While no one can predict the future of the internet, it's universally acknowledged that advertising budgets traditionally allocated to TV, newspapers and magazines have been steadily moving online, and it's hard to find anyone who will argue that the trend will slow down in the coming years.

So, why then would anyone suggest that the current crop of ad networks might have seen their best days?

One reason is the very prominent dumping they took from ESPN, specifically at the hands of Eric Johnson, ESPN's executive VP, multimedia sales, who adamantly declined to comment for this article other than to say, "It no longer suits our business needs to work with ad networks."

Another might be the hits many ad networks have been taking in private conversations among advertisers and publishers, based not only on a worrisome lack of transparency in online ad networks, but on irritating issues of channel conflict and growing interest among advertisers in developing online campaigns that seem to demand more than the current generation of ad networks can deliver.

Simply put, advertisers have long been concerned about where their network ads are running, and only recently have begun to receive enough data to find out. Less tractable has been the problem of so many ad networks buying so much inventory on so many of the same websites. The resulting channel conflict (less politely known as "cannibalism") is what presumably drove ESPN recently to change course away from offering its excess inventory to online advertising networks.

On a more positive note, the growing sophistication of audiences and of advertisers themselves -- with respect to online opportunities -- are now creating the climate in which advertisers can think about moving beyond the capabilities of most established horizontal ad networks.

But to say that online advertising is evolving is not to say that "old school" business models have lost their value, or that existing ad networks are not capable of changing to meet these advancing needs.

In a nutshell, online advertising networks will almost certainly survive in one form or another because they continue to offer important efficiencies to advertisers, agencies and media planners.

"Over the last couple of years, the internet has become more fragmented, and advertisers simply don't have the time to talk to every small publisher," says Aaron Kessler, Piper Jaffray senior research analyst. "They handle that issue with a network-based approach. Agencies, too, from an efficiency standpoint, don't want to spend the time to contact hundreds of sites. So I think there's still a lot of value in the networks."

But internet advertisers today want more than simple efficiencies. "I think you are seeing advertisers and brand marketers looking for ways to make better use of their dollars and looking for vertical expertise to help them target and reach specific audiences," says Robert Tas, president and CEO of Sportgenic, a media and technology company focused on connecting marketers to sports enthusiasts. "And I absolutely think that ad networks are going to provide that vehicle."

While smaller sites often rely on networks as their primary sales force, larger sites also need a network relationship to help them monetize unsold inventory. The recent spate of M&A activity around online networks during the past 12 months, in fact, almost certainly reflects the growing understanding of the power and value networks bring to both advertisers and publishers.

The challenge over the next 12 or so months, according to many experts, is for publishers and advertisers to find new ways to maximize the value of their relationships with ad networks. Publishers are eager to end the channel conflict that hurts their own direct sales efforts, while advertisers are starting to see the advantages of finding cost-efficient ways to expand online from direct marketing into branding campaigns, with their entirely different goals and metrics.

For years, ad networks have been built and sold to aggregate publisher inventory and to enhance advertisers' targeting capabilities. But more recently, we've seen the growth of vertical ad networks, which offer advertisers entirely new opportunities to optimize their ROI and better target specific users.

We're also seeing the advent of online video, which could present new and powerful opportunities for brand marketers to colonize and develop online territory.

And the ongoing consolidation of the market -- everyone agrees there won't be room for more than a handful of horizontal ad networks -- should create opportunities through greater scale to optimize retargeting capabilities in ways that vertical networks, which might not be able to track everywhere a person goes online, simply can't match.

"You'll see the bigger publishers start to announce they're working with only two or three ad networks," says Mike Cassidy, CEO of Undertone Networks, an online advertising network. "One of the problems in the marketplace has been too many networks going to the market and offering inventory cheaper than the publisher. Ultimately that hurts what the website is trying to do."

Understanding that the networks control much of the pulse of the internet, some of the best marketers on the web have intentionally experimented with how to use networks effectively. Rather than randomly throw any extra money at networks, these advertisers have discovered that carefully chosen networks can bring them new targeting capabilities, new video capabilities, new research capabilities, even new ideas they can use with their other media partners. Advertisers that have learned to treat a network as a strategic partner have seen important benefits.

That's why it's more and more common for advertisers to include at least one network in every campaign, and why certain advertisers have begun considering online advertising networks for their branding campaigns as well as for direct marketing.

In response, leading networks are now embarking on building an environment in which branding can be done for less, utilizing great sites purchased at great rates.

Fundamentally, market forces are dictating these changes.

"The barriers to entry are so non-existent that anybody can start an ad network, just by aggregating inventory on more than one site and having more than one advertiser," says Undertone's Cassidy. "You'll see lots more networks launch."

But new players entering this market generally don't want to try and build horizontal networks, a space already dominated by strong leaders, in which smaller players simply don't find sufficient market opportunities. That's one reason vertical networks are so hot: newcomers can see that vertical networks' value proposition to advertisers ("we can target exactly the customer you want") applies to a large number of interesting niches where leadership can still be forged.

Undeniably, video is a key element of the future of advertising on the internet. "Advertisers are still trying to work out the best formats for video ads," says Piper Jaffray's Kessler. "It could be a 15-second overlay, like Google is working on, or a 30-second pre-roll campaign. It seems shorter is better; no one wants to watch a few minutes of commercials when you're watching a program online. But there is an opportunity to insert commercials within videos, and that's what the brand advertisers will start to adopt a bit more."

Yet the future contains more than new technology.

"I think it's going to focus around audience quality," says Tas of Sportgenic, speaking about both online advertisers and ad networks. "We've been focused on scale for a long time. Now we know scale is doable. We're now digging into the depths of being able to connect brands with specific audience demographics. We'll see that continue to evolve, so the advertiser can connect the right brands to the right people." Because of the elimination of waste through better targeting, Tas expects ROI to double within the year.

"The industry is not that old," says Chas Edwards, publisher and CRO of Federated Media. "As an industry, we've only taken a couple of runs at what online advertising can look like. We've been focused on the click. But now you have significant budgets and marketing experts who think differently than just the direct response metric. We're still in the early stages of imagining what brand advertising on the internet looks like and how we can measure success against that. So I don't think we've yet seen a lot of interesting brand executions online, but we're beginning to."

Smart advertisers will continue their move toward retargeting and behavioral targeting and will probably look to make better use of video ads, which offer an as-yet-untapped potential to capture consumer attention and drive home messages with the same power that TV has long provided.

Advertisers will also need to be smarter and more contextually relevant. "In the old days, you could simply advertise 'Drink Coke' and everybody would buy it," says Tas of Sportgenic. "But today, choice is so prevalent, it's critical to be able to understand who you're speaking to, and to speak differently to an urban kid versus a country club golfer and to tailor those messages. That's the direction the marketing world is moving."

Smart advertisers will also experiment more broadly to see what works best for them online. Does that vertical ad network reach the prospects we like? What's the best strategy to build our brand online? The best methods are likely to be different for every advertiser. In the absence of clear-cut guidelines, the key will be to roll out several new ideas and see what each one yields.

"You can make your clickthrough rates go up through more dancing monkeys and more scantily clad models and giving away free motorcycles," says Federated's Edwards. "That will always drive the metrics up. But you won't be optimizing toward a more effective brand execution. Brands need to move past thinking of the internet as solely a channel for acquisition, and see it as a place where customers are spending a lot of time, and start to think about putting brand marketing tools online, as well."

As a kind of test, more aggressive advertisers will probably want to allocate some of their online dollars to a wide range of networks. If one delivers better than most, more of the budget can be shifted in that direction. ROI is one key metric, of course, but when advertisers move beyond direct marketing campaigns, they'll need to consider overall reach and frequency, and even try to measure the offline lift they're getting from their online campaigns.

Conclusion
The fact of the matter is, ad networks are going away at about the same speed that publishers are learning how to sell every bit of their own inventory directly, which translates to: not very soon.

But that doesn't mean they'll get a free ride -- far from it. Today's online ad networks will have to cope with a variety of new forces in the market, and to survive, they almost certainly will have to morph into significantly more sophisticated business institutions.

Robert Moskowitz is a consultant and author.