NBC (GE) to form a Media fund; the investment in Adify comes out of that fund.

The first Ad Network they are building with the Adify technology is around Sports Illustrated.

Time Inc. continues to account for nearly a quarter of the advertising revenue of all U.S. consumer magazines. Time Inc. ended 2006 with three out of the top four magazines in both advertising revenues and pages. People remained the #1 magazine in advertising revenue for the 16th consecutive year. Time and Sports Illustrated remained #3 and #4. Seven of the top 25 magazines in advertising revenues in 2006 were Time Inc. titles. This move into Ad Networks is a great way for Time Inc. to leverage its brand position in magazines and web sites, and better utilize its ad sales force and advertiser relationships.

My guess is, Time, Inc. will create ad networks in three other categories where they are very strong: Business, Women, Parenting; in addition, they already have launched the Sports Illustrated network. They are also likely to create Ad networks around popular culture, people, and politics.

Below is a short-term revenue model analysis, using the formula from my previous post on Blog monetization (you can plug in numbers and draw your own conclusions on other categories):