As Google/DoubleClick and Yahoo! RightMedia/APT are taking the lead, plenty of other exchanges and overlays of exchanges are coming online and offering advertising players unprecedented transparency and control whether on a reserved/futures or spot market basis. Early players in performance display advertising are enjoying the access to data and targeting in combination with the low CPMs of remnant inventory currently available.
Agencies are for the most part not ready for this change. Havas' Adnetik and MDC's Varick Media are definitely the exception and not the rule. Will agencies be able to survive the coming revolution of the exchange model? The AdExchanger's Magic 8 ball says "Reply hazy, try again."
On the large publisher side of the exchange, many challenges remain as some publishers try to maintain CPMs that are overwhelmed in a price/performance comparison with the inventory that certain exchanges and networks can offer. Publishers, such as a few in the OPA, have responded by taking away their inventory from networks and exchanges and selling direct only. We say, good luck with this strategy of exclusivity.
The consumers habits have fragmented. Small, efficiently run, niche content publishers are offering new access to users once the private domain of Old Man Portal. Networks and exchanges now offer access to what is essentially premium inventory on many small sites as they aggregate on behalf of small publishers the interest of advertisers and agencies - at much lower CPM prices.
Enter the yield optimizers who look to maximize revenue potential for publishers large and small.
Quickly, both of these optimizer groups will "cover" both buying and selling and, in effect, become an exchange.
In fact, optimization companies are already jumping into the exchange space. Pubmatic offers new ad network buying tools, Rubicon Project (whose CEO, Frank Addante, recently said they wanted to be the NASDAQ of online advertising.) announced its exchange-like Rubicon OnDemand and OpenX Market signals the opening of a new marketplace which has access to billions of impressions of OpenX publishers.
And we're just getting started. Can you imagine what it's going to be like in 5 years? Some say inventory will be further commodotized. We say inventory will be priced as it should be at its true value rather than through a blackbox. The new exchange model will make, potentially, every impression premium as targeting and data swirl in real-time to deliver predictable results.
And, fear not large publishers. Not only will you be selling premium through the exchange - but there will always be premium inventory you'll sell as part of integrated campaigns via a direct sales team. Big Brand CMOs looking to dip their toes into the supposedly turgid waters of digital will come to you first.
The Exchange End Game
We've said before that Google remains a lurking king of exchanges if it can marry its exchange, AdSense and AdWords and the currently, privacy-locked value of its search engine. Retargeting search will have a significant positive effect on retargeting as Doubleclick's ad exchange could retarget user search behavior in the online display ad inventory of publishers who may currently be forced to run low yielding, DR campaigns for Vonage and Classmates.com, for example.
Moreover, as Jeremy Liew points out, there will be many more ad networks in the future or, what we'd call, media traders. These traders will bring their relationships with advertisers to the exchange and combine it with their expertise in trading which will keep the exchange membership broad and prevent monopoly by any one entity. Google will have great difficulty replicating this component.
Before the next 5 years are up, the world of advertising will likely need to come to some agreement on standards for the distribution of data. And we're not even talking about privacy - we're talking APIs and the like.
And with the agreement and steady adoption of standards, there will need to be a new advertising organization that will guide the development and ongoing update of standards, a la NASDAQ. (Not the IAB which will always be about creative.)
These standards will tie everyone together in a super-heated, super collider of a single ad exchange that enables communication between the smallest publisher and the biggest media buyer.
Sound scary? Better get over it - the exchange is here.