With Google’s (NSDQ: GOOG) $3.1 billion acquisition of DoubleClick closed this week, it might seem like there’s no room for smaller ad networks. But a white paper by media investment bank DeSilva & Phillips—Ad Networks: Monetizing The Long Tail—says that there is still a valuable space for independent ad nets to fill, at least for the moment. D+P posits that the value is available through the Long Tail, which allows ad nets to gather up sites with traffic that was previously too difficult to advertise on or which was otherwise undesirable. In other words, there’s still a lot of web space to advertise on and even Google, not to mention Microsoft (NSDQ: MSFT), Yahoo (NSDQ: YHOO) and AOL (NYSE: TWX), can’t serve it all. (Again, the report reiterates its hedge that this view is not meant to be a long-term industry outlook).

The 15-page report reads like an introduction to ad networks, though it does make a few points worth mulling over:

-- The rise of mini-aQuantives: Certain stand-alone players are likely to have bright futures. D+P expects indies like Tribal Fusion and Casale to continue to generate cash by using their platforms to roll up small rivals and niche specialists into “baby aQuantives.” A combination of “unique technologies” and established relationships with marketers are the key.

-- The future lies in ad exchanges: Ad networks developed as a solution to a problem - namely, that mass volumes of fragmented inventory were going unsold; being able to shape that inventory into a coherent package with that ability to attain advertisers’ demands for reach and frequency led to a successful model. Going forward, it’s not clear that demand will remain as strong. And even if robust demand continues, D&P contends the giants - Google, AOL, MSN, Yahoo - “won’t be able to scale their existing relationships through tuck-in acquisitions.” And so, ad exchanges will play a big role in the evolution of networks. D&P: Economies of scale may be realized in ad serving and bringing traffic together into a handful of common locations for price discovery exercises, primarily benefiting the exchanges. Given that no “one-size fits all” appears to be emerging, there will still be unsold or under-sold inventory. The ad nets that can attain significant scale will live to acquire and be acquired for some time to come.

Ad networks’ reach and ownership (table below..click on it to see the bigger version):

Disclaimer: DeSilva & Phillips is a longtime sponsor of ours.