Commentary

The Collision of Ad Exchanges and Sell-Side Platforms - Does it Matter?

We are in the midst of industry consolidation in online advertising. Companies are merging (MediaOcean), selling (MySpace, AdMeld, interclick), and buying (Tremor Video, Federated Media) as they adjust business models to meet market demands. Companies like ad exchanges, DSPs, ad networks and sell-side platforms (SSPs), continually innovate and add new offerings to create competitive advantages.

It’s inevitable that exchanges and SSPs collide, as they are essentially in the same space. I see it firsthand when my company, an exchange, is confused as an SSP competitor, even though we are actually a close partner and do business with the majority of SSPs.

Can publishers and advertisers manage this complex environment when both sets offer similar value propositions?

For publishers, they are inundated with choices to sell digital inventory. While looking to sell the most volume at the highest value to maximize yield, publishers also seek advertisers with similar brand values that are relevant to their audience. In sales, publishers want to monetize inventory through partners, while avoiding channel conflict and maintaining direct sales control.

For advertisers and agencies, devising how and where to allocate spend is a challenge. The majority of advertisers want to reach the right audience, at scale, in brand-safe environments. To efficiently and effectively reach their target audience, understanding the nuances of ad exchanges, SSPs, DSPs and ad networks are important.

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For example, although SSPs and exchanges may look similar and share some functionality, buyers and sellers should know about the fundamental differences when operating in these respective environments.

Ad exchanges are rooted in technology and automation. Working with exchanges, buyers and sellers should expect an efficient interaction with dashboards and machines. They input data and information, plug in their inventory or ad buys, then watch the software work with some on-the-fly optimization from the ad operations team. Most exchanges take an open approach, like Wall Street markets.

All businesses are welcome if they meet minimum requirements, which vary by exchange. Every valid buyer and seller has the opportunity and tools to compete for advertiser dollars or a publisher ad impression. In an exchange, machines do your bidding (literally and figuratively) to buy and sell.

SSPs are built around service and people. Buyers and sellers engaging with an SSP expect that partner to deploy an army to help with ad operations, ad revenue optimization and ad targeting.

For a complex publisher seeking to build private marketplaces or custom solutions, SSPs can provide the right approach, as they possess the resources to meet these premium needs. In this highly unique environment, the people perform the customization tasks that machines cannot perform today.

Ad exchanges and SSPs have had a profound and positive effect on high volume buyers like demand side platforms (DSPs), agency trading desks, and ad networks. These companies have many options to find quality media, at scale. Many efficiently source inventory directly from publishers through exchanges and SSPs, thereby eliminating the need for excess sales resources.

With access to ad impressions established, buyers need to focus on the effectiveness of data (first or third party) to target audiences and maximize ROI. Further, as real-time bidding continues to grow in usage, the challenge for advertisers is differentiating how business is conducted within an exchange versus an SSP environment.

The ad exchange and SSP collision is happening and all are competing on technology and service. At the same time, these same companies can strategically partner where appropriate to grow their respective businesses. The industry has enough room for both segments because buyers and sellers want diversity in how media is transacted.

All campaigns are different and access to varied approaches helps ensure long-term success for advertisers. Ultimately, it may not matter to advertisers and publishers that exchanges and SSPs are in the same space. Their primary goal is that it works effectively and efficiently for them.

 

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