Commentary

Ad Exchanges Unclothed

One of the worst-kept secrets in digital advertising is that although everyone talks about exchange buying and selling, with its alphabet soup of offspring such as RTB, DSP, SSP, DMP, remnant inventory, premium reserved and Joe Zawadzki, nobody really has a clue what they are talking about.  We all know it has something to do with buying and selling digital ad inventory, but we are not at all sure how it all fits together and what to do when the paper feeder jams.

Thousands of words have been expended in "thought leadership" columns, on conference panels, in company blogs and in PowerPoints to try and clarify, yet we still get that uncertain, I-can't-see-my-parents-in-the-mall gut feeling whenever the subject comes back around. Who better to set the record straight than me?

When you want to buy some ad inventory, if it's on TV, you call a guy who takes you to a $1,000 dinner, a Yankees game and a couple of Broadway shows, and your ad runs. If it's on radio, you get a recorded message that says "We are not in the office at the moment, please leave a message..." If it's print, you get invited on a spa trip or a round of golf, and they run your ad 14 times for the price of once. But digital: that's a little more complicated.

If you paid attention to Neil deGrasse Tyson, you know that beyond what is known is probably more of the same, but we can't name it other than "multi-verse." The Internet is kind of like that, an endless expanse of ad inventory that would take light years to cross (and full of Mos Eisley Cantinas). If you want "scale" (something that I think can be treated with Neosporin) you have to buy lots of Internet inventory, since most sites tend not to draw much of a crowd. This means you have to call about 400 different people who might give you a USB thumb drive or a T-shirt at best. Since they are all 22 years old, they tend to pay more attention to their SnapChats than they do to taking your order (not unlike visits to McDonald's) -- and before you know it, your client's ad is running on a porn site (or The Daily Mail, whichever is worse).

After a while the 22-year-olds got tired of people yelling at them, and in a collective huff proclaimed: "Bite me -- go do it yourself!" So everyone turned to the geekiest kid in the office (MIT undergrad, Stanford post-grad) and said "Since we have no idea what you really do here anyway, we want you to build a machine that lets us buy digital inventory without having to talk to those 22-year-old idiots anymore."

Pretty soon, word got out that when the 22-year-olds didn't handle the insertion orders, everything got better, from the ads running more or less in the right place, at more or less the right time, and that there wasn't toenail polish on the invoices any more -- so everybody told their geeky guy to build a "platform."

Meanwhile, publishers had been amassing lots of Big Data on their users by tracking their every move, adding in outside information that seemed somehow related to their own cookies  (although no one was really sure just how) and labeling people who seemed to be somewhat similar in their online activities as "car buyers" or "cat lovers" or "left-handed golfers who tend to undercount their strokes but always buy at the 19th hole." Since nobody ever has more than three "cat lovers" on their sites at any given time, they decided to throw their cat lovers in with Mike's, Tim's, Joe's and Jon's, so whoever wanted to advertise to cat lovers could do it "at scale" (or steroids).

Turns out that cat-lover advertisers are perfectly happy with their TV buys, so to create some urgency, somebody who had read a lot of Michael Lewis suggested making advertisers bid against each other for the privilege of serving an online ad to cat lovers. Someone called this "unlocking the value of an impression" and was promptly assigned to clean out the office fridge.

Nobody wanted to be left out -- since much of ad tech is following the lemmings, anyway -- so everybody got a "platform," and just to further confuse things, called them something different, using vague terms like demand-side and supply-side and private, because someone in the marketing department had thought it up (or Terry said it in a speech).

The net result of all this was to drive down the prices that publishers get for their ad inventory and set up fierce, yet meaningless, debates about "premium" vs. "remnant." But if you find yourself stuck in the middle of a cocktail party conversation about ad exchanges, first try to excuse yourself and move over to the group discussing the newest farm-to-table joint in town -- OR accelerate your consumption until you are just as bombed as the others. Then you will all make perfect sense to each other.

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15 comments about "Ad Exchanges Unclothed".
  1. Rick waghorn from addiply , July 25, 2014 at 7:48 a.m.
    Superb.... The question - as posed by Dave Coplin, Microsoft's Chief Envisioning Officer here in the UK - is whether the rise of the humans starts now, particularly in the field of local... http://rickwaghorn.co.uk/2014/07/12/with-a-perfect-sense-of-timing-microsofts-chief-envisioning-officer-sees-humans-on-the-rise-again-in-the-field-of-local-ad-sales-big-data-is-merely-another-tool-for-a-story-teller/ Best
  2. Tom Butera from CBS , July 25, 2014 at 8:09 a.m.
    Brilliant, except for the part about radio sellers. They are the true scrappy hustlers in this business.
  3. Niklas Nikolaidis from Joinville AB , July 25, 2014 at 8:35 a.m.
    Lovin' it. Do TV sales people buy $1000 dinners for clients? F***, should've picked that industry instead.
  4. Leslie Sawan from CTV Media , July 25, 2014 at 9:19 a.m.
    Actually Tom, Cable reps are the scrappy ones in this business...Great commentary on an ever changing business...
  5. Paula Lynn from Who Else Unlimited , July 25, 2014 at 9:28 a.m.
    Newspapers give nothing but increased rates and triple them for National and then have exceptions up the wazoo. Then again, tongue in cheek. But your cheekiness sums up the mouth breathing.
  6. Mike Einstein from the Brothers Einstein , July 25, 2014 at 10:12 a.m.
    As ersatz plumber Curly Howard would say to brother Moe upon mistaking an electrical conduit for a water pipe: "No wonder the water don't work. The pipes are clogged with wires!"
  7. dorothy higgins from umww , July 25, 2014 at 10:53 a.m.
    hahahahahahahahahaha thud
  8. Tom Kramer from Essex Digital Platform , July 25, 2014 at 3:19 p.m.
    I loved this as satire! As a long-time platform architect with experience in designing and building RTB DSP platforms with fully integrated DMP capabilities, I can relate to how all of this technology makes people feel. Please allow me to clear a few things up. First of all, there are notable differences between DSP and SSP platforms; one is a "Demand Side Platform" for buying and the other is a "Supply Side Platform" for selling. The "Exchange" is where the transactions take place. DMP is a "Data Management Platform" that allows DSPs to select the audience attributes that they are trying to target and verifies that the creative is being delivered to the right audience targets. RTB is "Real Time Bidding" and takes place at the Exchange. All of this occurs in less than a second! You can all rest assured that no one in marketing simply made these up to sound good. These acronyms identify each system's role in the ad buying and trafficking process. Next, one does not just "ask the company geek to build a platform". Most agencies professing to have a "Private" platform are simply reselling an Ad Network with incredible mark-ups and scaled-back technology to allow for scalability. There are less than 500 people in the entire country who have the skill, knowledge and experience to architect a platform. Far fewer have the resources, money or time to do so. Since online marketing continues to displace traditional media at an astounding rate, my advice would be to jump into that conversation at the next cocktail party and learn more about the future of your chosen profession. You can rest assured that this technology isn't going away and your ability to make a living in the advertising/marketing space is likely to be dependent upon your understanding of this technology and your ability to communicate it to your advertisers. I know better than most how dizzying this is, but rest assured, the future is now and those most committed to mastering this space will reap the greatest rewards. Best of luck to all of you reading this :)
  9. George Simpson from George H. Simpson Communications , July 25, 2014 at 4:14 p.m.
    yeah, what he said....
  10. Ron Stitt from Fox Television Stations , July 25, 2014 at 4:17 p.m.
    Uh...Tom? I think we know all that. George was being funny...it's satire.
  11. Mike Einstein from the Brothers Einstein , July 25, 2014 at 4:43 p.m.
    Tom, here's the drill without a single acronym to confuse anyone: In digital media, the supply is completely subordinate to the demand that creates it. In fact, a pageview (the physical manifestation of that demand and the vehicle that carries the online ad inventory) doesn't even exist until a conscious content choice triggers its creation. The key is to do away entirely with ads than no one demands, and instead allow the content that everyone demands the opportunity to assert its inherent role as a trusted bridge between audience and advertiser, thereby unleashing at long last the true power and promise of the Internet. In so doing, you give the consumer the content they want (demand) without interruption as advertisers are converted from unwanted, unseen intruders into gracious hosts in a virtual return to the sponsored content model that fueled the golden ages of radio and television. Best of all, by directly tapping the demand, it becomes possible for publishers to monetize 100% of their traffic; true scale by any measure.
  12. John Grono from GAP Research , July 25, 2014 at 7:15 p.m.
    Pure gold.
  13. Thomas Morgan from Net2TV Corporation , July 26, 2014 at 9:57 a.m.
    I am now using this discussion to guide my stock market investments. I am now short on every public stock that has anything to do with Golf Courses!
  14. Rodney Mayers from Proximic , July 26, 2014 at 3:21 p.m.
    Brilliant piece. Underneath it all, it's all one big Ad Network with different names. Reminds me of three card monte on the streets of NY back in the 80s.
  15. Ari Rosenberg from Performance Pricing, LLC , August 2, 2014 at 9:21 a.m.
    George, so glad I caught this column on the weekend wrap up -- one of the best pieces I have read on MP -- thank you. Ari