Nathan Woodman is the Managing Director of Adnetik, Havas’ Digital Trading Network.
NW: AdX 2.0 brings massive supply liquidity to the bidded online display media space. Especially with the addition of AdSense real estate.
Google is looking to create an environment where display ad buyers compete with text ad buyers for pieces of AdSense real estate. It is their hope that with significant demand the display ads will outbid the text ads and in turn create higher yield for Google and its AdSense partners.
This will only work if Google can bring significant demand for display inventory into the system. They can maximize the demand by accepting bids from AdWords and also via networks through the AdX 2.0 channel.
[Regarding concerns], I am concerned about Google’s position as a principle in the transaction as a representative of the seller rather than as a pure facilitator of the transaction.
Google benefits greatly from the opaque AR/AP nature of AdX. They are the central transaction clearinghouse and all cash is paid to Google and Google in turn pays all their publisher partners the balance minus Google’s negotiated fee. It is rumored that Google has targeted a 20% operating margin for AdX 2.0.
In comparison other variable rate and RTB inventory sources stipulate that the terms of the agreements are between the buyer and the seller as the principles of the transaction. Terms like rev share, transparency and payment are negotiated between the buyer and the seller and therefore the economic model of each principle is transparent to each party.
In the end my concerns may be unfounded. If Google can aggregate enough concentrated demand into the system they will be able to control display much like they control search and their leverage will once again be unmatched and uncontested.
