AppNexus (minority investment)
* Twitter’s valuation is a guess, as it’s a private company.
What is most notable here is the companies that do NOT have their own exchange: Amazon, eBay, Priceline and LinkedIn. Still, Amazon has an ad network, and we should expect the difference between Amazon's ad network and a real RTB ad exchange to diminish and disappear over time. Additionally, eBay has its own thing going.
So we shouldn't be asking, "Why are all of these companies launching their own exchanges?" -- but rather, why not?
The costs of launching an ad exchange are being driven lower and lower. It is very appealing to advertisers to be able to control where their media is running -- and to publishers as well, to distinguish their media from everyone else's. However, Microsoft and Yahoo probably have not achieved this with Right Media and AppNexus, and iAds certainly hasn’t been a top performer for Apple. But if you have the scale to attract major media buyers, then it makes sense to control your own destiny in your own marketplace and not have your media come up for bid in competition with a bunch of vastly smaller competitors.
More advertising exchanges will not change prices, increase competition or affect inventory in any way. Why? For the most part, with the exception of Facebook, these ads were already available on exchanges. Thus, it comes down to being about control by the seller vs. putting more inventory online. This brings us to an interesting contradiction: most of us in the industry believe that the market is flooded by exchanges, DSPs (Demand Side Providers), and SSPs (Supply Side Providers). There are more around than we need. However, because of questions about viewability and suspicious traffic, if you are a big player, then it's worth launching your own exchange to differentiate yourself in the marketplace and raise your visibility to the type of small advertisers that have fueled Google's growth. Since it’s not that expensive to build or buy your own exchange anymore, why not?
LinkedIn is clearly the slow mover here, but the company has always been careful about how it expands its advertising inventory. Nevertheless, I think we should look out for the launch of an RTB exchange for LinkedIn in the future. It would also make sense for some of those “old-school” publishers such as Viacom, NewsCorp, Disney, and Comcast to launch ad exchanges as well -- or, even better, to create a “Hulu” of exchanges where only their premium inventory is available for purchase. Again, this makes it much easier for them to control and differentiate their inventory. Still, I for one seriously doubt this will happen, as these types of companies have traditionally not moved quickly enough in the digital arena.
Twitter’s announcement should not come as a shock to many -- it only signals the continued rise of the RTB exchange. While it will be interesting to see which publishers take more control over their inventory, it will be even more interesting to watch those that don’t.