Commentary

It's Time For Exchanges To Focus On Insights, Not Plumbing

As an industry, ad tech has always been defined by its state of constant change, but this past year has made all the previous seem stagnant by comparison. Market pressures for both publishers and advertisers are fundamentally different than they were just 12 or 18 months ago, and the rapid change on both sides is forcing the ad tech ecosystem to become faster and more efficient, ultimately placing control in the hands of buyers and sellers.

We’re entering a crucial time in ad tech where companies that to date have existed as mere plumbing between the buy side and sell side must evolve. Exchanges need to take a more active role in the process, supplying buyers with premium audiences by working in close collaboration with sellers. Doing so is imperative to increasing revenue on both sides of the equation, ultimately driving the entire ecosystem forward. 

On the digital publishing side, volume has long been the name of the game. First, publishers felt immense pressure to optimize for search, which drove a considerable bulk of their traffic. Over time, this dependency shifted to referral traffic from distribution platforms like Facebook. That is, until Facebook completely changed the game with its January 2018 algorithm update, which drastically reduced the reach of publisher content in favor of posts from family and friends. These days publishers need to be reassessing their monetization models for a future where traffic volume proves a fickle and unreliable measure of success, and not necessarily the one most valued by advertisers.

In a landscape where everything is suddenly different, the ultimate remedy to the current woes of both publishers and advertisers happens to be one and the same: better audience insights. As audience quality has unequivocally eclipsed quantity in value, publishers need to start thinking like data platforms. 

As the worlds of publishers and advertisers have been upended, so has the programmatic ad tech landscape that exists between to two. Gone are the black boxes. Transparency regarding auction mechanics is the new normal. The plumbing between the publishers and the advertisers — residing in the DSPs, the SSPs, the ad exchanges, and others — is cleaner than ever. But that transparency hasn’t come without a cost — a literal cost — to these players, and many are still struggling to reconcile their new financial realities in this age of transparency and header bidding. 

It is within this sea of upheaval on all fronts — among publishers, among advertisers, among ad tech — that a tremendous opportunity exists, particularly as it relates to companies that sit at the intersection of supply and demand. It’s time for companies like ad exchanges, which have historically played the role of industry plumbing, to focus less on the pipes and the infrastructure that connects the ecosystem, and more on the quality of water that runs through them (i.e., the audiences).

By virtue of their role in connecting supply and demand, ad exchanges have an almost expansive view of the number of ad requests around given parameters versus the available inventory and audiences to fulfill on those requests. The delta between those two numbers tells an important story, but that’s not a story that the business model of ad exchanges is currently structured to tell. As such, a valuable asset — a strong proxy around consumer intent — is going to waste. 

Ad exchanges have the opportunity to help their publisher-side partners realize the full value of their audience data by placing it into the context of other audiences inside the ad tech reservoir. This valuable audience intelligence layer is going to be increasingly required to ensure publishers are getting fair market value for their audience insights in a world where traffic volume no longer represents a viable path to sustainability. Meanwhile, exchanges can tap the same audience intelligence to help advertisers establish direct relationships with consumers.

Today’s publishers and advertisers need more than plumbing. They need a true competitive advantage through audience insights. If ad tech players that sit between supply and demand can provide the intelligence to power this competitive advantage, it will lead to a new equilibrium where data and intelligence replace plumbing and volume.

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