Michael Zimbalist is vice president of research and development operations at The New York Times Company (NYSE: NYT). Previously, he was president of the Online Publishers Association.

Pop out your earbuds at any online event these days and it’s a good bet you’ll be surrounded by chatter about demand-side ad networks, real-time bidding, and ad exchanges. These topics have burst into the digital conversation with a force not seen since keyword buying transformed the online-advertising mindset more than five years ago.

Virtually every agency, at the holding-company level, has formed a so-called demand-side network as distinct from the traditional “supply-side” ad networks into which publishers supply impressions for resale to agencies where the demand resides. The effect that demand-side networks have on publishers depends upon how these relatively new entrants evolve within the marketplace. It’s possible that they could push us even further in the direction of direct response. But it’s also possible that they could reduce the emphasis that marketers currently place on clicks, sparking a greater appreciation for the value of reach and frequency, and ultimately driving more ad spending to the web.

The motivation for the demand-side networks is simple. Agencies have always struggled to buy online display profitably because there are too many suppliers. Last year, Razorfish alone reportedly did business with more than 800 online media vendors. Think about that for a minute. Buyers in the TV world can get all the advertising they need from just a handful of vendors. The same goes for magazines and newspapers. Buying online display requires hundreds of suppliers, meaning more back-office expense in the form of billings, collections and accounting. 

As a result, agencies have been increasing their spend on ad networks relative to their spend on individual sites, in part because of the lower price that networks offer, and in part because buying a network amounts to buying a bundle of sites all at once, simplifying the planning process and eliminating lots of overheard. 

But agencies have woken up to the fact that even as they struggle to make online buying profitable, the ad networks are reaping huge operating margins. And they make these margins by doing essentially the same media planning work that agencies are supposed to be doing for their clients! 

If demand-side networks can squeeze out the supply-side networks, that would leave more margin for publishers and agencies to share. And agencies would actually pay less for non-premium display inventory while publishers could charge more. 

But the demand-side networks are entering a complex ecosystem. They’ll be toiling alongside buy-side optimizers, who seek to discover the lowest price for buyers from multiple suppliers, and sell-side optimizers, who try to find the highest possible price for sellers. These intermediaries also crave a slice of the margins that supply-side networks rake in. 

Here are three possible outcomes to the turbulent transition now underway as demand-side networks make their presence felt in the marketplace:

1)  Same Beer, Different Label: Demand-side networks end up being an awful lot like supply-side networks since they currently have little choice but to acquire impressions through ad exchanges, which remain dominated by arbitrage between supply-side networks. As clients begin to see agency-owned networks on their media plans alongside the likes of ValueClick (NSDQ: VCLK) and Ad.com, they will ask legitimate questions about whether they are getting the best value for their money. Demand-side networks will thus be evaluated largely on the basis of price against the incumbent supply-side networks. 

It’s hard to see how this outcome leaves publishers any better off than they are today.

2)  SEM for Display. : The holding companies align their SEM practice with their demand-side network. Clients get comfortable with budget-based buying for their non-premium display. The media plan is wholly subordinated to the outcome, which is evaluated entirely as CPW (cost-per-whatever). Real-time bidding for impressions is enabled both within and between the demand-side networks. True competition for each impression raises non-premium prices; the demand side is advantaged by better buying tools while supply-side networks struggle because publishers become more comfortable allocating their non-premium directly to the ad exchanges. 

This outcome is better for publishers in that it increases non-premium pricing, but it has the disadvantage of firmly rooting online display in the realm of performance marketing. 

3) Audiences on Demand: Demand side-networks move beyond the realm of performance marketing and begin to focus on delivering reach and frequency against a designated target, measured in GRPs (gross rating points). Clicks diminish in importance. The media plan matters a lot, because the affinity of audiences for specific websites deepens the impact of brand advertising. Marketers meaningfully shift their TV dollars online with greater confidence because online delivers something they understand and need to achieve their brand objectives. At long last, audience truly becomes the basis for both planning and buying online. 

This is the best outcome for publishers.

I can already hear hoots and howls from online purists, scoffing at the thought of measuring the web using reach and frequency.  It’s about relationship marketing! It’s about harnessing user intent!  All true. But what’s also true is that TV continues to get the majority of brand dollars even as its audience vanishes. Demand-side networks selling reach against target could challenge TV to the benefit of buyers and sellers alike.