Let’s Take the Google Ad Exchange Conversation to the Sell Side for a Minute

“The Sell-Sider” is a new column written by the sell-side of the digital media community.

Michael Barrett is CEO of AdMeld, a publisher yield optimization company.

Michael Barrett of AdMeldThere’s been a lot of interesting talk over the past few weeks about the potential impact of Google Ad Exchange. While there seems to be consensus that the platform will catalyze the adoption of real time bidding and the exchange model in general, most of the analysis (as noted by FarneyMedia) has been from and about the buy side. But from AdMeld’s perspective, I’m most interested in the role AdEx may play in the lives of our clients—the web’s premium publishers.

Like most things Google, AdEx brings to bear some smart technical features. For instance, by connecting the exchange with DFP, Google’s built a nice onramp into the platform for large publishers. That kind of convenience is important, but it’s just one part of the equation. For AdEx or any exchange to succeed, it will have to demonstrate superior monetization capabilities on the sell side. That means delivering the highest possible yield for every impression at 100% fill, and doing it better than the top players in the space.  As Mike Cassidy of Undertone said recently, “publishers are better off selling through multiple channels than one transparent channel at lower rates.”

Beyond monetization, premium publishers are looking for more than just technology to help them navigate the ad space. In an increasingly complex landscape, publishers want partners and advocates with expertise ranging from emerging sources of demand to data strategies to minimizing issues like cannibalization. Speaking of cannibalization, I had a recent conversation with a client in which he acknowledged the need for more efficiency in the industry but asked: “If I lean into exchanges whole-heartedly, will it turn my $0.50 remnant CPM into $3 (a good thing) or my $30 premium CPM into $3? (a not so good thing.)” We’ve heard it before, but this is a persistent and legitimate concern for top-tier publishers. Without their confident participation, the exchange model simply won’t deliver. I don’t think Google wants to help publishers strategize around these types of issues, and if they did, the inherent conflicts of also running an ad network would make it a difficult sell, even if those conflicts never actually came into play.

While some have speculated that Mountain View will come to dominate the exchange space, I think it’s an unlikely scenario. Google will find a way to play a meaningful role in display advertising, but as Darren Herman said in a recent post on this site, the industry has yet to see one platform in any segment (including PPC, Google’s core business) that meets everyone’s needs. Whatever happens with Google specifically, AdEx and similar platforms are spurring a new wave of innovation and competition that will make it a lot easier to transact display advertising inventory—and that’s a good thing for everyone. Forgive the industry-thought-piece cliché, but it really is an exciting time to be in this space.

Follow AdMeld (@admeld) and AdExchanger.com (@adexchanger) on Twitter.

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  1. Great post, Michael. I am delighted to finally see some proper debate on the sell-side about the exchange model. I agree with Mark Cassidy’s assessment that a multi-channel approach is probably better than using “one transparent channel at lower rates”.

    Clearly, not all publishers are going to have the same success with the DoubleClick Exchange – and I’m not convinced it will become the one-stop shop for publisher trading. I think some will continue to use RightMedia and Contextweb to sell inventory.

    And, as Darren Herman pointed out yesterday at the AdRevenue 09 conference, more publishers will look to build private exchanges using the likes of the RMX platform.

    The yield optimsers will offer a great option to manage the “ad network” channel. And of course if you can’t sell that inventory at your requested floor price, cut a deal with one of the performance ad networks.

    Data trading, in my view, will also develop into another important channel. We are still waiting for the likes of Bluekai and Exelate to roll out their service her in Europe though.

    It’s a very confusing market, but it’s great to see publishers starting to realise the potential of the exchange model. More debate and education is necessary though.

  2. Agree that this is a great post and love seeing some sell side thinking.

    That said, I’m a skeptic that publishers will be better off using a multi-channel approach to non-premium inventory. Auctions achieve the highest price when there are lots of participants and every participant has full information. That’s true across every domain: financial markets, high-end art, ebay, & online advertising.

    This doesn’t change the potential conflicts between premium sales and non-premium, but if you’re going to sell non-premium inventory via an auction, you need a crowd.

  3. In the long run I have to agree with Tim, more buyers with better technology will result in higher prices for publishers. In the short run multi-channel will certainly work better as we on the buy-side get up to speed on the exchanges.

    Nice work Michael