The Rise of Native Ad Exchanges

  • by , Op-Ed Contributor, February 11, 2015

Only about nine months ago, I was attending an invitation-only digital media conference, with many of the industry’s top publishers, ad agencies, technology companies, and investors there. During a panel on the topic of programmatic advertising, in a room filled to overcapacity, a heated exchange broke out and quickly spilled into the audience.

On one side of the debate were a small but vocal group (yours truly among them) who believed that native programmatic was a concept whose time has come.  On the other side, in vastly superior numbers, were those who believed that programmatic and native were completely incompatible, that the very term “native programmatic” was practically an oxymoron.  They strongly believed that delivering native ads that were actually native to the page simply could not be done programmatically, since the very concept of native advertising implied custom, one-off campaigns that can’t really be executed or improved using programmatic techniques.  

How quickly times have changed. This past October, IDC released a report predicting that by 2018, native programmatic as a category would reach $5.25 billion in revenue.  Clearly, the shift of digital ad dollars from traditional display advertising into native is only accelerating, and since platforms have emerged to enable them, programmatic capabilities are now possible in native.  And a key component fueling this growth is the emergence of native-only ad exchanges.

As we saw with display advertising earlier in the 2000s, exchanges -- particularly open exchanges -- have a way of dramatically opening up markets.  That’s because when demand has open access to potentially hundreds of thousands of supply sources in real time, and the market prices the inventory at auction, two very big dynamics take hold: pricing efficiency and scale.  Pricing efficiency because advertisers can specify exactly the type of audience they are looking for and bid for it, and publishers can offer their inventory in the same way.  Scale happens because advertisers on an exchange can have unfettered access to huge inventory sources at once.

Exchanges are now rapidly growing in the native ecosystem.  Helping to move things along, the IAB has released an updated version of the OpenRTB specification that is specifically addressing programmatically accessing native advertising.  This spec, currently in public draft status, outlines specifically how supply and demand can programmatically connect, while retaining everything that makes native the exciting channel that it is.  

In addition, the advanced technologies required to bring programmatic processes to native advertising are now deployed in the market. These technologies enable real-time rendering of ad executions to look native to the page, optimize matching of supply and demand using third-party data, and include provisioning and reporting tools that make it relatively easy for advertisers and publishers to connect on the exchange.

As we continue to see rapid growth in native advertising, look for the continued rise of exchanges.  Efficient markets are, after all, the great equalizer.

3 comments about "The Rise of Native Ad Exchanges".
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  1. Andrew Boer from MovableMedia, February 11, 2015 at 4:10 p.m.

    Interesting. I think there are two ways to define native. One is that native is that which is inherently bespoke or custom: ie. not programmatic. Thus the idea of native programmatic strikes people (like me) as an oxymoron. But native has also become a big tent agglomeration of various concepts, including in-feed advertisements/sponsorships on social networks (ie Facebook sponsored posts), content amplification (ie. Outbrain) and advertorial (ie Forbes BrandVoice). Elements of these will be programmatic.
    But then are they truly native? If I can have an advertorial from Forbes show up on the WSJ and feel native to the WSJ, is it truly a native ad of the WSJ? Yes the design and format might seem native, but will the content? Maybe not.

  2. Ram Srinivasan from EZCorp, February 12, 2015 at 6:35 a.m.

    @AndrewB The Native Advertising Playbook from the IAB has a good evaluation framework. Check it against that.

    What I am not seeing in that playbook is reference to media. Think of an ad inserted into music or a product into a video that fits that evaluation.

    I agree with the author's views on native exchanges. It is bound to happen. Programmatic buying need not involve real-time bidding. Want to bring the author's attention also to the recent Open Direct standard, meant for Programmatic Reserved.

  3. Brian Smiga from dotSUB, March 4, 2015 at 8:07 a.m.

    Will Programmatic kill Native. No. Native & Programmatic are are aligned partners. Programmatic will become more important as native rises. Native relies on programmatic power to continue to grow. It’s because you need self-driving software to fill all the native, non-standard spots. You need computer vision, decisioning, re-composition, and targeting - all of which will be best performed programmatically. A potential leader in the space is leading AppNexus partner, TripleLift.

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