Yahoo! Begins Requiring Right Media Seats for Demand-Side Platform’s Advertisers

Going DirectThe other shoe appears to be falling.

If you’re a demand-side platform or ad network on Right Media Exchange, you may not be allowed to buy Yahoo! Class 2/remnant inventory on behalf of your client unless your advertiser gets its very own seat on RMX. (Having an advertiser get its own seat is not easy on RMX. It requires time, money – and approval.)

According to multiple, reliable sources, that’s the latest directive from Right Media account managers who began telling some of their DSP/network clients that they will have until December 2 to migrate their advertisers. Thereafter, the display ad inventory “valve” containing Yahoo! inventory which leads directly to the DSP, will be turned off.

As All Things D’s Peter Kafka reported two weeks ago, retargeters such as TellApart, Criteo and Dotomi have already had their “Class 2” inventory (Yahoo! remnant display ads) shut off.  This week’s move isn’t a huge surprise given the demand-side platform model is essentially the same between retargeters, DSPs and ad networks.

There are several intended effects for Yahoo!

First, it wants to drive the sale of display ad inventory through its direct team which comes in at a higher CPM. As large direct advertiser relationships are established on the exchange, this will provide Yahoo! visibility into those buyers and their remnant AND direct sales needs. Over time, if it wants, Yahoo! may be able afford dropping CPMs on a direct basis as it has cut out the middleman, which sets up the possibility of larger, bulk buys of direct or remnant inventory on an “upfront” basis by the direct advertiser – a relationship the publisher covets.  The “upfront” – woohoo!

Another important strategic partner in all this for Yahoo! is the agency trading desk on Right Media which will be funneling gobs of demand from its clients. Will ATDs eventually need to get seats for their clients? No. In fact, Yahoo! will be (or should be) looking to serve ATDs any way it can given the fact they bring potentially huge budgets from coveted big brand advertisers. And, Yahoo! wants to make its agency partners happy since they drive the purchase of direct and integrated buys on Yahoo! O&O.

The question for Yahoo! (and other big pubs) is… can going it alone through a direct relationship with advertisers overcome any perceived shortfall, which relationships with skilled, data-driven DSPs/ad networks had made up by buying remnant – and aggregating demand – through RMX on behalf of clients?

Yield management without the middleman echoes the theme of the deal which Yahoo! has led with Aol and Microsoft where each will be selling the others remnant display inventory. Owners of “big inventory” are starting to guard the inventory gate in hopes of limiting exposure to the data-driven platform buying “middleman” world that is perceived by some to be cherry-picking inventory and driving down overall yield for big publishers.  Also, publishers want to prevent channel conflict as advertisers may try to buy through DSPs and ad networks, which works against publisher direct sales efforts to those advertisers.

Timing-wise, this move is similar to last year when AppNexus was cut off from DoubleClick Ad Exchange around the busiest time of the shopping year (“Black Friday”) and had to find its advertisers their own seats on the Exchange.  But, that was a unique case for Google Doubleclick – the difference for DoubleClick Ad Exchange in comparison to Yahoo!’s move is that Google currently allows most of the nimble DSP, ad network and retargeter players access to their inventory.  Will Yahoo! miss them?  Does this make Google display ad strategy stronger by driving the demand aggregators to DoubleClick Ad Exchange?  Or, does Google make this sort of move, too, in the long haul – requiring all advertisers have a “seat” on its exchange?

Big players are flexing their inventory muscles and requiring access to the advertiser.  What’s a DSP to do?    For beginners, direct relationships with publishers through private exchanges or the like will likely be increasingly important.  And, that’s what Right Media is becoming – a big, gated private exchange for Yahoo! inventory. (- or is RMX becoming a big DSP for Yahoo! inventory? 6 of 1, half a dozen…)

The idea may be that there’s a little less margin on the arbitrage between the purchase of remnant display and selling it back to the advertiser client. Now the advertiser client has a direct relationship with the supply source and its pricing. The advertiser still needs the retargeter, DSP and/or ad network to bring it all together for the advertiser across all supply sources and a layered, data-driven digital world that leverages multiple tools and services. This is not the end of the middleman – but this slice of transparency may be an early move away from arbitrage and to the services model of agencies.

It’s safe to say that interclick (acquired by Yahoo! earlier this month) was not cut off from Yahoo!’s inventory and may be the last ad network left standing on Right Media for Yahoo! Class 2 inventory along with Yahoo!’s own ad network and “Big 3” members (Aol) and Microsoft Media Network (Microsoft). Perhaps the Big 3’s ad networks will pick up some of the pieces of clients who don’t want or can’t afford a seat on RMX.

It’s the Big Squeeze!

By John Ebbert

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  1. Way to go, Yahoo! Why not make it even harder for advertiser’s to buy your inventory? Perhaps you could require a blood test as well. What they fail to realize is they’re not the only exchange. When all the DSPs/ad nets shift their buys to the other 20+ exchanges out there, they’ll realize what a ridiculous idea this was. I’m sure their new CEO will fix all of this, given their track record.

    • Not sure I agree. In terms of display inventory that converts well at scale for broad swaths of advertisers, it’s Google, Yahoo, Bing and then a few others, but you can’t just replace the sheer volume of traffic that a Yahoo or a Google AdX brings.

  2. 1. 10/18/11: Google stops passing keyword referral data for organic search from those logged in to Gmail, G+, G Reader & other G-hosted apps. 12% of data goes away, likely ramping up to 25-50% inside 1-2 years.

    2. 11/10/11: Yahoo shuts off Criteo, Dotomi & TellApart, three top retargeting firms.

    3. 11/23/11: Yahoo shuts off DSPs from its remnant display inventory.

    Looks like publishers are making moves to more closely control their inventory and cut out display middle-men. Given how high the margins are/were for many intermediaries in the display space, I can’t say I blame the publishers.

  3. This is ridiculous. They won’t require advertisers to have a seat for ATD clients, but they will for DSP clients? Aren’t all the ATDs working with the DSPs?

    I’ve seen RMX inventory perform great when managed in-house via a DSP, but when we buy through Yahoo! performance is terrible because no one at Yahoo! is even ‘watching the store’ let alone optimizing our campaigns daily.

    Yahoo – if you want me to buy inventory direct, fine. But either give me the tools to optimize or staff to pay attention to your <$100K/month clients if you want to keep DR business flowing.

  4. Mike Fleischman

    This doesn’t sound like a Right Media Exchange policy, but more of a Yahoo Net+ policy. It’s important to distinguish between the two. Yahoo is one of many supply partners on RMX and I would venture to guess that this policy is specific to Yahoo. I can’t see RMX Account Managers telling DSPs that they require a seat for all advertisers that want to buy across the platform.

    • Good point Mike, and this makes sense. But worth noting that Yahoo! is a bit more than just “one of many supply partners” – they are one of (or the) biggest ones with more ‘premium-ness.’ And they happen to own the exchange itself.

      If this is intended to be more like a private exchange setup through the SSPs where the pubs just want to see/approve advertisers and agencies buying inventory (where you can get a ‘seat’ with a few emails), that’s one thing. If they really want every advertiser to buy a seat on RMX, that creates a serious hassle for all involved.

  5. dataguy81

    This is pretty unclear, and there has been no official announcement yet, so lets not jump to conclusions.
    Right Media has a dozen or so DSPs powering networks, hundreds of entities (majority intermediaries) and tens of thousands of advertisers. Clearly RMX will not be deploying tens of thousands of new seats for single advertisers to access Yahoo inventory.
    As Mike mentioned, Yahoo is either turning off the firehouse to just about all intermediaries (which is counter to them touting how they’re 100% RTB enabled for all), or they are just making networks get their own seats that are powered by DSPs (like Doubleclick has started doing). This is not an RMX announcement and is Yahoo specific either way.

  6. Matt Barash

    The momentum is swinging from the demand side back to the publisher. Shrewd move on the part of Yahoo and I would expect other large “players” to follow suit to take steps to improve ad quality, rate integrity and each property’s respective user ecosystem.

  7. While I’d love to be yet another disgruntled buyer, as an active stock investor I think this is a great move for Yahoo!. It plays well with what appears to be a cohesive strategy for boosting Yahoo! revenue (years overdue). Combined with InterClick and the AOL/MS deal, I suspect Yahoo! will see a healthy yield increase. After all, they know who buys and what the buyer pays. It would be fairly simplistic for Yahoo! to model the impact of this policy to ensure they are not shooting themselves in the foot.

  8. Interesting move by Yahoo, and clearly another foundation for a Super Private Exchange, but not sure I see this one given the liquidity of cheap supply and a performance focus of DSPs.

    Forcing DSP’s to get seat-level permission for every advertiser slows down the flow of programmatic buying and limits auction pressure, keeping prices flat. Combine that with the fact that the DSP’s are the optimizing servers, not Yahoo’s, and I struggle to see where this does anything except drive RTB spend outside of RMX.

    Remember that OpenRTB standards include white lists, so when you have exchange partners who are OpenRTB compliant, it means that buyers can safely buy in brand-safe environments at scale. Buying safely into Yahoo becomes a little less necessary when you can buy safely everywhere.

  9. Yahoo has played right into the hands of Appnexus… Brian O’Kelley is laughing all the way to his huge IPO now.

    Another highly questionable move by Yahoo amongst a long string of them. This will not stop the rapid commoditization of inventory and the dominance of algorithmic based buying. Just shift dollars to multiple other venues.

    Yahoo may make a more profitable business, but a smaller one, for sure.

  10. I’m not sure this strategy is going to work. I liken it to the old Ad Network argument to the DR advertiser of why the Advertiser should permit the Ad Network to overlap their buys (on pubs they are buying directly), “because they are getting $1.00 CPM inventory for $.35 CPM as they are being treated by the Ad Network as a fill Advertiser.” There is obviously more science (and creative optimization) involved here, so the margin they think they are swinging over to their camp, is just going to be Opex & Capex costs they have to build into their organization to enhance their ad server optimizations (there is also a network effect here, this takes years to build). If they think Advertisers will just sit by patiently while this happens, they are mistaken. In the end, Yahoo! will find is that DSPs and Networks blend most advertisers into a publisher’s inventory, and going direct to that Advertiser is not as attractive as they think it is. What Y! should be focusing on is how to make the better platform and pub dev, where I agree with DataMan, AppNexus will/is dominating in this arena and at the end of the day, a publisher only cares about eCPM – so if Yahoo! (by default, RMX) turns away all these DSPs and AdNets, AppNexus wins. This is small thinking, but I expect nothing less from a bureaucratic organization.

  11. Chris Pirrone

    Given its massive impression volume, Y! Is engaged in a balancing act of transitioning advertisers to (hopefully) higher priced direct buys and removing intermediaries that earn nice margins and may not add much value, but soak up a lot of Y! inventory at remnant pricing. But at what cost/impact to Y!? Can Y! bring this direct demand on quickly enough to stem substantial rev and margin losses caused by blocking partners? Will DR campaigns back out for advertisers at higher CPMs? Can ICLK’s platform, optimization and team support the DR focused demand and eat up the significant volume that DSPs and RT companies currently manage? We can look to AOLs earnings to understand the impact that cutting out partners can have. But like AOL, I imagine this is a marked shift in strategy focused on longer-term objectives, raising the value of Y! inventory/audiences and strengthening direct advertiser relationships, and may be the bold move that finally turns the tide at Y!

    • Right, agree with the long term view here, no question. I just think there is a more strategic way to do this with a slower roll out and accomplish the same end. At FOX we did this, but we focused on it from more of a channel/advertiser perspective. I think to get more branded and branded performance budgets, this will probably work, there is still going to be the long-tail that goes unmonetized and will be a potentially bad experience for performance advertisers. Hopefully Y! is looking at each 3rd Party on more of a case-by-case basis and not doing the carte blanche approach.

  12. Yahoo are really looking after only one group of people at their company being their direct salesforce. Since the advertiser doesn’t benefit at all out of this with paying; higher prices while getting no performance optimization, little display media services and constantly being sold on “new” offerings, this is going to fail and it is only a matter of time.