• by Mark Walsh  @markfwal, September 27, 2009

With Madison Avenue increasingly adopting Wall Street's data-driven approach to the buying and selling of media, leaders of the new crop of agency trading systems gathered Friday to discuss how they fit into the advertising ecosystem and the shift toward buying audiences rather than inventory.

On hand for the panel titled "Agency Demand Platforms: Is Everyone a Media Trader?" at CBS' Paley Center were executives from agencies including the Interpublic Group of Companies, Publicis Groupe, Razorfish, MDC Partners and Havas Digital.

They collectively made the case for the private digital media trading desks as the agencies' logical response to the proliferation of ad networks and ad exchanges -- most notably Google's newly revamped DoubleClick Ad Exchange -- where the vast majority of remnant display ad inventory is sold.

Using proprietary algorithms and sophisticated technologies, these systems aim to assemble audiences from the sea of unsold impressions that match the targeting needs of clients and deliver higher return on investment. In broad strokes, the trading operations turn agencies from media planners into audience aggregators.

"What we try to do from the agency side, the advertising side, is to understand how to extract value, and appropriate value to the right kind of audience, irrespective of what the inventory would suggest," explained Quentin George, chief digital officer of Interpublic's Mediabrands unit, who oversees the agency's Cadreon trading system launched in June.

Darren Herman, founder and president of MDC's Varick Media Management unit, also discussed the idea of targeting the same or similar audience to ESPN.com or SI.com on other sports-related properties through a more efficient buy. "If you're using standard display or video formats, which VMM offers, and more coming next year, such as mobile, we'll make the argument that an audience is an audience, and we'll reach them through sports content," he said.

Herman added that Varick's broader strategy is buying from the public exchanges -- like ContextWeb's Adsdaq marketplace, which hosted the Advertising Week event -- and overlaying those buys with as much data as possible so they amount to a buying audience.

Nathan Woodman, managing director of Havas' Adnetik digital trading network, talked about refining buys further via demand-side platforms by allowing advertisers to pay different prices for different types of remnant inventory.

"That's where I hope we're going as an industry -- to a more transparent nature where buyers will be able to set pricing in terms of how much they should pay for combinations of 'I want this user on ESPN or Forbes or Joe's blog or somewhere in the long tail," he said. "Those will all be independently priced at the impression level."

Working directly with major Web publishers like CBS to obtain audience data to optimize buys has been a big part of Publicis' effort in this area, according to Curt Hecht, president of VivaKi Nerve Center, which built its trading unit on top of the DoubleClick Ad Exchange. That approach has helped afford the flexibility to do both automated and spot-buying with premium publishers.

Moderator Jay Sears, executive vice president of the Adsdaq Exchange, asked if big brands were sold on the new agency trading arms as well. The panelists suggested that brand dollars were shifting over as large marketers become more comfortable with the in-house systems.

"One thing we've found is that retargeting is a fantastic way to get great results out of the gate," said Hecht. "However, a lot of our big brand marketers like the targeting part of it to be fairly easy, so age and gender still work -- or 'I want an automotive-intender' -- so the easier we make it for them to tie into those audiences, the more the dollars will continue to flow over."

When it came to the controversial question of arbitrage -- whether it was permissible for the digital trading outfits to ever take a cut from ad transactions -- the consensus was yes, as long as the client is aware of it and approves it.

"The advertisers I've spoken to about this -- their initial reaction is, 'Am I going to be paying more than I'm already paying?' No. They'll say, 'So long as we know that you're doing it, and you're not ripping me off, you guys deserve to make some money.'"

But Interpublic's George raised questions about the practice creating a potential conflict of interest. "It's a fine line. The No. 1 job we have is to apply our clients money where it creates the biggest value, and in return we can expect money for services," he said. Arbitrage introduces the possibility that agencies will make ad decisions more in their own favor than their clients.'

"Certain buyers have become a lot more willing to talk about things like licensing fees and data fees, and we would much rather make money on those elements than pure arbitrage when you put capital at risk," added George.

As far as running the equivalent of startup businesses inside large ad-holding companies, the executives said the key was to bring everyone on board. "What I've learned is, it's all about the language. If you keep it simple, you usually will do well," said Hecht. "So the simpler you can make it with the guys who run MediaVest or Starcom to explain what this is, why it's good for clients, you usually do all right."

In that vein, he suggested changing the title of the panel to simply, "Buying Audience."