Today’s column is written by Kirk McDonald, president at PubMatic.
To hear the business pages tell it, ad tech is a category very busy growing up: With high expectations for the industry’s major players, and with revenues climbing steadily, we’ve crossed the chasm that greets every new technological innovation and are now focused on growing relevance and value.
But before ad tech can fulfill its massive promise it must be properly understood. Ours is a notoriously technical and maddeningly complex industry, so to make things clear allow me to offer a metaphor that I trust we can all appreciate: food.
Do you cook your meals yourself or order take-out? Each approach has its advantages. Cooking gives you complete control over the flavors, texture and temperature of your meal, but it requires a somewhat steep learning curve and constant awareness. Take out, on the other hand, is usually consistent and arrives neatly packed up at your doorstep. It leaves you little say in how the dish is prepared, but it’s easy.
The same can be said of ad tech.
Home-Cooked Vs. Take-Out
As the industry grows, we see two distinct business models evolving. The SSP/DSP model is for the ad tech version of a “foodie.” It offers the customer control over a range of specific tools that empower them to manage their own marketplaces, plus the technology is custom built to maximize revenue. With this approach you can “julienne” your data any way you want it, but it does require that you either have an in-house chef or, in the case of case data, a scientist or solutions expert to help implement your approach.
With the other model, which is built around the exchange, things are a bit simpler. You don’t need to be a chef or expert – or bring in one – to know what you want to accomplish or to implement a solution. The skill of the chef is less important and the setup is easier, but the product you receive could have been pulled from beneath the metaphorical heat lamp.
To continue the culinary metaphor, exchanges are take-out. The exchange-based model operates in a couple of different ways, including when the exchange takes a principal position on the inventory (really an arbitrage play) and drives liquidity of the given inventory at their disposal for their benefit and the publisher or advertiser’s gain. Publishers that specifically opt for this model are perfectly happy to put somebody else at the helm, understanding full well that they’re giving up some control in return for a revenue-generating process that is streamlined, simple and undemanding.
The DSP/SSP model is different. Based more clearly on a Software-as-a-Service approach, in the case of publishers, SSPs offer tools to drive a bespoke strategy and manage the principal risk for themselves. It allows for custom marketplace solutions that are specific to the publisher’s propensity for risk and or desire for consumer experience or brand control. It’s the sharpest chef’s knife in the drawer, allowing you to fillet your stuff the way you like.
A Balanced Diet
All of this may sound fairly obvious, but until the last couple of years, it wasn’t. We’re only now acknowledging that inventory doesn’t start out segregated as direct or indirect, primary or secondary, guaranteed or nonguaranteed, or any of the other words we like to throw around. With the growth in private marketplace and more desire for solutions like programmatic direct, I see more publishers choosing to select and manage their own inventory and sales strategies. It turns out that feeling at home in the kitchen simply requires being comfortable handling a knife.
So which strategy is better, exchanges or SSPs/DSPs? The question is as silly as asking someone to choose between Chinese take-out and a homemade casserole: Each has its place, neither is mutually exclusive and both can be part of a balanced diet. I recommend that publishers utilize whatever means they believe will drive their advantage. Some will rely heavily on one model or another, while others will work with SSPs and plug into one or more exchanges behind it as a solution for inventory fill.
This technological and strategic diversity is what makes our industry so promising. Now that we have greater clarity on the different platforms and technologies at play, we can focus on continuing to grow it to its highest potential.
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