Another Look At Ad Exchanges
In a recent article, Ari Rosenberg outlined some reasons why an exchange may not be
of value to a premium publisher. The points were accurate and well-reasoned. They did not, however, cover all the potential opportunities that exchanges offer. As a counterpoint, here are some
concepts that may provide value from a premium publisher standpoint.
Almost all purchases are driven by three concepts. In no particular order, these three are price, quality, and ease of use. From the start, it’s evident exchanges are designed to fulfill at least one of these concepts, ease of use. But if ease of use is the primary reason purchasers become return customers, it doesn’t necessarily imply better pricing and it certainly doesn’t assure quality.
In an exchange, the method typically used (and primarily addressed by Ari’s original article) is bulk impression purchase. If a publisher simply packages up all or most impressions and sells them on an exchange, Ari’s arguments are well-reasoned. There is little to support an exchange as a value proposition. However, what if we close the exchange somewhat? Let’s
say we create a private exchange, limit the impressions offered, break them into smaller packages (Women 18-49, Auto purchasers, Male Teens) and offer only smaller portions of the impressions we have as a premium publisher. And what if we can assure that the buyer knows it is a premium publisher rather than a random bunch of impressions from any and all sundry websites? This should create a degree of scarcity, as well as improving the assurance of another key purchase point –- quality –- while limiting quantity and potentially bringing in more bidders. This should help drive up price.
Assuming this is no sure thing, however. Even private exchanges have limitations as functional equivalents to broad-based reach purchase programs. There is still a need to make sure we are not cannibalizing from our direct sales team, nor undermining our primary ratecard. If an advertiser can buy premium impressions on an exchange at a discount, there is less need to go direct. How can we augment and avoid this, while still providing ease of use?
Each package in direct sales typically includes somewhat targeted or ROS line items. These are meant to provide some level of mildly targeted and bulk impressions at a price that brings in the CPM, while providing some additional value. Agencies recognize and accept this. As long as the pricing in the exchange does not discount these line items, there is no incentive to snipe inventory –- advertisers can’t get anything special at a discount that they aren’t already getting. Furthermore, the ease of use of the exchange (limiting the number of human hands touching a deal) reduces potential for error, and frees up the sales force to spend time actually pitching the inventory on the private exchange as “more valuable than that found elsewhere.” This actually enhances the value of a sales force, without undermining it.
Finally, as the industry moves closer to the viewable impression, or some other form of currency, the limitations this creates (as opposed to simply purchasing ads rendered) on the overall industry will place more value on all available impressions –- even those that are ROS. This should increase the bidding further, eliminating the undercurrents of low-priced, low-value
inventory that are making exchanges only appear to be glorified ad networks.
The final, additional, point that would provide value is what Online Spin columnist Cory Treffiletti recently suggested -– a futures market for advertising. While many people question this proposition, allowing publishers to offer future inventory for sale, or advertisers the chance to purchase in advance, will firm up long term revenue streams, allowing the publishers greater control of their short-term inventory, while offering advertisers the chance to jump ahead of markets and purchase at a discount.
Exchanges are not a panacea and will not solve all industry problems. But they are a good step in the right direction and worthy of greater analysis and study before simply rejecting them for the flaws they currently exhibit.