All about growing automation and the rise of ad exchanges

1. Ad exchanges are often confused with ad networks.

Both exist in the space between ad sellers (publishers) and ad buyers (marketers and their agencies), but the two are quite distinct. Ad networks work with publishers to sell online inventory, usually by aggregating and repackaging unsold non-premium inventory. Ad exchanges are technological platforms that serve as marketplaces for ads.

Marketers or agencies can bid for slots from both publishers and networks (usually on a CPM or CPC basis). Publishers tend to put minimum prices on their inventory in order to protect their premium inventory.

Generally exchanges take a flat fee for facilitating an exchange. Ad exchanges emerged in the US in 2005 with Right Media, later bought by Yahoo. Google’s DoubleClick also has a major ad exchange.

2. RTB on exchanges has become increasingly common.

This means that an advertiser can bid on ad slots based on their performance at that time. Ads are then served immediately to that audience. This allows marketers to spot where audiences are and deliver relevant ads to them, boosting response rates.

“The growth of RTB is coming from a shift in the way marketers want to find their audience,” says a Yahoo spokesman.

“Marketers don’t want to target a website to find their audience. They want to have more control over targeting the right audiences across multiple sites and control over how often they serve an ad to them.”

3. A real-time ad sales system has led to further complexity in this market.

Supply-side platforms, such as The Rubicon Project, now work with publishers to optimise pricing and yield.

There are also demand-side platforms offering campaign management or bid optimisation tools for marketers and agencies on exchanges.

4. In Asia there are few options in this area.

Right Media is the best known, Google also has an exchange offer, and The Rubicon Project last year set up in Asia. However, their coverage is limited - ad exchanges and RTB are “virtually non-existent” in China, according to Andrew Meaden, regional director at GroupM.

One reason for this is the low amount spent on digital marketing compared with markets such as the US. That means, says Nick Fawbert, managing partner at Third Space Asia, “the necessary technology investment is high when the overall market size is a little low”.

What’s more, as Meaden points out, the use of exchanges favours direct-response clients such as travel agents and credit card firms looking for lots of impacts cost-efficiently. “In Asia, this category is still fairly small and until it develops, exchanges will find it hard to grow.”

5. Exchanges and RTB systems should have implications for other media with remnant inventory to sell.

There are already exchanges for offline channels, such as India’s Last Minute Inventory, which offers space on Discovery Channel, among others. And as more TV content moves to digital channels, the prospect of RTB in these areas arises. Andrew Tu, VP business development at Adify, argues that presently the principles apply mainly to ‘streamed’ media like TV and radio. “Print still requires the extra step in production.”

Meaden points to another obstacle. “Much offline media in Asia is government controlled and often in near-monopoly situations within the markets, so they may feel no need to discount inventory or worry about hitting yield targets for advertising income.”

6. This is still a market in transition.

Last year Google relaunched its DoubleClick exchange. Soon afterwards, Yahoo announced it was repositioning Right Media to focus on premium inventory. Furthermore, Adam Hemming, general manager at Zed Digital, notes that “most of the big agency groups are entering the fray and working on some form of ad exchange platform.” How this will all play out in Asia is still up for grabs. But, says Hemming, change may be imminent. He predicts a “huge upswing” in advertisers experimenting with these systems in 2010.

“I think the next six months will see a lot of media agencies in this region investing a lot of time in understanding how these platforms work.”

What this means for...

MARKETERS
> Getting to grips with the array of networks, supply-side platforms, exchanges and demand-side platforms is not for the faint-hearted. It is a world of acronyms and shifting definitions. New companies appear in the space regularly, and advertisers can expect the market to remain volatile for some years. Marketers can expect their media agencies to play a growing role in this area.

> The key benefits are cost-efficiency and flexibility. Exchanges allow marketers to buy media space for a flat fee and adapt campaigns quickly. They tend to work best when they are connected to lots of ad networks, but in Asia these are relatively few in number.

> According to Grant Watts, CEO of Admax Media Group, one drawback of buying on some exchanges is a lack of visibility of what you are buying. “Inventory may have passed through several networks and with every pass through it gets impossibly hard to control and affirm that the inventory is brand-safe.”

MEDIA OWNERS
> Exchanges help publishers maximise monetisation. The key benefit is that they are in control of the price at which they sell their inventory. If the inventory is not sold at the premium price they set, it will be auctioned off to the highest bidder.

> But not all online publishers will have direct access to exchanges, which tend to focus on major players. “Most small and mid size publisher would not be included by an ad exchange,” says Watts.

> Supply-side platforms are emerging to help publishers navigate their way through these options and maximise their yield.

Got a view?
Email [email protected]

This article was originally published in the 22 April 2010 issue of Media.