• by Roy de Souza , August 20, 2012

Over the last year, many publishers–the latest of whom is Hearst– have set up private exchanges, thinking they would be the Holy Grail to raise revenues and solve the problem of selling their premium real estate at more than remnant CPMs.

As yet, most of the private exchanges haven’t succeeded, and now as a group they arecoming down the other side of the hype cycle. Publishers are still missing revenue targets, and the Lumascape just keeps getting more crowded.

One reason is that private exchanges can’t prove to agencies that they’re any more valuable than buying on the open market. Agencies are asked to buy at higher prices yet they are offered very little reach and exactly the same type of inventory they can get in the open exchanges. So agencies seeing more reach and lower prices, just stick to buying on the open exchanges.

Another reason is that private exchanges are still selling commodity inventory but hoping for a non commodity price. They are selling standard IAB sizes on standard types of sites. This is commodity inventory and RTB is forcing it to be more commoditized and less impact.

The bottom line is that publishers are creating private exchanges but no one is buying the inventory or at least not at any decent CPM.

The phrase “direct-pipe” better explains what a real solution does: create a direct technology channel for agencies to buy premium publisher inventory.

 A good direct-pipe will include the following:

1. It will need to have programmatic buying capabilities, but that doesn’t necessarily mean auction based pricing. Auctions are for remnant inventory.

2. Agencies are more willing to buy if the formats and types of advertising on the exchange are not just standard IAB sizes but great advertising opportunities for their clients. Video is important.

3. They must have enough publishers on the direct-pipe platforms to give brand advertisers the high reach they need.

We've invested heavily in this, because we believe it's the future of media.

Roy de Souza, CEO of ZEDO