Over on the YPN Blog, Jerri Gillean here in the Eugene Right Media/Yahoo! office contributed an overview of what an Ad Exchange is and some important questions to ask when comparing ad exchanges.
When you’re looking at joining an exchange, ask these questions:
1. Does it work in real time? Using historical data is like checking yesterday’s weather to predict what to wear today.
2. Is it neutral? A neutral exchange simply provides a technology that allows for buying and selling, and doesn’t attempt to hold all the relationships with the buyers and sellers.
3. Is it scaleable? If your site goes from 100,000 to 100,000,000 impressions a month, will that exchange be able to handle that volume?
4. Is it secure? How does the exchange protect you as a publisher? (This is key: It isn’t as easy as you may think.)
5. Is there open competition? Does the exchange allow non-members to compete with exchange members?
6. Is it a community? Sure, there’s competition, but are there also forums so that people can communicate with each other and form partnerships?
7. Is it a technology platform? Is it open, with APIs that anyone can connect to?
8. Does it have publishers, advertisers AND networks?
9. Is there a solution for me? Does the exchange offer a solution for both enterprise and non-enterprise publishers?
10. Are there strings attached? What else does the exchange require you to do?
In my opinion, not everyone claiming to be an ad exchange today really is one. So the questions Jerri lists are definitely interesting to ask across all the companies who say they are operating an ad exchange today.
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It’s funny. I read his post and like most descriptions, including that found on the Right Media Web site, it still feels like hand-waving. The basic principles are indeed sound — no one can argue that the more demand you are able to leverage for your inventory, the better the competition and the market will provide you the best rate.
But outside the *theory*, are the concrete benefits really there yet, or is the exchange model dealing with some basic issues, such as:
— it’s all remnant inventory that can’t be sold direct, so the market has already valued it to some extent and it’s not much! Then you add in the 10% intermediary fee (not paid by you) and are you as a publisher better off? In other words, are the market inefficiencies that poor where the exchange model demonstrates continued lift? I’d like to see some case studies.
— is the demand greater than the supply? I saw your other post where you mentioned 6,000 buyers and 13,000 selllers on the exchange. If there’s just a lot more supply than demand (which I believe to be the case in display ads), then I’m not sure an exchange will do much for you. If the demand is greater than supply, then you’re better off selling direct yes?
— don’t most ad servers now allow you to optimize their queue using eCPM rules (instead of schedule)?
I’ve been talking a bit with Right Media and it still doesn’t feel like a place for buyers to get a great deal on inventory and publishers to make more money.