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By Domenic Venuto
I was hoping by now we would see ad technologies consolidated into a manageable few. Instead there’s been an exponential growth in technologies—ad exchanges, ad optimizers, data exchanges and the old faithful behavioral targeting network—promising publishers a better way to manage their inventories. While I like the innovation this proliferation brings to the industry, so many options can create confusion. To help sift through the hype and marketing palaver I sat down with Matthew Greitzer, Razorfish’s VP of search marketing and our resident expert on ad exchanges to ask him what he thought about these technologies and what he would recommend publishers ask when presented with another ad technology pitch.
Domenic: Before we get into the details, help me understand what the differences are between all these ad technologies.
Matthew: All of these technologies come from the angle of trying to help publishers maximize yield in one way, shape or form. So maybe we can start with what’s similar. Ad networks are the traditional players in the space. They’ve been around for the longest period of time and they offer publishers two different, but specific, value propositions. Generally, a way to monetize unsold inventory through demand they bring to the table using their sales force, helping the publisher liquidate inventory they can’t sell directly. With something like 600 ad networks in the space, it’s a pretty crowded field. The publishers with whom I’ve spoken have had concerns about giving up control and quality to these ad networks. So the question publishers have to ask with these guys is, “Who is in the advertising base, and what kind of controls do you have in place to make sure that inappropriate ads don’t show up on my site?”
Domenic: Do these traditional ad networks do some amount of behavioral targeting?
Matthew: In this day and age, most do some sort of behavioral targeting, but there’s a whole category of behavioral targeting companies out there who are the analysts to the ad networks. They offer a slightly different service offering for publishers, like the classic behavioral targeting company Audience Science, which used to be called Revenue Science. These behavioral targeting companies provide data liquidity. So rather than an ad network using inventory liquidity to sell your unsold inventory, a behavioral targeting network offers data liquidity. Their pitch is, “Hey, you have all this information about people coming to certain categories on your Web site, let us pay you to cookie those users which we can sell elsewhere.” Since those users may have little value to you on your Web site, behavioral targeting technologies will pay you for the ability to connect with those users elsewhere. For example, Audience Science might go to a company like….
Domenic: Forbes.com…?
Matthew: Yes, Forbes.com. They would cookie the users coming to Forbes.com and then go out into the market and sell that as piece of data as a consumer interested in financial information or services, as an example.
Domenic: So if I went to Forbes.com, got cookied and then show up on Yahoo’s finance pages, they would know I was someone interested in financial information and/or services?
Matthew: Yes, exactly. In this model you would be cookied on Forbes.com and Forbes.com would get paid for the right to do that. The behavioral targeting company would then target you by acquiring inventory cheaply somewhere else and selling the fact that they know your behavior to a buyer who wanted to hit you coming off of the Forbes.com site. So really, with ad networks and behavioral targeting companies you have the first generation of inventory and data liquidity.
Domenic: OK, so what would you classify as the second generation of ad technologies?
Matthew: The second-generation technologies are ad exchanges and data exchanges. Unlike an ad network, which essentially guarantees a fixed payout or a percentage-based payout, an ad exchange is a market-based approach on a technology platform. While it doesn’t have a sales force, it essentially solves the same problem as ad networks—selling inventory a publisher can’t or doesn’t want to liquidate themselves. Instead of creating a sales force, ad exchanges simply create a marketplace that allows buyers to bid for publishers’ inventory in a market-based pricing environment or a bidded CPM market.
Domenic: An eBay of ad impressions. So what’s in it for the publisher?
Matthew: There are a couple of advantages to this approach. One is that the publisher has more direct control over who is buying their inventory, and at what terms they are getting it at. A lot of publishers that made deals with ad networks had little visibility into what was happening in terms of how were they monetizing that inventory and what kind of advertisers were showing up and for what price. With the exchange environment, publishers can determine the relationships they are getting into with some control over who’s buying the inventory and who specifically isn’t. This helps manage sales conflicts. If you don’t want your direct advertisers accessing your inventory through the exchange for less money, you can explicitly block them. Floor pricing can be set in a more manageable way.
To a certain extent, the exchange, because it is market based, gets publishers the highest yield possible. In theory, the advertiser that’s getting that impression is the one willing to pay the most for that impression at any given point in time. The caveat here is that for that to be true, the exchange has to be at scale—the bigger the market, the higher the demand. So if a publisher is considering signing up with an ad exchange, the biggest question for them will be how much scale does that ad exchange actually have and how much real demand are they bringing to the table. Additionally, they should ask how the exchange would ensure inventory liquidity at the highest possible price. There are a lot of exchanges out there, but not all of them have a lot of demand.
Domenic: So is an ad optimizer the third generation?
Matthew: In a way. These technologies play the explicit role of the yield optimization on the publisher’s side. Think of it this way—you’re a publisher with 500 or so direct advertisers and you’ve got three ad networks with whom you work. You’ve also got all your house ads and some clients for whom you need to over-deliver because your site performed poorly last month. So the question becomes, how do you manage delivery across all those potential advertisers to maximize yield and then still fulfill against all the orders that you have to fulfill against? That’s a really complex problem. So ad optimizers like PubMatic and Rubicon claim to solve for that with technology that automates that decision-making process. These guys are the über-optimization layer sitting on top of an optimization layer. For example, the ad optimizer would sit above a publisher’s ad network and ad exchange optimizing inventory across both networks. Publishers should ask themselves whether this is a really a problem they have, and if it is, whether it needs to be solved. Ad optimizers might only be worthwhile if the publisher’s ad technology is a potpourri of different ad networks, contextual networks, display networks and exchanges.
Domenic: Let’s come back to a point you made before about publishers looking for more control. Is the main question then what sort of controls do these technologies have in place?
Matthew: Yes, and I would ask around yield, too. One of the key questions, especially for large publishers, is how well do these ad technologies integrate into the publisher’s in house yield management system. I think what you’ll see over the next year or two is that ad exchanges will start to perform yield management functions.
Domenic: What else should publishers ask these ad technology providers?
Matthew: I think that one of the big questions or all of these companies is what happens to my data? How are you going to ensure that my data isn’t used in ways that are not acceptable to me? How can I make sure you’re not holding on to it and using it beyond the terms established? What checks and balances does the provider have in place to ensure that that data is not used in a way that is against the publisher’s wishes?
Domenic: So the publisher has asked the questions of scale, the controls in place, the data terms of agreement. Should they be concerned about anything else?
Matthew: I think there’s a whole series of discussions around response times and latency, which is very relevant for a publishing business. You don’t want your customer base to suffer from page-load times dragging because of some pixel that hasn’t fired from your behavioral targeting provider. It’s a technical discussion that should engage the publisher’s tech team.
Domenic: Is all this worth the effort? Publishers are already juggling hundreds of moving objects—they’re trying to create premium products, redesigning sites, syndicating content, testing new ad layouts, refining user experiences and so on. They are being creative and innovative and they’re working very quickly in this dynamic market. Do these technologies add complexity and yet something else to manage?
Matthew: Yes, I think so. These technologies help move a publisher’s sales force up the value chain and get them away from selling pure banner ads. There’s generally more value in a custom sponsorship, so these technologies allow the sales force to spend more time on these opportunities. These are really valuable for advertisers. Making the standard, repeatable IAB size inventory plug and play for publishers is a good thing, especially with the ad exchanges and the good ad networks that will be around in the long term.
Minsider columnist Domenic Venuto is SVP and Head of the Media and Entertainment Practice with the New York City office of Razorfish, one of the world’s largest digital agencies. He can be reached at domenic.venuto@razorfish.com.
Domenic Venuto Archives
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All of these so-called optimizers that are supposed to help publishers only add to the problem.
Ad Networks in there ever growing quest to get more publishers and reach dilute their own marketplace so thousands of publishers all get a tiny slice of the pie.
Ad optimizers, rotate the crappy ads from the ad networks and rarely can beat the weak CPM that AdSense gives you.
Ad Exchanges too cause a massive price competition environment where publishers can continue to low ball each other, so again, everyone makes lower CPM's on their already weak fill rates, so these only end up beneficial to the advertisers looking for super cheap prices.
Chad Randall, CEO
http://www.AdvertiseSpace.com