Industry Reaction: The Impact Of Right Media And The Importance Of Multiple, Large Exchanges

Right Media and ExchangesGiven the announcement earlier this week from Yahoo!, the plot thickens as the display ad ecosystem evolves into demand-side platforms.

In this survey of a broad, cross-section of the digital ad industry, AdExchanger.com looks back and looks ahead with the help of the industry.

The questions...

  • What has been the impact of Right Media Exchange?
  • In the future, how important is having at least two, liquid, large scale, ad exchanges in the display ad ecosystem? And why.


This is the first of four posts - 41 "Reactions" total! See below.

Ad-Juster - Mike Lewis, CEO

The Right Media Exchange has created an alternative to the traditional ad networks' "buy, mark-up, resell" model of distributed digital advertising. The creation of a transactional model, one in which a technology platform is supported by transaction fees and remains a neutral 3rd party mediator between media buyers and sellers, has allowed many smaller sized publishers to gain more direct control of the operations and improve their margins. RMX has provided a baseline roadmap to accomplish this, however many significant hurdles, such as brand protection and direct sales effort competition, will continue to dampen the rate of broad adoption.

[Regarding the importance of having at least two, large ad exchanges], unfortunately, the natural acquiring organization of any real-time exchange platform will be an active participant in the digital advertising space. This was demonstrated when Yahoo bought RightMedia. The immediate loss of neutrality, since Yahoo both owns the exchange and generates revenue buying and selling the commodity traded on that exchange, gave rise to healthy scepticism and concern. The presence of two or more self-supported, liquid exchanges will hopefully force, through competitive pressures, more transparency and cost efficiencies. Today the two biggest players will be Google and Yahoo, it would be nice to see a viable 3rd contender free from such partisan ownership gain parity in the market as well.

AdMeld - Michael Barrett, CEO

The launch of The Right Media Exchange in 2005 was a watershed moment for the online ad space. RM legitimized the monetization of remnant inventory, opened up frequency data, and provided a full view into buying and selling behavior beyond the "direct sold" world. It enabled long-tail inventory-be it premium or non-premium-to be transacted in an open marketplace in which every buyer had an equal seat at the table. In many ways, Right Media was an incubator for the online advertising world today, nurturing and sustaining new ad networks while monetizing supply that previously was relegated to PSAs and house art.

The Right Media Exchange also taught us how important it is to maintain control over online advertising and insist upon transparent transactions, on both the buy and the sell side. Transparency is critical for a healthy marketplace as opacity leads to uncertainty and subterfuge that undercuts inventory value.

[Regarding the importance of having at least two, large ad exchanges], multiple exchanges are necessary to force competition and discourage monopolistic behavior. The key is for each exchange to sufficiently differentiate. For instance, premium publishers should look to partner with a marketplace that specializes in high-end inventory like theirs and provides protection against arbitrage.

AdSafe Media, Kent Wakeford, Co-Founder / EVP

With respect to digital marketing over the past 5 years, few events have been more important than the ascendency of the inventory exchanges, notably RightMedia. Absent the exchange model, numerous innovative ad technologies designed to reach the "individual" consumers in a scalable and cost efficient manner (Tacoda, Media,, BlueKai, eXelate, etc.) would never have been possible. Data exchanges, behavioral re-targeting, performance optimization, and other technologies are able to leverage pools of cost efficient display inventory across exchanges to provide brands and agencies with powerfully sophisticated marketing tools. The powerful and productive interplay between the exchanges the third party business models which they have made possible has been critical in fulfilling the long touted promise of Internet marketing: Large numbers of highly targetable consumers delivered at scale and with suitable frequency.

[Regarding the importance of having at least two, large ad exchanges], increased competition in the exchange market will inevitably lead to product enhancements and product differentiation to attract major buyers of inventory – brand advertisers, demand side platforms, and others. Google’s large-scale entry into the exchange market will hopefully create additional liquidity and wet the appetite of more companies to create innovative new targeting tools that leverage the exchanges. Industry standards to identify "brand safe" inventory and compliance with inventory classification requirements (i.e., IAB Networks & Exchanges Guidelines) will more quickly emerge to eliminate concerns and barriers to entry of major buyers. Competition will inevitably lead to a rapid adoption of technologies and measurements to satisfy buyers and shift more media dollars online.

Dapper - Eran Shir, CEO

The impact of the Right Media exchange on the media industry has been tremendous, and we are just in its beginning. It had impact that ran across the entire food chain of the media business. Most of the benefits are enjoyed by various players on the buy side. First and foremost, it is a great equalizer, allowing start-ups and small companies to get as fair a chance in bidding for media as the biggest advertisers. As such, it provides the type of liquidity in display that keyword bidding provided in search marketing.

Second, it facilitated the introduction of new technologies and tools that utilize an automated media buying platform. It justifies investment in new targeting capabilities and data leveraging. It’s already spun a set of new companies that are implementing automated media buying and optimization a la Wall Street, forcing media agencies and ad networks to adapt to this new world. It wont be long before we’ll be seeing a lot of openings for ‘quants’ in agencies.

[Regarding the importance of having at least two, large ad exchanges] - it's very important, especially in the current scenario where both the two largest ad exchanges are also big time buyers and sellers on their own and thus have skin in the game. We would like to see much more than just two exchanges in place. This is also important for ensuring rapid innovation. In particular, I think it will be very problematic for Google to monopolize this market.

Demdex - Randy Nicolau, CEO

The initial impact of Right Media Exchange was as another clearinghouse for all of the ad networks who understood how to capitalize on this newly-available inventory. They had the access to the data, and the technologies and, quite frankly, the industry experience to go in and arbitrage this. In the beginning, it's no secret that 80 percent plus of the people using the Right Media Exchange were these ad networks.

I think over time, with the introduction of data exchanges like BlueKai's, with new technologies like MediaMath and Invite Media that make accessing the exchanges easier for advertisers and ad agencies, we've now begun to see that section of the marketplace move more aggressively into using the exchanges. I think overall it's had a very positive impact in terms of allowing advertisers and agencies to more accurately audience target.

As for whether at least two large exchanges is important, liquidity is incredibly important for a couple of reasons. I think first and foremost, again going back to my earlier point about people buying third-party data from the BlueKai's, Targuses, etcetera of the world, because data has a very finite lifetime, you need to find those users and action that data as quickly as possible. Therefore, if you only had one player like a Right Media, where the majority of their inventory is coming from Yahoo!'s unsold inventory, that limits you to one area where you can find those users. To the extent that you've got additional exchanges where you can go out and broaden the reach and increase the likelihood that you can quickly identify one of those users, it's going to help make that data purchase more valuable.

eXelate - Iri Zohar, CEO

The Right Might Exchange was a game changer – in the truest sense of the expression – because it opened all of our eyes to the potential of exchanges in the online advertising eco-system as a complement to ad networks. In addition to being one of our original partners, I saw the exchange opportunity for eXelate in the data world by studying what Right Media had done to add liquidity to the media marketplace. At the end of the day, RMX started the revolution that I believe will result in most of the "secondary channel" of media being monetized via media exchanges.

[Regarding the importance of at least two large exchanges], competition is the natural and healthy state of any market. The existence of at least two large scale exchanges is necessary in order to ensure that the media market – advertisers, publishers, ad networks, exchanges and agencies, (and ultimately users who benefit from ad supported content) receive fair, transparent and optimized value from their advertising efforts. Beyond market transparency, a second exchange provides additional opportunities for data providers such as eXelate to add value to non-targeted media, enabling publishers to generate greater revenue from advertising, while facilitating better converting and more effective advertising for advertisers. In that vein, competition is critical for the supporting companies and services. As the providers of a key element that those future media exchanges will run on, we need the competition to incentivize the development of technology to realize the potential of our data.

Eyeblaster - Gal Trifon, CEO and Co-Founder

The concept of media trading as a tool for ad-networks to efficiently trade surpass / deficit inventory was broadly discussed as far back as 2003. Right Media was first to execute against this challenge and had quickly proved the feasibility of and the demand for an efficient and automated trading platform. The acquisition by Yahoo was disruptive since for the first time it provided access to massive amounts of first-hand inventory and created interest from buyers across all categories.

At times when both Google and Microsoft introduce their alternative platforms and specifically look to leverage a stronger position in search bidding, for Right Media to continue and maintain a leading position they will need to enhance their platform and position to:

  • Enable real time bidding and interfaces to allow agencies and advertisers to more easily utilize audience buys
  • Support the unique needs of brand advertisers in terms of inventory quality controls, ad-format support and brand-oriented targeting and reporting
  • Position itself as more media-friendly to other premium publishers who look to increase the yield of their un-sold inventory and may find Right Media / Yahoo's position as more friendly than that of Google / Microsoft

Our view is that there is room for two or more large & liquid exchanges to enable a competitive pressure for these types of buys for both "supplying" publishers and "demanding" buyers. Optimally standardization should enable easy trading and placement across multiple platforms in the future while forcing the platforms to compete over placement fees, ease of use, inventory quality and format support.

FreeWheel - Doug Knopper, Co-CEO

Exchanges like Right Media and DoubleClick make a lot of sense in the direct response world where conversions and defined metrics are all that matters, and the media environment and other qualitative factors are not valued. In essence, in this DR construct, all ad environments are treated as equals.

However, in the brand advertising world, qualitative factors matter and the environment is a critical factor. Think of the extreme case - a Super Bowl ad is probably less impactful from pure advertising performance measures. But the benefit of that exposure has its own value. This kind of thinking presents one reason why we feel that there won't ever be a pure ad exchange for branded advertising. The qualitative factors are simply too valuable to allow the inventory to be traded equally.

Within this vein, the tools, services, and technology that facilitate the establishment of branded advertising in premium digital video need to be enabled, and that's what FreeWheel is focused on. There is certainly a portion of brand advertising which can be sold in a marketplace or exchange environment, but it is not at the premium end of the market."

Genacast - Gil Beyda, Managing Partner

In an ideal world where there is fully transparency, scale, the ability to qualify inventory and low transactions costs, there would be no need for a second online ad exchange. However, that is a tall order. Especially in the early stages of development of exchanges, each exchange will cater to specific types of inventory, have different technology platforms and allow for differing levels of transparency.

If buying and selling efficiency is the aim, then a single exchange maximized that opportunity. However, we won't see that for a long time, if ever. There are too many competitive roadblocks to the top exchange players agreeing on a single platform. Each believes they need to own and control the platform. Control implies the ability to manipulate the exchange which is detrimental to creating an open, market-driven exchange. The only check-and-balance to this is buyers and sellers having multiple exchange choices -- assuming low switching costs.

Maximal efficiencies for buyers and sellers can only be reached in a single exchange, however until the existing exchange platforms decide it isn't a strategic asset, it is highly unlikely we will see the day of only a single exchange. The only hope is that competitive forces encourage each platform to allow high transparency, low transaction costs and low switching costs. For the foreseeable future, we will continue to see unified buying tools that allow the acquisition of inventory across all the exchanges and "ad exchange jugglers" which manage and optimize inventory placement on exchanges on behalf of sellers.

Jeff Green (formerly of Microsoft's AdECN)

While some players in this space have clearly defined the difference between an ad exchange and an ad network, our industry as a whole has not. An exchange must be in the business of creating a fair market. It should be more of a referee than a player. Having the exchanges associated with the big three (GYM) has always been a double edged sword. On the one side, the exchanges need to be scaled and liquid and it is extremely difficult to achieve without the participation of the big boys. However, on the other side, there is an inclination within GYM to try to create exclusive or proprietary advantage—even within the exchange. Since our industry hasn’t clearly defined the role of an exchange, the industry could potentially evolve for some time without the fair and open marketplace that would make all boats rise on the fair and transparent tide that is inevitable. The surest way to keep the exchanges in check and keep the price of liquidity low is to have competition. The industry will likely either have two fair, scaled exchanges or it will have one scaled network.

mPire - Kirby Winfield, CRO

[Regarding the impact of Right Media Exchange], publishers and ad networks have been the largest beneficiaries of aggregation of and increased access to reach in remnant display via RMX. Publishers (especially tail- and social-media-based) enjoy higher eCPM's on display inventory due to increased access to demand, and the blending of their own traffic with more valuable/name-branded inventory. In fact, many publishers use RMX as an optimization platform a la Rubicon/Pubmatic/Admeld, greatly increasing efficiency in inventory management and accessing huge swaths of ad network display ad fill. Networks can create immense scale virtually overnight on RMX.

On the negative side, Right Media grew too big to fast, without sufficient controls. There is too much unwatched money coming into the RMX ecosystem, in the form of large volume buys from major ad networks (yes, they do use RMX despite what they say) and brokers, creating incentive for bad action.

[Regarding the importance of at least two large exchanges], the existence of multiple, large exchange options is crucial to the display ecosystem for obvious reasons: advertisers will vote with their dollars, and competition will drive feature development and parity in the areas of transparency, safety, fraud prevention, ad quality, and performance and yield optimization. A world with one major ad exchange is like a one-party government: if you don't like what you've got your only option is to leave the country. RMX has been the one party, and this has kept many agencies and advertisers on the sidelines. Two exchanges will, one hopes, keep each other honest, and bring dollars into the ecosystem that have been loath to go all-in on one option. The optimizers and complementary technologies will benefit as well, assuming an arms race develops in the exchange space.

Netezza - Brad Terrell

The impact of the Right Media Exchange has been to validate the role that ad exchanges will continue to play in bringing efficiency and transparency to the online advertising industry.

Having at least two large scale ad exchanges is very important for the display ad ecosystem because it accelerates the industry's pace of innovation. Competition among the large players results in innovations that introduce marketplace economics and efficiencies to the industry and ultimately benefit all players - the trends toward increased transparency and real-time bidding are great examples of this. The large players also create implicit standards that make it possible for smaller players to enter the market and compete effectively with specialized offerings and technologies, further increasing the overall level of innovation in the industry - the growing number of demand-side buying platforms are a great example of this.

The accelerating pace of innovation in the online advertising industry forces participants to choose among three strategic options: "attack", "defend", or "arm the combatants". The expanding ad exchange ecosystem is attacking - leveraging analytically sophisticated techniques that ultimately increase targeting precision and campaign ROI. Players that don't plug in to this ecosystem will struggle to defend their positions in a world in which "reach" and "inventory quality" are no longer considered competitive differentiators. It's a good time to be an arms dealer.

Norwest Venture Partners - Jeff Crowe, Managing Partner

I believe that it is quite important for the industry to have more than one large scale, liquid exchange for display advertising. Any exchange needs to be liquid to be useful, and there is enough volume in the ecosystem for two (maybe more) exchanges to have sufficient scale and liquidity. The industry is better off if there are at least two exchanges competing -- they need to have to compete on the basis of liquidity, pricing, and functionality such as real time bidding, ease of use, ease of integration, etc. It would also be dangerous for the industry if a large market player owned the only liquid ad exchange, as that market player could derive informational benefits from owning the exchange that would allow it significant advantages over other bidders on its exchange.

Peer39 - Amiad Solomon, CEO

Right Media Exchange opened the door to new thinking about how advertising is bought and sold. By providing a new marketplace to bring buyers and sellers together, they built a platform that enabled the incorporation of data from multiple sources into media buying at an unprecedented scale. RMX set things on a trajectory toward a more scientific approach to media buying in display.

[Regarding the importance of having at least two, large ad exchanges], it is essential. Clearly, competition is a good thing – it necessitates differentiation and ignites technological innovation. We believe that having multiple exchanges will raise the bar on data accuracy.

Everyone is talking about how 2010 will be the year of data. The primary market maker in the exchange arena will be access to reliable data and its application – we call it making every impression an "informed" impression. This enables advertisers to effectively connect their message to the right audience and in the right context at huge scale.

Spanfeller Group - Jim Spanfeller

Publisher advocate, Jim Spanfeller, told AdExchanger.com: "I do think there is a place in the world for a "premium" exchange. In fact that might be the only type of exchange that flourishes. By premium I mean an exchange that does allow network ad sellers redistributing either impressions or low cost advertising a seat. So only direct to publisher impressions are available on the exchange."

Teracent - Chip Hall, SVP

Right Media pioneered the exchange model, and they helped usher in the era of liquid inventory. The impact on the industry has been very positive and has helped accelerate a number of innovations for Advertisers. We obviously can't know how the new Yahoo! policies will play out, but we are excited by the direction they are headed. A move toward more direct-from-publisher supply will set the stage for more demand from large advertisers and agencies and enable real innovation in media buying that trends away from opaque arbitrage and toward transparent, predictive valuation of ad impressions.

[Regarding the importance of having at least two, large ad exchanges], choice is always good for advertisers as it ensures that they will get the best solutions and ideally the most attractive return on their marketing dollar. Competition will lead to a more efficient market that ultimately benefits our core constituents, advertisers and agencies. In a competitive environment exchanges will be required to justify their fees by offering better targeting and functionality and allowing broader access on the supply and demand sides.

YieldBuild - Paul Edmondson, CEO

The success of Right Media Exchange has laid the groundwork for all the data retargeting services that have sprung up in the marketplace and made the non-premium, non-guaranteed ad inventory more valuable. It's also spearheaded the necessary scale for both publishers and advertisers to take it seriously.

[Regarding the importance of having at least two, large ad exchanges], it's an interesting question, because now there will be two competing wholesale ad marketplaces. Only one market should be necessary; whichever marketplace is most efficient and most liquid is the one both publishers and advertisers will gravitate towards. And because it's entirely possible that one exchange will be more efficient, one surviving exchange is a possibility.

That said, I think it's more of an emotional question to how important it is to have someone besides Google controlling the marketplace. My expectation is that Google will own a significant portion of this marketplace even though it is trailing Yahoo today.

Yieldex - Larry Allen, President

[Regarding the impact of Right Media Exchange], I think that it has been very smart in educating the market on the benefits of an ad exchange, and also got agencies thinking about how to buy inventory-enabled networks, enabling buyers to target highly segmented audiences at scale without the waste of taking control publisher inventory. This has caused a dramatic decrease in eCPM generated through purchased media, by providing access to inventory at scales never before possible.

At the same time, it has participated in the downward spiral of value of the Yahoo Network inventory by giving buyers access to the best Yahoo inventory at a discount. No surprises there.

[As for having at least two, liquid, large scale, ad exchanges], most publishers have an "ABG" mentality (Anything but Google). So having a
viable second exchange in the market is very important - no different than having NYSE and NASDAQ for companies to choose from. Media buying platforms and agency ad serving planning tools will closely integrate with one and likely not both exchanges. Each exchange will likely have a unique set of pros/cons. Right Media, I suspect, will be much more open to integration with multiple third party technologies. Google is currently vertically integrated within the DoubleClick/Google monetization products and will likely be slow to adopt or integrate with other technologies/vendors creating the opportunity for a second, liquid exchange.

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