• by Chris Sukornyk , March 14, 2013

Private exchanges are the real-time bidding equivalent of a gated community.  They are walled gardens of inventory that allow publishers to decide who exactly gets into the auction. The idea of private exchanges makes sense; it gives comfort to publishers and helps them bring high quality inventory into the world of "programmatic" buying.  With tighter controls, publishers can ensure that their programmatic sales do not conflict with their direct field sales efforts.  We welcome the addition of better inventory -- but the current incarnation of private exchanges is failing.

For buyers, private exchanges require almost as much effort as doing a direct media buy,  removing much of the value proposition of real-time bidding.  To gain access to a private exchange one has to pick up the phone and talk to every private exchange directly. Granted, once you have access, subsequent media buys are automated. Nonetheless, this approval process adds inefficiency and stifles demand. Some major ad exchanges have launched online tools (UIs) to help media buyers connect with publishers. While a good start, the experience has not been seamless, and we’ve resorted to reaching out to publishers directly.

Having to manually request access to private exchanges is one problem, but potential buyers have an even larger challenge: actually knowing that private exchanges exist. Amazingly, there is no master list of private exchanges.  Having asked every major ad exchange for their seemingly secret list private exchanges, some responded.  What we received was a partial list of private exchanges they operate and email addresses for each.  Nothing in this list helped us figure out what each inventory was, the scale of the inventory -- or anything that made us want to expend the effort to reach out to each publisher.

Ultimately, supply-side platforms (SSPs) like Rubicon, Adx, Pubmatic and others will evolve, since we're only in the second or third inning of the game of programmatic buying.   Some quick wins are possible though, helping to solve the basic challenges the demand side faces with private exchanges:

1) Publish a list of private exchanges.  Each SSP needs to provide a UI and web service that lists the private exchanges they manage.  This list should include a description of the inventory and perhaps some example links.  Ultimately this is a sales pitch, where publishers get the chance to explain the value of accessing their private inventory.

2) Automate the approval process.  Ideally human involvement could be totally removed.  This can be accomplished in a number of ways.  SSPs could certify each buyer and allow publishers to “programmatically” define the rules of engagement.  For example, give them tools to block categories of advertisers (ie. no dating ads, no Acai berry ads) and stipulate rules like price floors and other limits.

3) Automate advertiser approval.   Many private exchanges ask buyers to disclose the list of advertisers that will appear on their site. This list changes daily – it’s a manual process that usually involves daily emails.  Standards need to be developed that would allow buyers to disclose a list of advertisers that will appear on the publishers site. Publishers can choose to manually review this list – or even better, they can automate the approval process by having a black list of advertisers they do not want appearing on their site.

Private exchanges have huge potential because they allow publishers to generate demand for their inventory and they allow buyers to access higher quality inventory.  However, the current barriers to entry are failing to allow private exchanges to reach their full potential.