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Yahoo After RMX: What Is Yahoo Ad Exchange Anyway?

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YahooAdExchangeNow that Right Media Exchange (RMX) has been officially sunsetted by the powers that be, the Yahoo Ad Exchange has become a private marketplace of sorts, where demand can plug into Yahoo-owned and -operated supply.

Yahoo has made a concentrated effort to streamline its ad business in the past year. The company used CES 2014 as an opportunity to announce the launch of Yahoo Advertising, a purple umbrella to house all of its ad-buying capabilities, including Yahoo Ad Manager and Ad Manager Plus – self-serve tools to help SMBs and larger brands manage their Yahoo native and display campaigns – and the Yahoo Ad Exchange, intended to provide “a higher-quality marketplace” than RMX.

Recent acquisitions Flurry and BrightRoll will form the mobile and video cornerstones of Yahoo’s tech stack.

As Josh Jacobs, global CEO of Accuen, Omnicom Media Group’s trading desk, noted to AdExchanger at the time, the move was “long overdue.” That said, Jacobs observed that Yahoo still had some work to do in terms of “[fleshing] out its definition of what programmatic advertising means in the premium space.”

YAX, as some industry execs have started to refer to Yahoo’s exchange platform, appears to be part of Yahoo’s effort to lay down that definition.

AdExchanger spoke with several industry sources to dig deeper into what exactly YAX has to offer.

YAX Facts

Yahoo alerted buyers still using RMX in mid-Q4 2014 that, starting in 2015, YAX would no longer support third-party publisher relationships outside of Yahoo O&O network sites.

But what about yield extension beyond Yahoo O&O properties like finance.yahoo.com, sports.yahoo.com, news.yahoo.com, mail.yahoo.com and other premium URLs?

Yahoo’s VP of programmatic ad product, Dennis Buchheim, told AdExchanger that buyers can also purchase inventory via YAX from a wider network of sites made up of publishers who maintain direct relationships with the Yahoo sales team.

“Yahoo Ad Exchange remains a large source of high-quality programmatic inventory from Yahoo properties and other hand-selected premium publishers who we have direct relationships with,” Buchheim said. “So we do still support third-party supply on our network, but now it is all managed by Yahoo on Yahoo’s own exchange seats so we can better control quality and monetization. We also continue to offer private marketplace access to selected inventory managed on the exchange.”

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In terms of tech, one DSP source told AdExchanger that Yahoo appears to still be using a part of the former RMX technology to power its O&O and network-level exchange.

Buchheim confirmed as much and elaborated.

“Yahoo Ad Exchange has evolved over the last two to three years, with significant architectural and engineering investments to the Right Media technology focused on fraud detection, traffic protection and enhanced marketplace liquidity,” Buchheim said. “Some core functionality from Right Media remains, but much has been rebuilt since 2012 to support rebranding as Yahoo Ad Exchange in early 2014.”

Quality Time?

Multiple demand-side players told AdExchanger that they didn’t feel much pain in terms of curtailed supply when Yahoo pulled the plug on Right Media – they weren’t using RMX to access much that wasn’t Yahoo-owned and -operated anyway.

“There were less than 15 publications operating inside Right Media we used that weren’t Yahoo O&O, so when it was shut off, the impact on us was not very great at all,” said one demand-side platform (DSP) source.

And that’s because of the quality issue. Over time, RMX had become synonymous with less-than-stellar third-party inventory. But with the Right Media name buried and YAX rising from the ashes, there’s confidence that Yahoo’s exchange platform will be a quality play for advertisers.

“The Yahoo inventory is very desirable – it has always performed and it still does,” said Mike Baker, CEO of DSP DataXu. “We think it has good quality and we expect that Yahoo can make it even better in a programmatic world.”

Another DSP source echoed Baker’s sentiment, noting that Yahoo O&O performs well, with higher than average CPMs. “Based on all the inventory we’re seeing across our platform and all of the exchanges we’re plugged into, the yield is also pretty decent,” he said.

That same source also told AdExchanger that he’s pleased with the volume on Yahoo’s exchange, which hasn’t gone down much since RMX was shuttered.

“About 70% to 80% of the requests we got from the Right Media Exchange were represented by just Yahoo-owned and -operated and network sites,” he said. “The bulk of the transactions we purchased was represented by Yahoo inventory.”

According to Buchheim, Yahoo has been “strategically decreasing inventory to improve quality and facilitate a managenable planning and buying shift for our partners.”

In other words, Yahoo is cognizant of making up for any dip in volume that might come as a result of the RMX closure.

“While we will continue to manage premium inventory on Yahoo Ad Exchange, we are focused on scaling third-party supply for our network and platform clients globally using our new programmatic buying platform to buy targeted, high-quality ad impressions through a range of marketplaces,” Buchheim said.

In Yahoo’s Own(ed) Best Interests

Any potential short-term revenue loss that might have resulting from killing RMX’s open exchange business will be more than worth it, Baker said.

“They’ll gain control and increase quality in the long term, which is a smart move,” he said. “We’re cheering for Yahoo to move down this path with force and efficiency to keep pace with some of the other big audience owners out there like Google and Facebook.”

Owned-and-operated makes more sense for Yahoo from a brand perspective, too, said Mike Seiman, CEO of digital ad company CPXi, once one of the largest ad networks on Right Media. CPXi ultimately moved its business over to AppNexus in 2011 because, under Yahoo, Right Media “wasn’t moving into the RTB market with a speed we were comfortable with,” Seiman said.

“Yahoo is a company that thrives on relationships, yet they went and bought something to create an open world,” said CPXi President Jeffrey Hirsch, referring to Yahoo’s 2007 purchase of RMX. “Over time, different managers inherited that scenario and it was hard to make it work. There was an inherent conflict.”

But Baker sees Yahoo’s rededication to O&O as a key move for the company’s future and the market at large.

“It’s also positive for the market if Yahoo focuses on improving quality and reducing fraud – this is where the industry is going, so we applaud the move,” said Baker, who noted that DataXu has made a move to increase its queries per second on YAX. “Viewed against a backdrop of fraud, it makes a ton of sense for Yahoo to make a move that gives us more confidence to buy on their exchange. It’s exactly what the industry needs.”

Tanuj Joshi, senior director of strategic media enablement at MediaMath, also sees Yahoo’s flight toward more premium inventory as a step in the right direction.

“O&O inventory might not have multiple billions of impressions per day like run of exchange inventory, but it does offer more control and, often, higher quality and greater performance,” Joshi said. “It’s a separate class of inventory. Think about Facebook, which has the largest exchange of only owned-and-operated inventory.”

Yahoo’s calling curtains on RMX is an inflection point in terms of more publishers devoting themselves to O&O inventory, Joshi said.

“Microsoft, AOL and others have done their fair share, and I think we’ll see more owned-and-operated publishers follow suit and go in that direction, as Yahoo did,” he said.

Playing It Safe

Speaking of greater control, Yahoo issued a mandate in late 2013 that all of its products, starting with mail and including advertising creative, would soon be required to be SSL compliant, an encryption protocol to protect privacy when users place personal information on a web page.

As Yahoo Advertising notes in the ad specs section of its site: “All components of display ads, including creative and tracking, must be able to serve via SSL (https://) without any disruption to the browser, page or user.”

This means third parties looking to place ads on Yahoo sites need to serve SSL-compliant creative.

“Mandating SSL-encrypted ad creative helps us maintain a trusted relationship with our users and also helps advertisers avoid wasting money on fraudulent impressions,” Buchheim said.

While one DSP AdExchanger spoke with felt like Yahoo’s insistence on SSL creative was hurting its business – “It was a bold move on Yahoo’s part … [but] buyers have to create separate creative just for Yahoo and that’s been a point of friction and it’s affected them from a revenue standpoint” – DataXu’s Baker disagreed.

Yahoo isn’t the only publisher to support SSL-enabled ads, Baker said, pointing to what he called “a secular trend among some of the bigger audience owners who drive quality and confidence in the market.”

“We take a more long-term view on this – welcome to ad tech in 2015!” Baker said. “It’s a change from the existing way we’re working, but so is virtually everything as the industry matures. Digital isn’t something that’s 10% of people’s budgets anymore. The tail has become the dog. This is now a big business and when that happens it becomes more serious [and] more focused on quality and operational excellence.”

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