Pubs and brands have complained about programmatic inventory on open exchanges for years, but a renewed focus on inventory quality is gaining traction.
AppNexus has long positioned itself as the platform for ad networks, but it reversed its policy in recent weeks by removing ad networks that don’t provide direct publisher or seller relationships.
Shortly after, Facebook’s LiveRail banished some ad networks because “LiveRail is shifting its business focus toward quality, direct-publisher relationships.”
Brands and publishers are increasingly bringing effective first-party data into their digital buys, and they want certain levels of performance and reliability on the open exchange.
“The true buyers and sellers are demanding a flight to quality,” said Sam Cox, MediaMath VP of global media partnerships. “For buyers, every remove means there’s more risk, and more margin disappears. You cut out all that noise, and it increases yield without affecting advertiser price.”
Of course, when Facebook and AppNexus cut out ad networks, it creates an immediate reduction of inventory and revenue. But it’s a hit they’re willing to take in order to ensure long-term growth.
AppNexus did sacrifice some short-term revenue, said Catherine Williams, the company’s chief data scientist, who is leading an internal inventory quality push. But it became clear to AppNexus that without securing bigger brand budgets – which would be impossible without better inventory – there was a severe ceiling on the company’s long-term prospects.
She disputes the idea, however, that AppNexus is a “restricted platform.”
“AppNexus is in the process of pulling something together that will be comparable and a lot more open to what you can find on restricted platforms,” said Williams. “The biggest players with the most money don’t want to spread it through 20-point solutions, and that’s a big advantage for Google or the consolidated world.”
Publishers move toward PMPs
Publishers also believe improving inventory quality happens through direct relationships. But instead of the open exchange, they’re looking for that to happen in private marketplaces (PMPs).
Publishers increasingly “understand they have data to improve programmatic sales, but just need the environment to offer that,” said Index Exchange research director Lizzie Komar.
Komar said PMPs set up by Index Exchange in the past quarter saw a 16% increase in spending and a 70% increase in overall impressions. The numbers indicate a decent growth of ad budgets for PMPs, but publishers rushing to host their own inventory.
Will publishers’ interest in PMPs lead to an exodus from open exchanges, lack of ad nets notwithstanding?
Williams said PMPs are not “a compelling reason in my mind for publishers to defect,” but that “The big, open question AppNexus and others need to address is how to unlock publisher data.” She said there is a current disconnect between many SSPs and publishers, but SSPs have unique data and levers they can pull – such as header bidding, dynamic floor pricing and, well, kicking off ad networks – that also drive CPMs.
Komar noted that marketers have always been demanding with their data, and that publishers have just been slower to do the same.
“People intuitively understand how an advertiser suffers from fraud or daisy-chaining, but it’s less clear how publishers suffer from it,” said Michael Tiffany, CEO of the ad tech security firm White Ops. “If you take away all the waste currently in the system, those are billions of dollars that wouldn’t disappear from online advertising … it would just actually go to the people developing an audience.”
Williams described it as a bitter pill, “acknowledging that for some people who had been on our platform a long time, that business model was going to be shut down.” But she said it became inevitable, once “the question that we were working from stopped being ‘Are they malicious actors?’ and became ‘What value do they bring to the table?’”
