Oversight A Must For Continued Growth Of Ad Exchanges
- by Tameka Kee , November 8, 2007
"There's more coming. I think we all know that," says Dan Ballister, COO of TRAFFIQ.com and a participant in ad:tech's Analyzing Online Advertising Exchanges panel on Wednesday.
Earlier this year, Web giants like Microsoft, Yahoo and Google took part in an online feeding frenzy, gobbling up independent ad exchanges like AdECN, Right Media and DoubleClick (the ad-serving firm announced that it would launch an exchange in April). ContextWeb's ADSDAQ and the recently launched TRAFFIQ are reportedly two of the relatively few high volume independents left in the mix.
Another panelist, Imran Khan, managing director and online advertising analyst at JP Morgan, also noted that publisher and advertiser concerns about marketplace competition, transparency and regulation were valid.
"The three largest exchanges are now owned by the three largest sellers of online media," noted one attendee. "Should there be some kind of auditing or regulation?"
According to Ballister, "some third-party oversight makes sense--given some of the main players and the fact that [exchanges] are starting to gain traction." But he added that cross-industry entities were already paying attention to the rapidly evolving space, with the IAB, for example, launching a certification program for ad servers that tackles both the technology and processes behind auditing.
"This is a very interesting time because it creates the question of how transparent these exchanges are," Khan says. "Both Microsoft and Yahoo have said that they are trying to keep the companies separate-- and be very clear about who is the seller of the inventory they're offering. If the DoubleClick acquisition closes, then Google will likely try to do the same."
The premise of an ad exchange is an open marketplace where advertisers bid on unsold publisher inventory--with the high volume of sellers creating a wealth of non-premium inventory that if targeted effectively, can garner better CPMs for publishers and ROI for advertisers.
Some of the challenges facing exchanges are the seeming lack of transparency or control when it comes to when and where a specific ad will run, the need to sometimes integrate an additional layer to the ad-buying process, as well as "dissimilar business models all using the term exchange," Ballister says.
But both Ballister and Khan were bullish on the continued growth of exchanges, with Khan serving up JP Morgan's revenue forecast for graphical ads in the years to come as part of the rationale. "By the end of this year, global spending on graphical ads will reach at almost $17 billion--a 22.5% growth from 2006," Khan says, adding that spending will grow by about 21% in 2008, and reach over $27.6 billion globally by 2010. Given the wealth of inventory that the billions of dollars represent, it's likely that publishers will have a hard time selling it all on their own.
