Cameron Hulett, senior vice president of publisher solutions at Acceleration, argues that ad exchanges are the industry’s future.
Online ad exchanges, which work a bit like a stock exchange to match buyers and sellers of ads, are nothing new but they're starting to heat up again. And last month’s launch of DoubleClick’s Ad Exchange V2.0 has helped continue to fuel the flames. But it will still be another 12 months before the impact of ad exchanges will hit the mainstream. And at this point, the way that advertisers, agencies and publishers buy and sell advertising online will fundamentally shift.
An ad exchange is an open and transparent marketplace that facilitates the buying and selling of online advertising. It brings together buyers and sellers in an automated electronic auction to achieve a fair price for online inventory – and then facilitates the placement of the buyer’s creative on to the publisher’s website. At its most basic level, an exchange addresses the underlying needs of buyers and sellers by providing the ad serving platform, community, controls and services.
What does this mean for publishers?
Historically ad exchanges have been seen as a way to sell low-value remnant inventory. But this completely undervalues the power of ad exchanges to act as a strategic and efficient sales channel for publishers. Ad exchanges provide tools, controls and mass audience to sell high value inventory extremely efficiently. Ad exchanges will massively impact all publishers – whether they like it or not.
Via the ad exchange publishers will have access to far more buyers and every single one of these buyers will have the ability to buy on an impression-by-impression basis – in real time, under auction conditions.
What’s in it for agencies?
Media buyers will now be looking for specific inventory that answers a very specific set of evaluation criteria. If search has taught us anything, it’s that “not all clicks are created equal”. This is exactly the world we start moving into in display – where not all impressions are created equal. In future, advertisers will be able to understand more about the impression under auction. Here’s how it works:
- Sellers make specific inventory available for purchase on the DoubleClick Ad Exchange. They define a minimum bid value for the inventory and specify rules to restrict certain advertisers, format or content. Buyers specify the inventory they want together with the price they are willing to pay. They can also specify a rule to dynamically control the bid so that the bid price depends on the inventory’s performance.
- What follows is an auction for each impression, where DoubleClick Ad Exchange scans the marketplace to match the buyer’s targeting requirements with the seller’s inventory. If all matches, the highest bid wins the inventory.
A win-win scenario
The flip side of ad exchanges is that buyers will have access to a much bigger pool of inventory. This will enable them to target new market segments that, for reasons of efficiency, they simply couldn’t access previously. Via the ad exchange, publishers will be able to sell premium inventory to small international markets that don’t justify a direct sales team or even a local sales-house relationship. Or they will be able to sell inventory in niche interest areas to advertisers who historically have been too small to target directly.
Change brings challenges
With the fundamental changes ad exchanges will bring, what happens to the traditional media buyer and seller roles? In short, they evolve. My guess is that managing complex technology is not high on their list of skills. But it needs to be.
On the buy-side, agencies will need to be able to manage large amounts of custom data – in real time. They’ll also need a highly automated analytical and optimisation capability. And they’ll need a deep understand of how to integrate and leverage marketing technology? Sound like today’s media buyer? I don’t think so.
And the sell-side? Whilst it’s unlikely that super-premium inventory will move to the ad exchange any time soon, the sales role for this inventory will become more strategic and educational around the media value which goes beyond the scientifically quantifiable. It probably means fewer but more senior sales people delivering this function.
Will ad exchanges change the game?
Absolutely! Forrester Research shows that 25 per cent of online advertising inventory is never sold. And buyers are constantly looking for better and more targeted places for their ads. Advertising is one of the last markets that relies on a large number of people to perform individual transactions in the online sales process. The result is extreme inefficiency. Ad exchanges move us towards efficiency. They are the industry’s future and for some they are already today’s reality.
