Programmatic Moves From Arbitrage To Futures Markets

A seemingly endless supply of display advertising, paired with the often opaque nature of programmatic advertising, has resulted in a number of downsides for brands, while creating opportunities for others.

Some players benefit from rampant ad fraud, a practice expected to cost advertisers $16.4 billion in 2017. Beyond the way fake sites and fake clicks can take advantage of unsophisticated marketers in the overcrowded programmatic market, another industry has entered the fray: financial markets.

As the number of demand-side and supply-side platforms have exploded over the years, bringing a fragmented market, agencies have long been engaging in programmatic arbitrage:  buying up inventory, repackaging spots, then turning around and selling those same spots for a bit more than they paid.

Still, they got strong pushback from brands when they did so. It was hard to make the argument that agencies weren’t shortchanging their clients when they were on both the buy and sell sides of the same product. Price transparency became an issue.



With the opportunity for arbitrage still there, financial institutions have begun positioning themselves to create an organized futures market for programmatic inventory.

“There’s been a lot of speculation surrounding large hedge funds coming along and buying up the inventory for big events like Black Friday, the Super Bowl, or Cyber Monday, to then add it to a portfolio so they can sell it for a profit,” Lou Severine, CEO of the New York Interactive Advertising Exchange (NYIAX), told England-based City A.M.  “If it works and the demand is there, we’ll open it up.”

NYIAX, developed in partnership with NASDAQ, is injecting speculation into programmatic marketing by creating a kind of futures market for digital inventory. The NY-based exchange has been in the pilot phase since February, and is expected to have a wider release later this year.

This speculation will be prone to the usual whims of such markets, but will also allow both brands and publishers to plan further ahead, not unlike the upfronts that dominate TV ad buying, Severine noted.

NYIAX incorporates the various components of the ad-tech landscape into its trading platform, including DSPs, ad exchanges, data-management platforms, and ad servers. With the inclusion of blockchain technology as well, NYIAX is expected to have a noticeable effect on transparency in programmatic advertising, and will likely give marketers more time to root out fake or unwanted inventory.

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