Today's column is written by Zach Coelius, CEO of Triggit, an online advertising, media trading company.
As loyal readers of AdExchanger.com know, we are currently seeing a very significant platform shift in the technology that underlies display advertising. One of the most exciting things about this shakeup is that it allows all the players to look around and try to establish a different position in the ecosystem. Companies can use the changing dynamic to enter new markets, intermediate, disintermediate, grow margins, swap spots or simply get run out of the business all together. It is like one giant game of musical chairs with billions of dollars at stake, guaranteed great fun to be had by all.
In this latest round of the game, transparent exchanges, accessible media and real-time bidding (RTB) are playing the tune and all the players are looking around at each other trying to figure out who can use the shakeup to their advantage. Some of these players include: Silicon Valley stalwarts, technology driven startups, high margin ad networks and the creativity and service-driven ad agencies. Who is going to lose their seat?
For the young technology startups, the advent of RTB and transparent exchanges presents a huge opportunity to whoever can overcome the significant technological challenges. For these startups at the moment there are two approaches to this game of musical chairs. One is to build technology and to license it to the big boys who want play on the exchanges. This approach is what all the agencies are asking for and is a model that many markets have followed in the past. The other play it is to build proprietary technology and to compete with the established players on the premise that the technology will provide a competitive advantage. For this to work, RTB needs to not only be a way to access inventory, but to also provide meaningful lift to those that are the best at it. Without a doubt, the startup market will be one of the most exciting to watch as the nimble startups jockey for position.
On the ad agency side, there has been a tremendous amount of development as agencies have rightly recognized that automated digital media buying platforms create quite a few opportunities for them. With the right technology, agencies should be able to disintermediate media sales organizations and ad networks, develop new proprietary competencies, provide better client service and as a result grow their margins. All of the major holding companies have started companies to grasp this opportunity including: Publicis’ Vivaki, WPP’s B3, IPG/Mediabrand’s Cadreon, MDC’s Varick Media Management, Razorfish’s Atom Systems and Havas’s Adnetik. Each of these companies are licensing technology that will enable them to buy, track and optimize media for their clients’ campaigns in a highly automated way. For agencies that are under a lot of stress at the moment, this seems like quite a game-changing opportunity. Though it remains to be seen if the agencies will be able to compete in an emerging technology game without really having any real technology of their own.
In the end, the big question is if this platform shift is simply a swapping out of a piece of software and set of vendors for another, or if it is a more fundamental reordering of the industry. While I am certainly biased, I would argue that there is a great analogy in search. Before Google, everyone thought that the technology to run a search engine was a commodity and that you could license it and build your business off of someone else’s platform. And then Google demonstrated that for technically challenging problems, engineering is a core differentiator. Will RTB and its challenging problems be that game changer for the media space?
Follow Zach Coelius (@zcoelius), Triggit (@triggit) and AdExchanger.com (@adexchanger) on Twitter.