More Reaction From The Demand-Side Platforms: On Right Media And Multiple Exchanges

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Right Media and ExchangesAnd now.. The Demand-Side Platform reaction.

The questions...

  • What has been the impact of Right Media Exchange?
  • In the future, how important is having at least two, liquid, large scale, ad exchanges in the display ad ecosystem? And why.

AdBuyer.com - Tim Ogilvie, CEO

The Right Media Exchange started the revolution. They pioneered the notion that both buyers and sellers would benefit from increased liquidity and transparency in the market and built the infrastructure to prove it.

I think we'd be better off with a single exchange. A neutral marketplace is a natural monopoly. Buyers and sellers both benefit from increased scale, and you're able to remove many of the significant frictional costs that are taxing returns for participants in the marketplace. We're just starting to realize the potential of exchanges, and I think a single liquid exchange would get us there faster.

Brilig - Paul Cimino, CEO

Recognized as the first big exchange, RMX set the stage for both simplification and commoditization of digital advertising. On the plus side this allowed publishers to fill unsold inventory while simplifying ad buying for marketers and agencies. The cost of filling unsold inventory was publisher dependence on vendors who controlled (and lowered) prices while displaying blind ads not line with their editorial. In some cases the ads are contrary, even damaging. And while simplification was good for marketers and agencies, commoditization along with other phenomena such as look-alikes and daisy-changing inventory, hurt both the sell side and the buy side by simultaneously driving down prices and effectiveness. The next step for RMX and other ad exchanges is to evolve from a focus on just 'space' to a combination of space, time, purpose and audience. The advent of "multidimensional interactive advertising" will lead to an explosion of data which intern will drive the need for specialization.

As our digital marketing marketplace matures more than a few ad exchanges will emerge. The numerous dimensions and facets in digital marketing will drive the need for exchanges that specialize. As Yahoo!, Microsoft, AOL and Google mature their be-all, end-all exchanges over the next few years, we will see specialization and diversification in ad exchanges the same way that we have financial markets for equities (NYSE), commodities (CME), metals, treasuries and bonds. Geography will also play a role as each region builds its own exchanges just as they have built their own search engines, portals and ISPs.

Every market has distinct phases as they mature; Invention - lots of chaos, Consolidation - where we are now, Maturity - where the financial markets are now and digital marketing is headed. With the recent turmoil in the financial market, one could argue there is a 4th phase which is a loop of regulation and restructuring.

CPM Advisors - Rob Leathern, CEO

Right Media Exchange has been a pioneer in helping to move us toward the vision of a central, trusted, neutral market for online ad inventory.

The Yahoo! relationship provided liquidity and validation, but ultimately I think the acquisition has not fully realized the goal of creating that neutral, credible, robust market that everyone can trust to help bring buyers and sellers together. That, not making it easy enough for buyers and sellers to use, and a failure to provide more policing of buying and selling practices have hurt the development of the market. We are not there yet and I don't yet know who will be that market. We don't have two, we don't yet have one...

Trust, fairness and liquidity are key components of an exchange that works. I still remember the first time I saw RMX and immediately got it and loved it, media geek that I am, and cannot overstate how valuable the Right Media Exchange has been towards getting us where we are today. Its DNA also is and will be in many of the companies that make a success of the increasingly automated, optimized media future (as it is part of our firm's DNA via our investors and advisors). I think there is a real gap in the market right now, actually, that Right Media could still return to fill if they decide they want to, that of actually being a centralized, trusted place for buyers and sellers to meet. Whether it is one or two or three big marketplaces, to be viable they will each need certain characteristics that allow the market participants to trust them with their data, their buys and sales, and know that they are not going to start competing with their customers.

If the financial markets are a guide, people don't REALLY care whether the companies whose stocks they are buying are on the Nasdaq or the NYSE, but these places being solid and dependable allow the Schwabs and the Goldmans and all the other firms in the ecosystem to thrive servicing customers - and there are many more of them than there are exchanges. It's still really really early in this market's development.

DataXu - Mike Baker, CEO

Right Media introduced advertisers to the idea that you can buy online display media by bidding in an auction, just like paid search ads. The early adopters of "auction media" were ad networks who used the exchange primarily for re-targeting consumers that visited an advertiser's site. Like all innovators, Right Media helped us peer into the future. And the real-time bidding paradigm emerging today is built on the foundation of RMX's ground breaking work.

From an advertiser's perspective, it's important that the market for biddable display media is populated by multiple impression aggregators, be they exchanges, publisher yield optimizers, or ad networks. When markets are robustly competitive, suppliers innovate and differentiate more aggressively, which tends to benefit customers. In the display advertising market this is particularly important because the ad network value chain that has matured over the first 15 years of the internet is disaggregating. The ad economy is on the cusp of a major change to become more open, transparent, and efficient. If we get this right, advertisers will be empowered like never before and the market for display advertising will grow much more quickly. The active leadership of key players like Yahoo will accelerate this scenario.

Invite Media - Nat Turner, COO and Founder

There is no question that Right Media has had and will continue to have a
huge impact. It's still the largest exchange and has quite possibly the
biggest and best inventory source available. Right Media was also the first to educate publishers and advertisers on the advantages of an exchange model, which undoubtedly paved the way for future exchanges. There has been a lot of chatter about the quality of the Right Media Exchange's inventory, which I believe they will seek to "clean up" over the next couple of years, but overall it has played a huge role. Unknown to most people, Right Media's ad serving technology has also powered many ad networks over the years, including several of the "DSP's" we know and love, which was a huge ingredient to jumpstart getting demand into the ecosystem.

Also, regarding the importance of having two large exchanges, I think having multiple large display ad exchanges certainly has its advantages, if only to ensure that the exchanges evolve in a way that is best for buyers and sellers. It can't be denied that other mediums have taken a more "black box" approach in their exchange dynamics, most notably search. If there are multiple ad exchanges in display, then one can only hope that each exchange is forced to push transparency (among other things) as a means of competing for representation of publishers and capture of bids. This transparency is what buyers demand and ultimately will be a major driver in opening the floodgates. All in all, because of the massive fragmentation in the display sell-side as well as buyers demanding maximum reach, I think we're a long way off from having just one major ad exchange.

Triggit - Zach Coelius, CEO

The Right Media Exchange, and all the people involved in its creation, were responsible for demonstrating that a large scale exchange can be very successful. Without Right Media, the amazing innovation that we are currently seeing in the ad space would not be possible. Not only that, but Right Media still has the power to transform itself and once again become an innovator in the space.

[Regarding the importance of at least two large exchanges,] with only one dominant exchange the real question becomes who owns it. If that owner is either of the exchange players themselves - such as the New York Stock Exchange or a neutral third party similar to some of the private exchanges - their usually is not to much to worry about. On the other hand, if the exchange owner is also a player on the exchange - like Google is on their exchange - then the major worry is that the exchange owner might be able to misbehave without the participants having any recourse or any other place to take their business. Needless to say, it is never a good thing to only have one place to do business. A viable ecosystem with multiple exchanges is the best outcome for all participants.

Turn - Bill Demas, CEO

Right Media is the company that defined the exchange marketplace, and they have been a true industry thought leader. Today, the Right Media Exchange remains a leading ad exchange that is driving important efficiencies in the display advertising ecosystem. Their up-market move to a premium exchange is a great step forward for brand advertisers, premium publishers and demand side platforms such as Turn.

[Regarding the importance of having at least two, large ad exchanges], as in any industry, competition is good. It brings out the best in companies and ultimately their customers benefit. In this case, having two or more liquid, large scale ad exchanges is important to maintaining competition and driving innovation, especially as we move to a world of real-time bidding environments. Turn is working with each of the major US ad exchanges today, and we are seeing liquidity across many of them.

[x+1] - John Nardone, CEO

Right Media Exchange as the first scaled, feature rich exchange platform was proof positive that an auction/marketplace was viable and valuable to the display ecosystem. RMX also set the bar for all future ad exchanges and a number of RMX features are still pending release in many of the close exchange followers including remarketing, pacing and API access. RMX is also the only exchange to incorporate optimization. The newer exchanges require that buyers (and sellers) build their own optimization algorithms into the systems. RMX's first mover advantage is a double-edged sword in that they're still working out how to migrate their v1.0 pre-bid line item exchange to a v2.0 real-time bidding environment and also how to incorporate independent 3rd party data providers.

[Regarding the importance of having at least two, large ad exchanges], we believe that competition within the exchange space is critical to stimulate innovation and ensure market rates on fees and pricing. There are also a number of outstanding exchange features such as auction method (second price vs. first price), ad relevance influences on bid price, etc. that need to be tested and having multiple exchanges makes this type of exploration more likely.

It is also worth noting that online media ownership, much like offline media ownership, is balkanized. It seems clear that the major media companies won't agree to participate on a single exchange platform. That being said, access to quality inventory and real technical limitations imposed by ad server hops will ultimately limit the total number of players in the ad exchange platform business.

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