Comments on: While Exchanges are Hot, It’s Actually Not About the Exchange

By: Ramsey M

Ramsey M — Thu, 15 Oct 2009 22:15:40 +0000

Good post. An exchange is about supply normalization, and then it provides the mechanisms of control on the buy and sell side to support both a spot and futures market where buyers take data at a tactical (clicks, site visits, demos, etc) and strategic (POV that auto inventory will be severely constrained) to determine what the value of inventory is.

Access to inventory was not an assumption five years ago, but with the RMX, AdX, others and DSPs, it's fair to assume access to inventory. So, the winners will be defined as those that are best able to negotiate preferred access and/or use insights to create advantage.

By: Darren Herman

Darren Herman — Thu, 01 Oct 2009 01:31:44 +0000

Thanks for all the kind comments guys. lots of good points in the comments here.

By: Christian Brink

Christian Brink — Wed, 30 Sep 2009 22:37:02 +0000

kblake - your question about speculation - taking a speculative position in media doesn't involve RTB; only exiting it does.

By: Zach Coelius

Zach Coelius — Wed, 30 Sep 2009 18:25:44 +0000

Very well said as usual Darren. Though I would argue that the technology to handle hundreds of thousands of bid requests per second and effectively bid on them is hard enough that it is unlikely to ever become commodity. Otherwise I think you are right on.

By: kblake

kblake — Wed, 30 Sep 2009 17:35:50 +0000

Great post. Will we need advertisers to think of their online investments more like their GS investments?

I see a fundamental difference between financial markets and real-time media trading markets. Financial instruments are useful for betting on current and future value and require taking upfront positions where success is derived (or foiled) by fluctuations in price, independent of the underlying value. This is where the trading houses derive big payouts. In the RTB world, there is no future price of the impressions you buy (only impressions like them)--wouldn't this help protect against speculation and resultant wealth concentration at the brokerage (ad network, ad trader, agency demand platform) level?

By: togilvie

togilvie — Wed, 30 Sep 2009 12:11:33 +0000

Good insights Darren! I think you're right about where lots of value will be created, but I wouldn't count exchanges out of that game just yet. It's only relatively recently that Goldman makes so much money from prop trading. Most of their history was as market makers and investment bankers, very similar to the exchanges of today. They used this business to gather data, smart people, and perspective on where money was being made. The exchanges may be waiting, gathering data and developing insights through a market-maker's purview. And one day we'll all wake up to find we're working at the equivalent of People's Bank! Suffice it to say that I expect that's the long-term plan of at least one exchange.