Posts filed under 'Ad Exchanges'
Stephanie Clifford writes about ad exchanges in the New York Times and discusses the new “traders” that are using exchanges to buy and sell ads.
First, it’s great anytime the ad exchange space gets press in my opinion as it’s still not widely understood both in the business world overall and even in the advertising space. There are a few comments I’d like to make though:
– It’s absolutely correct that there is a set of companies that are spending a lot of time, effort, and money around learning how to trade on exchanges. This is a very smart move on their part. Exchanges are still in the very early stages, and it’s inevitable that they are going to grow over time as the biggest players (Yahoo!, Google, Microsoft, AOL) continue to invest more in them.
It would have been cool to get some more specific examples of the different ways companies are using exchanges, although I doubt the general public would understand it much.
– Exchanges may be primarily remnant inventory today, but they are quickly going to be in the guaranteed inventory world, and that will create even more value and opportunity for everyone.
– As
Greg Yardley points out, the actual serving of the ad is not the most important piece of what’s going on. It’s doing the ad arbitration and how much revenue the exchange touches that really matters.
– A lot of people make comparisons to the financial industry and the trading that occurs on the financial exchanges. While there are some similarities, it’s really quite different. And we’re a long way off if ever from really getting to that point, but that also doesn’t really matter. This doesn’t need to be exactly like the financial trading world, it just has to make advertising better and create market opportunities at scale.
In an upcoming post I’m going to dive into why ad exchanges are so crucial to the future of display advertising. It should be fun, if you care about this sort of thing.
July 27th, 2008
Glam Media has announced the launch of their own ad exchange, which is interesting for a couple of reasons.
First, without knowing much about the implementation and their plans for it I’ll question whether it’s really an ad exchange. There have been companies in the past who have dressed up their ad networks with slightly altered technology and then labeled themselves an ad exchange because it’s a hot buzzword.
I don’t really want to debate that now though, my bigger question is that the general notion of an ad exchange is that it provides liquidity and efficiency by bringing lots of buyers and sellers on to a common platform.
If Glam’s ad exchange consists of only their publishers on the supply side, and then Glam’s advertisers on the demand side, I don’t see how it adds any liquidity or efficiency. If they let their advertisers buy directly from their publishers through the exchange and remove themselves as the middleman, then this provides some value, but why would Glam do that since it kills their margins?
So according to their CEO, it’s purpose is to fill their unsold inventory. I’d take this to mean that when Glam represents a publisher, they’ll sell guaranteed campaigns and then put all the unsold inventory into their exchange. Why not just put that inventory into a much bigger and liquid exchange with tons of demand?
If it’s due to quality or minimum CPM concerns, most exchanges have controls that allow you to control what quality of ads you see and set a minimum CPM. Adding more fragmentation to the display landscape makes things tougher on all parties. However, I can understand Glam wanting to try and improve their place in the world and help their publishers, I just think it will be interesting to see if their exchange can exist alone.
I’d definitely recommend they try to at least tie in their exchange to other exchanges to improve liquidity either way.
July 9th, 2008
The
IAB conference just occurred, and
John Battelle of
Federated Media made the following comments about Wenda Harris Millard’s comments during her
IAB speech:
Wenda Harris Millard, the new Chair of the Board (on which I serve) just laid out a line I really loved:
“We must not trade our advertising inventory like pork bellies.”
She refers to the commoditization of branded advertising inventory via ad newtorks and algorithms. It was quite inspiring. But folks were not sure whether to clap. I say: Bravo
I respect John Battelle and what he does with Federated a great deal, and there will ALWAYS be a place for custom ad campaigns (conversational marketing as they call it at Federated) that need to be based on human relationships and built for specific sites and audiences, but taking an “anti-algorithm” or “anti-ad exchange” stance when it comes to advertising is not really necessary. The fact that Millard even has to call it out like a battle cry is amusing to me because I don’t believe the algorithms and ad exchanges of the world are killing the premium advertising business. Nor will they ever do so.
I’d equate this kind of “fighting against the algorithm” talk to web directories in 1996 saying that algorithm-based search engines are bad and that a web directory with the human touch is going to better serve people looking for information. You can imagine people making that argument at the time, but as we saw, that definitely was not the case as Alta Vista and then Google crushed the directory business for finding websites.
I can understand this viewpoint a little bit as exchanges have started in the non-guaranteed area of online advertising. I imagine the fear comes from the notion that exchanges would move to premium inventory and thus lower premium ad rates for publishers and commodotize it, or make the role of salespeople and what they do go away.
Neither of those things seem likely to occur. As Exchanges move into the premium inventory space what they’ll create is NEW relationships and INCREASED operational efficiency. Is the value of Wenda Harris Millard (and team) and John Battelle (and team) in their ability to think creatively and build relationships, or to spend days and weeks trying to establish contact with the right people and dealing with the operational overhead of getting campaigns and their creatives running, getting reporting dialed in, etc.
Another analogy is looking at stock exchanges and stock brokers. A lot of stock trading is done electronically through algorithms and through stock exchanges, but has that killed the role of the stockbroker who still has a relationship with a client and has expertise that’s valuable? It may have changed their business as the industry became more computerized, but it hasn’t killed it.
Our clients on the Right Media Exchange still have human relationships and do business as humans, but they’ve removed the operational inefficiencies and the Exchange has allowed them to more quickly and easily create new relationships.
As exchanges move more into premium inventory, it will just create more buyers of that premium inventory on a common platform where they can purchase it quicker and scale the number of premium relationships they have.
Even if their fears are warranted and algorithms and exchanges did lower rates that publishers were receiving, they wouldn’t need to generate as much revenue if they had no need for their sales team anymore. What you lost in premium revenue, you could make up with not having to support a sales team.
One would argue the reason that’s bad is that premium ad buys and salespeople help advertising be more relevant and high quality. I think that point is probably up for debate in the first place, but as technology improves ads will become more relevant through enhanced targeting. And just because a premium ad is on an exchange, it wouldn’t make it lower quality or less relevant because of how it was bought and sold.
I still think it’s unlikely it’d ever come to that, but those are the reasons I don’t think people in the premium publisher inventory space should fear ad exchanges and advertising algorithms.
February 26th, 2008
The Right Media Open event we held last October in Half Moon Bay was a big success for both Right Media as a company but also for all our clients who benefited from the networking that took place at the event. Just recently some videos of some of the panels and discussions at the event were added to our Right Media Open site. The videos include:
February 25th, 2008
In a recent post I talked about a post on the YPN Blog about questions people should ask ad exchanges before working with them.
Jordan Mitchell left a good comment with some questions that I thought deserved responses in a post. He starts off with:
But outside the theory, are the concrete benefits really there yet, or is the exchange model dealing with some basic issues?
I think ad exchanges do still have basic issues, but what business model doesn’t? Paid search still has some basic issues, but that doesn’t mean it’s not a very good and efficient business. Additionally, the ad exchange world is already way beyond “theory”. The Right Media Exchange does a very significant amount of volume, with a lot of money transacting every day. And it’s still VERY EARLY in the evolution of ad exchanges. Plus, would Yahoo! pay hundreds of millions for theory?
— 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.
Initially ad exchanges have primarily operated in the remnant inventory space. It was the area of inventory that was the easiest to get customers to try things with, and it also is an easier technology then trying to set up an exchange for guaranteed inventory. However, we’ve definitely seen people start to blur the lines with what they do with exchange technology, and you can bet that ad exchanges will move into the guaranteed inventory world. I’m not saying that exchanges will ever replace a sales team and the fact that inventory is sold on a guaranteed basis, however, exchanges may become a large part of the underlying technology platform that sales teams and ad operations staff work with to reserve, book, and deliver guaranteed deals. The lines between guaranteed and non-guaranteed will eventually blur.
Yes, the ad networks and forms of inventory allocation used by publishers out there are so inefficient that paying an exchange a small fee to have it monetize that inventory better is worthwhile. We’re working with many of the largest publishers on the web, and doing a ton for the largest publisher (Yahoo!). Also, non-enterprise publishers can work with the Right Media Exchange without paying any fees by using our Direct Media Exchange product.
You can find case studies for some non-enterprise publishers on the Direct Media Exchange site, as well about 20 featured publisher articles on the Right Media Blog. A couple of larger case studies exist for Tickle and Looksmart. There will be many more coming in the near future.
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?
Supply and Demand isn’t really that black and white. Both can be broken down into really granular parts, which is why we actually break it down to each individual ad impression. As an example, let’s say for the entire exchange overall there is more supply than demand. That doesn’t mean all supply is worthless. There could be a lot of demand for female Canadian impressions and not much supply. By using an exchange, the publisher has a much better chance of monetizing female Canadian impressions than if that impression was randomly allocated to a USA-based ad network. The exchange allows all connected buyers to see the characteristics of that impression and bid appropriately for what it’s worth to them.
One might even argue that if there is more supply than demand overall, an exchange is EVEN MORE valuable because it increases the amount of demand you can get access to all through one technology platform. Might as well have a lot of ad networks bidding for that impression instead of just the one that you sent that impression to through a rules based ad server.
In the case where you have more demand than supply, if it’s possible to sell directly for the best prices that’s great. But might you make even more if you allowed all those demand sources to bid for each impression individually?
don’t most ad servers now allow you to optimize their queue using eCPM rules (instead of schedule)?
Yes, but that’s pretty much “dumb optimization”. Essentially what occurs for non-guaranteed inventory is publishers set up a cascading daisy chain of ad networks based on historical pricing. If you think about what’s going on you aren’t getting the most value for each impression. The ad network at the top of your chain may choose to take an impression that a network further down your chain might have paid more for. An exchange concept blows that out of the water. The historical problem is that exchanges need to have enough demand to compete with the largest ad networks that are the primary placeholders in publisher daisy chains. And it’s happening.
Great questions from Jordan, and this kind of dialog is fantastic for helping explain the concepts of ad exchanges and what’s happening with them in reality.
February 19th, 2008
Ad Exchanges are popping up left and right, and that’s a great thing. Of course, only in certain cases are they actually exchanges instead of an ad network calling itself an exchange, but that’s a topic for another post.
The latest exchange to announce comes with an international flavor, as the Alibaba Group has launched Alimama. Alimama is an exchange focused on the Chinese ad market, and as Battelle notes, sometimes China is late to the party. However, in this case Alimama may be the first country-specific exchange I’m aware of.
But is that a good thing? In this case it might be as the Chinese ad market has operated differently and at a slower pace than much of the world, but in the long run the true global exchanges will most likely be the winners. Or at least the exchanges that are open enough to partner with exchanges such as Alimama to allow for cross-exchange buying and selling.
What happens when you have cross-exchange action? What is that even called? The online ad world is changing rapidly, and it’s still REALLY early in this game.
November 24th, 2007
