• by Jayant Kadambi , Op-Ed Contributor, April 29, 2014

There is little more frustrating than being offered a product you don't want to buy or, on the flip side, trying to sell a product without knowing what the buyer wants. You need both pieces of the puzzle or the deal doesn’t work.

Yet, in the world of public real-time bidding (RTB) ad exchanges, this kind of double blind is standard operating procedure. Sellers make ad requests, and buyers accept or reject them, often for unknown reasons, in milliseconds. Sellers go on to make additional ad requests elsewhere, and on and on it goes.

First, the sellers have a reverse incentive to start with their best product. Second, the buyers are forced to rely on buying inventory the way a third-party data management platform (DMP) sees that inventory.

As an example, imagine being in a fruit market trying to explain to a bystander what a kumquat is so they can then explain it to a buyer who can’t hear you. This game of telephone is one aspect of what I call the “Data Fault Line.” It’s a common and accepted error that occurs in public exchanges and is the main reason brand dollars will increasingly flip from public exchanges to direct and private marketplaces. Let’s explore the Data Fault Line and what the ad industry can do to solve this problem.

The key concept to understand here is that reach and price compression are directly opposed to the variety in one’s inventory. To put it another way, tradition has it that if you want broad reach at a good price, you have to make the product uniform. You need huge pools of items that look the same. This provides no flexibility or adaptability across platforms, which is what brand advertising requires.

Offering buyers the chance to see unique targeting, industry players have started to add variables, such as audience targeting, but the mechanisms for communicating those variables in public exchanges have not kept up and, because of the Data Fault Line, will never stay current with advertisers’ evolving objectives.  

Advertisers want assurance that they can reach their target audience with ads that are viewable. Without the means to identify this type of premium inventory, on a real-time basis, you’ll be hard-pressed to find an exchange that offers simultaneous viewability and audience guarantees in today’s marketplace.

Nor is there an exchange that offers custom audience segments, with demographics and psychographics, at scale. Add to this the urgent need for multi-screen reach and advertisement frequency capping, and you have the second great error in the Data Fault Line.

DMPs do not track mobile, tablet or connected TV, yet more than half of Facebook’s revenue last quarter came from mobile. (See the missed opportunity?) Brand advertisers who do not count reach and frequency across ALL devices are simply throwing money away. To use the fruit vendor analogy again, imagine there are two sales people at the same fruit stand and they are both telling the bystander they have one kumquat left. You, as the buyer, hungry for kumquats, tell the bystander to buy both, not knowing that you are paying twice for one piece of fruit. Not very cost-effective, but this is the way public exchanges treat mobile, tablet and connected TV.

So, how does the industry solve for the Data Fault Line?

We build direct, private marketplaces that have deeply integrated, cross-platform publisher software tied to rich, variable targeting, campaign and reporting tools for the buyer. Buyers should have a clear window on what sellers have to offer and how those offerings provide brand value.

At the same time, sellers should also be able to hear what buyers are interested in and have the tools to help improve their offerings to match those interests. Rather than homogenizing data, as is done in a public marketplace, private marketplaces can present these specific and custom data flows and views.

DMPs will continue to play a role, but only as one data source to inform decision-making. They will not solely drive the purchase decisions as is so often the case in public exchanges.

With this “full stack” approach, buyers get access to high-quality brand audiences, frequency capped across all devices, and sellers get data insights that help them curate and improve their audience profiles and performance. Buyers say what they want, and sellers hear them. How simple, yet novel at the same time.